At a recent lunch with investors, the conversation turned to AI ETFs and the parallels to past investment booms. The internet bubble of the early 2000s, the rise and fall of major tech players in the ‘70s, and even the mobile revolution all offer valuable lessons: not every early leader survives.
The History Lesson: When Hype Meets Reality
During the dot-com era, companies with “.com” in their names saw sky-high valuations—until the bubble burst. AOL, Yahoo, and countless others were once dominant but struggled to adapt. The same pattern played out with Kodak, Polaroid, and HP in the 1970s tech boom, and later with Blackberry, Palm Pilot, and Xerox.
The takeaway? Not every innovator remains a leader.
The Smarter Play: Picks & Shovels Over Gold Prospecting
During the California Gold Rush, the real money was not made by prospectors—it was made by those selling the picks and shovels. Microsoft and Cisco learned this lesson early in the internet age, providing the infrastructure for digital expansion rather than chasing individual dot-com trends.
When it comes to AI investing, the same principle applies. Rather than chasing AI-specific companies, it is wise to recognize that AI will transform all industries, making many companies more efficient, not just the ones developing the technology.
Why Diversification Matters
It is tempting to go all-in on AI giants like Nvidia, Apple, or Google, but history suggests caution. When companies reach a certain massive scale, growth slows, competition increases, and new players emerge. Betting on individual winners is risky—when the ferris wheel stops, it really stops.
The Bigger Picture: AI as a Business Booster
At our firm, we are already seeing AI’s impact—not as a stock play, but as a tool that expands our capacity and enhances efficiency. AI enables us to spend less time on legwork and more time delivering value to our clients. That is the real story: AI is not just about AI companies—it is about how AI will lift all companies.
Bottom Line: Invest in the Future, Not Just the Hype
- Do not chase trends—invest in the broader market. The biggest winners may not be AI startups, but traditional companies that leverage AI to become more efficient.
- Diversification is key. No one knows who the long-term AI winners will be.
- Look for businesses that use AI as a tool, not just those branding themselves as “AI companies.”
AI will shape the future, but the smartest investors know it is not about finding the next AI stock—it is about investing in the entire ecosystem that benefits from it.
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