I would say that there has been quite a bit of hubbub about AI. Probably not an understatement to say that AI has been the topic of the market for almost exactly a year and a half. And with any brand-new technology, people feel the urge to bet on the underdogs. People want to buy the next Amazon, Netflix, Nvidia, etc. So, investors are especially aggressive with their money, whether they’re retail or institutional. Investors are especially cautious about buying the big boys. I felt this recently myself. As I previously wrote, I recently bought a large Ferrari position, but I was considering Adobe as well. I did not pull the Adobe trigger because I could envision a world in which Adobe is beaten by an upstart AI company that does pretty much everything Photoshop and the rest of its tools could do. In making that mental calculation, I was making a mistake. Here is how.

     I was thinking too emotionally. I recently read Dune and loved it. What I try to do whenever I read something so beautifully written, is extract valuable lessons, and what I tried to extract from Dune was the separation of an emotional and purely analytical state. There is time for both when investing, especially because so many others (all) invest emotionally, you cannot try to be completely analytical all the time, but in a situation like this, when a new, potentially world-shaking, technology is introduced, it pays to think analytically.

      Take two companies, Adobe and Apple. Both companies are in interesting positions in relation to AI. Adobe’s Photoshop tools could theoretically be replaced by AI, or, more realistically, Adobe could incorporate AI into their already existing software. I recently saw that Adobe’s employees were protesting to upper management because they were worried about Adobe’s new tool that allowed for a sentence of instruction to be written that was then carried out by their AI tool. Same thing with Apple. Apple could be replaced by a new hardware company that was basically just a worse iPhone with some bad AI, or, more realistically, Apple will just incorporate AI onto their already beloved and massively profitable hardware, as seen by the deal they struck with OpenAI.

     We mostly see big companies replaced by small, innovative companies when the big companies refuse to innovate. That is not the case here. All the massive companies in the world are incorporating AI. Nobody is rejecting the premises of AI or choosing to forge ahead without AI. Nvidia, Apple, Microsoft, Amazon, and Meta all mentioned AI at least 50 times each on their earnings calls. No big tech company is getting left behind on AI, which leads to the inevitable conclusion: massive, monopolistic tech firms outspend startups on every front until they have an insurmountable lead. Microsoft snapped up OpenAI, Nvidia sold every chip possible, Meta is spending more than anyone else, Adobe is already implementing AI tools into their software, Google has its own AI, and the list goes on and on.

     Invest in the big boys and feel confident that they will spend enough money to stay ahead.