AI Value Keeps Moving [Raw Session]

00:04 — What Does the Market Actually Value?

Hey, welcome back to Slow Builds.

This one is me trying to keep pulling on that same thread I had in one of my other videos about what the market is currently valuing.

The last one was really about what I considered always to be the staples of what to invest in and then how things like attention and what is grabbing people’s attention seems to be getting all those incentives now.

And so I keep coming back to the question over and over again about what does the world really value at this moment?

Like what are people in…

So this one’s going to be about the investing part of it.

And not what we say matters and not what sounds important, but what actually gets rewarded.

Where money goes, where investors place their value, where the market seems to think that going and the more I think about it the harder it is for me to separate the actual importance of something from the investment value of something because those are not always the same thing.

Food matters.

Power.

Shelter.

Medicine.

Finance.

Insurance.

Infrastructure.

Those are the things people people need.

Those are the things that make the world function.

But the market does not always reward what matters most.

It rewards what grows.

Every definitely rewards what scales.

It rewards what controls people’s attention, the world’s attention.

It rewards what controls access and I think that is the part I’m trying to wrap my head around because I’m looking at a and I’m gonna bring this back to AI just like most of the videos and I keep asking myself where does the value actually go?

Is it the AI companies themselves?

Is it like the hardware like the chips?

The RAM?

Is it the data center?

So the infrastructure part of it?

Is it the power that powers everything?

Is it the companies that already have customers?

So to the information to build the models off of?

Or does the value in this situation keep moving?

And it’s the question I keep sitting with.

Where does the value go when the bottleneck keeps changing?

02:37 — AI Looks Like Code

The strange thing about AI is that on the surface it feels like software, it feels like code.

It is code, no getting around it.

Models, agents, chatbots, tokens, images, videos, all these things detect the prompt box, the response, ones and zeros.

And because I’m a developer part of me looks at that and thinks, okay, this is just software.

It is very advanced software, very expensive, and extremely powerful.

But still, it’s just code in the end.

It’s just software in a box.

And software has this weird property or once something works it can spread very quickly.

It can be copied.

It can be improved, rebuilt.

It can be wrapped into other products.

It can be made smaller, cheaper, and it can be made more specific.

It can be made open source.

It’s a big thing people I haven’t heard too much about.

There are some open source models now and they’re getting stronger and better.

So when people talk about like AI is going to be one winner, one company, one model, one giant system that owns everything.

I don’t believe that at all.

I have a very hard time accepting that.

Maybe there will be a few huge winners.

And right now we’re seeing that with the two or three major players in the game, maybe four major players.

And each hold their place and I believe that.

And they will be very valuable.

But I do not think AI is going to be one thing.

I think AI is going to become many things, big models, small models, local models, company specific models, agents, personal assistants, medical tools, financial, legal, customer service, creative tools, pieces and models that are small enough and efficient enough that they work within a phone, inside apps, directly on a chip, models inside operating systems, cloud-based models.

There’s all these different aspects of it.

And models are not even visible.

Models anywhere because they are just built into the workflow.

So that makes investing in the technology kind of hard.

You can, I’m going off a little bit so for loose spot.

You can go with what currently are the leaders in the market, but that changes.

And that makes me go back to the beginning of the web, like AltaVista, Yahoo, try to use some of the other ones, Locust, all the old search engines.

And they dominated the web, Netscape.

But then search got modified.

Google came around and they took ownership of it really.

Bing tried to take over, Yahoo’s still kicking around, but DuckDuckGo for anonymous.

But I’ve always said for a long time that search itself is gonna be replaced sometime, which is why these companies like Google, they expand and build other things.

They use the revenue from the ads that are from the search and they use that to build other parts of the company and grow bigger.

’Cause I still think Google is gonna be one major players that win this AI race.

But, so back to it.

So it makes, it does make investing very hard because if AI becomes everywhere, then where is the durable value?

Is it in the model itself?

Or does the model become like electricity?

Something running in the background?

Something everyone uses?

Something that becomes expected.

Something that becomes less special over time.

Something becomes copied and rebuilt and reconfigured and just changes mold basically and multiplied across many different companies and owners and players.

06:48 — Right Now, the Money Is Physical

And this is where it gets strange because AI looks digital, but right now the money that is going into AI is going into the physical things.

Like I said, the chips, the data centers, power, cooling, LAN, all the infrastructure set up, the manufacturing, and it makes perfect sense because right now the bottleneck is physical.

You need all these things to make it work.

You need that infrastructure and all the chips and the hardware to run these models.

So even though AI feels like software, the value right now is being placed on the physical layer underneath the software.

And that is what I’m trying to understand because for retail investors, like small-time investors like myself, that is where a lot of the access is.

You cannot easily buy into the current AI companies.

They’re all privately held.

Some IPOs are coming.

You cannot, a lot of the pure AI model companies, like all of them are private at the moment, except for Google really.

And the public market starts chasing infrastructure around it.

The chip companies, the cloud companies, data center, retail, real estate companies basically, energy, nuclear is a big one at this point.

And that makes sense.

If the gold rush is happening, you cannot buy the gold mine.

Maybe you buy the picks and the shovels.

But then I keep asking, is that permanent?

Or is that just where the bottleneck is right now because if chips are scarce and chips are variable.

Same with data centers.

If land and infrastructure is scarce then whatever is available becomes valuable.

Then all of a sudden becomes land.

Then it becomes all the building around building new data centers.

It becomes around nuclear to get cheaper energy.

But what happens when those constraints change?

What happens when there are more chips, there’s more when models get smaller and don’t require as much energy, when they can run locally on a phone and don’t require the big data center and you want more specific.

What happens when local AI, like I said, local AI is good enough for most tasks.

And what happens when every company has access to good enough AI?

Where does the value move then?

09:08 — The Value Keeps Moving to the Bottleneck

And that’s probably the biggest idea in the video right there.

The video, the value keeps moving to the bottleneck.

At first maybe the bottleneck is the model, then the best model, the best research, the smartest systems, then the bottleneck becomes the chips, who has the GPUs, who has the supply chain, who owns it, who can get enough compute from their chips.

When the model becomes data centers, the buildings, the land, the cooling systems, the infrastructure, all that stuff.

And then it becomes, back to the data mode, it becomes who has the data, who can build the best models, who already has customers, workflow, who already sits inside the business processes.

And then maybe the bottleneck becomes trust.

Who do people actually really rely on who they believe and allow access into their life who gets embedded deeply enough that switching away becomes hard.

I think there’s one winner in that situation at the moment and when most people the average person thinks of AI they do think of Jet GPT so open AI has a strong name advantage on that one.

It’s not just picking the best AI company.

It’s figuring out where the bottleneck is now and where it might move to next because if you buy the bottleneck too late maybe you’re buying the thing after the market already priced like price it to its top and if you buy the wrong layer maybe the value moves somewhere else.

So it’s a very it takes a lot of research a lot of market but understanding the ecosystem that’s happening around AI.

I didn’t mean to make this about AI but it’s just showing how the value proposition and where it moves and how it navigates around even this technology that is changing the world and changing how we invest this change in how we day-to-day lives.

11:20 — Does Infrastructure Stay the Winner?

So right now infrastructure feels like the obvious place and I get it.

I understand all the things it’s not magic to figure that one out it’s not floating around in air, AI has to run somewhere, and so there’s a physical layer.

But the thing I keep asking is, does the infrastructure stay the winner?

Or is the infrastructure just the first obvious investment wave because real AI companies are private?

Because that is a big difference.

If infrastructure is permanently scarce, then maybe it keeps winning.

But if infrastructure gets built out, if chips become more available, energy gets cheaper, get smaller, AI becomes way more efficient, then maybe the value shifts away from the infrastructure.

Maybe it moves back towards the software or maybe it moves towards companies that already have distribution or maybe it moves into more normal business that use AI.

That is where the whole thing starts to feel unstable.

Not unstable like it’s all fake but unstable in the sense that the center of value may not stay in one place.

The market might be rewarding chips today because chips are scarce.

Then it might reward power tomorrow.

Then it might reward the AI companies.

And then it might punish model like the AI companies if models become cheaper and more interchangeable.

I think they’re going to get punished too if they don’t come up with a token strategy to the average Joe and the smaller companies not run out of token so quickly.

And that brings you back to the boring stuff because maybe the answer is not that AI replaces food, finance, insurance, healthcare, energy, logistics.

Maybe AI becomes those companies, maybe AI makes those companies better.

Maybe the value eventually goes back into the old world, but through the new efficiency layer.

Now see, that’s where AI right now…

I’ll get to this…

My next section is that.

So I’m just going to keep reading.

13:31 — Maybe AI Becomes a Feature

This is one of the things I keep thinking about.

One of AI does not say special.

One of AI becomes the feature.

A feature.

Because that happens with technology.

At first something is the product, then eventually becomes a feature inside every product.

The internet was special.

Then every company had a website.

Mobile apps were special.

Then every company had an app.

Cloud was special.

Then every company and every software is non-Cloud based.

And AI is probably gonna go the same route.

Right now AI is the thing.

Everyone is talking about it, trying it, investing in it.

And every company is trying to explain how they’re gonna use it.

But everything, eventually maybe AI just, It’s just part of the software stack.

And this goes against a lot of taking jobs.

Not really, because it’s still part of that, ’cause it brings value to companies.

I just watched the one where AI’s pretty much gonna replace all drive-through intercoms.

And the people, so there’s a job gone.

Now the people inside, so far they’re liking it, but it’s a pain point at the moment, but it’s one of those things that’s gonna happen.

So that’s a place where that becomes a feature that a company can, like Wendy’s or Burger King or McDonald’s, they can use that to make their ordering more efficient, to make one less employee they have to pay for or put that employee, still pay that employee, but add them to the queue so they can manage more drive-through customers at once than a single at a time.

That’s a smarter way to be, if I was the marketing company for one of those, that’s the way I would look at it.

Your drive-through guy now can take both orders instead of one, speed up the process.

But yeah, that’s where it becomes like an automated system.

So like, but it becomes part of the stack within the company.

It is inside banks, it’s inside insurance companies, grocery, logistics, hospitals, call centers, counting software, it’s already in development tools.

I use it every day.

I ran out of tokens today, so I had to come do my video.

So it’s inside everything at the moment, but it’s just not being utilized to make the companies always more efficient at the moment or being, like I say, boring, it’s just part of the process.

And maybe the models get cheaper.

Maybe we start having like again, the local models for each company, specialized versions.

So picking a winner becomes pretty much almost impossible in a software game like that.

‘Cause it’s not one winner, it is many winners in many places.

So maybe the better question is not which AI company wins, maybe the better question would be which companies can use AI to improve their business they already have.

And that is a different way to look at the value that AI brings and where the market, where the value would shift to.

16:43 — Tesla, SpaceX, and Physical-Digital Companies

And this is why companies like Tesla and SpaceX, they don’t get out of my head.

Not because I’m saying they are automatic winners, I’m not saying that, but they are interested because they are not just software.

They are physical and digital at the same time.

Tesla has manufacturing energy, it has cars, it has robots, it has the software, it has the data.

It says it has AI here but SpaceX has the AI and it has satellites with the Starlink, it has communications, it has the infrastructure, it also has the solar, it has many things that you put all that together, you have an entire ecosystem.

And then also like the software and they have the data, they have the attention, and they have the full infrastructure and ecosystem wrapped all around it.

So when I look at companies like that, part of me thinks, okay, maybe that is closer to where value might be sitting.

Not only in code, not just in infrastructure, but in the companies that combine physical capability, software, data, distribution, attention, the power, did I say communication?

Yeah, because they literally have it all.

They even have the boring company.

They can put the holes.

Like it’s scary when you think about it.

And it does not make it, and I see, It does not make it safe because it is scary.

It does not mean it’s not overvalued.

Does not mean it’s going to work out.

It’s not a guarantee.

But it explains why my brain keeps going there because the company is not just selling a digital thing.

It is building physical systems and software systems together.

Maybe that combination matters more in the next phase.

The companies that win are not only the ones with the best models, maybe they’re the ones with the best connection between the model and the physical world.

18:56 — The Retail Investor Problem

And then I come back to the retail investor problem.

Where do you put your money?

Not in a financial advice way.

I’m not giving any advice at all here.

And I’m just thinking through the problem, talking out loud, reading my notes today I wrote for me.

Because if you’re a normal investor, you’re always trying to figure out what you actually access to.

You might believe AI is going to be huge, but can you buy the companies you actually believe in?

A lot of them are private, so you buy the public companies around them, chips, cloud, infrastructure, consulting, power, say land companies that already have AI exposure, SpaceX if you want it, but also land.

Land is going to be anything nuclear for the power also.

But then you had to ask, am I buying the real value?

Am I buying the temporary bottleneck in the flow where the value is going to end up?

That is the uncomfortable question that has to be answered because sometimes the temporary bottleneck makes a lot of money and it does.

But you got to know when to get out and when to get in.

Sometimes it’s the right place to be, but sometimes by the time everyone sees the bottleneck, market has already moved on and then the value moves again.

So maybe investing in AI is not just about believing AI will matter.

That part feels extremely obvious to me.

The harder part is knowing where the value settles before the first wave is over.

When the first wave is finished and when we start moving into the second and third wave of this new world that we’re going to be living in and where the calm waters are going to be?

Does it stay in the chips, the cloud, the power?

Does it stay in the infrastructure and land?

Does it stay with the software companies building the AI models?

Does it move to the data modes with the companies that own the data that build the best models off and know you and know your company and has the trust of the consumer?

So it now makes it very hard.

21:04 — What If AI Gets Smaller?

And then there’s another side of it too, like if AI gets smaller, it gets cheaper.

Again, we have the local models.

What if companies don’t always need the biggest model?

What if most tasks do not require the top of the line?

Because that seems possible.

I know it’s going to happen.

I can see it in a way I envision things and how to build things and how to be selective on when you use a model, what you use a model for, how deep you need it to be, it makes a big difference in the long run.

So there’s ways to cut costs, to save on all aspects and all frontiers.

There’s ways to move it into the phones, the handhelds, move it into wearables, small workflows within your system, little nodes that sit somewhere between that doesn’t even need internet access for some of it.

Maybe there’s enough information and data to process an incoming form that has pre-designed answers and it knows, you know, it’s limited to what’s there so it can make decisions without requiring outside sources and it can make itself smarter.

I’m just me thinking out loud.

So a small company answering internal questions that always need the biggest system.

Small business doing support is not always needed either.

A developer working inside its own code base, sometimes just needs a little help with syntax and knowing where a method may live or is there a test for this type thing.

It doesn’t need the best model all the time.

So if AI spreads out that way, then the value might not concentrate as much as people think, it might fragment.

It may become more specialized and more embedded.

And that changes the whole investing story because the big infrastructure build makes sense everyone needs massive centralized computer for compute forever.

But if a lot of AI moves closer to the user, closer to the device, to the business, smaller models, smaller applications, then maybe the infrastructure thesis changes a little bit.

It does not disappear, but it changes.

And maybe the question becomes who benefits when AI gets cheaper?

Is it the company?

Is the customer?

Is it the model provider?

Is it the business using the model?

Is it the chip company still?

Is it the power companies?

Is it the company that no longer needs as much compute?

And that’s a very, that changes the question again.

23:42 — Maybe the Value Goes Back to the Old Staples

And this is where I start looping back to the old safe investments, food, shelter, finance, insurance, healthcare, energy, utilities, infrastructure, logistics and banks.

The things that used to feel obvious, because maybe I does not replace those things.

We can’t replace all of those things.

Maybe I’ll be makes them more efficient.

Maybe I helps grocery chains manage inventory better.

Helps insurance companies analyze risk better.

Helps banks automate support and fraud detection.

Helps healthcare systems process information faster, clients.

A help logistic companies route trucks better, helps with fleet management, helps energy companies manage demand better, find bottlenecks there, break up the grid, better sources, know when to pull energy, when to pull it back, how to manage price better.

AI helps manufacture reduced waste.

AI helps normal companies do more with fewer people.

And if that is true, then maybe the value eventually shows up in the boring companies again.

Not because they’re AI companies, but because they use AI well.

And that is where it gets interesting again to me because maybe the market is chasing AI as a category, but the real long-term value might come from AI becoming invisible inside other businesses.

The same way electricity is not exciting by itself anymore.

It’s just part of everything.

Same way the internet became part of every company.

AI is gonna become part of every company in my mind.

And then the question becomes, which companies actually get better because of it?

That might be harder to see than buying the obviously AI names, but it might also be where the long-term value is gonna sit.

25:40 — Why Picking Winners Is Hard

So this is why I keep going in circles on this, because I can see both sides.

I see why infrastructure matters.

So yes, there’s value there.

But I also see how that value, in my mind is going to shift.

Because chips, energy, the models, all that’s going to price will drop, they’ll get cheaper, they’ll become more available.

If every company gets access to the same similar tools and the value may not stay in the obvious places.

It may move to distribution, trust, customer relation, the data modes, companies that already own the workflow again.

And that is why picking the winners is extremely hard because there is no single winner here.

Maybe there are hundreds of winners.

Maybe the winners are not even the companies we think of as AI companies.

Maybe the winners are the companies that quality use AI to become better businesses, more efficient businesses.

And maybe some of those companies that look like winners today are just sitting on the current bottleneck.

And it does not make them bad investments.

It just means the questions is more complicated than AI is the future, so buy AI.

26:55 — Where Does AI Create Durable Value?

So to finish this up, maybe the hardest part about investing in AI is that the value keeps moving.

First it moves into all those things that we’re currently seeing the market flood to.

And then maybe in my mind it moves away.

It’s definitely going to move when those companies go public.

The value is going to shift there pretty quickly.

And then after that, maybe it moves into companies that learn how to harness the models to make them cheaper and more common and allow companies to harness the power of them without requiring all the large infrastructure and scale that they currently require.

And then maybe it moves more than whoever owns the customers, the workflow and the data.

And eventually maybe it moves back into normal businesses, food, banks, insurance, like all those things, healthcare, groceries, like you got to have groceries.

You have to have energy, you have to have shelter, you need to have healthcare.

So those things, like whichever companies learn how to harness it extremely well, to in my mind, those are still through the old staples in the new era, in the AI era that learned how to reduce costs, to leverage AI to make their companies more efficient.

And hopefully as being more efficient, you become more customer satisfaction goes up also.

So maybe the question is, where does AI create durable value once it stops being special?

And that is the part we’re all trying to figure out.

Say AI is code in the end, but right now the money’s going into all the things wrapped around that.

And that changes the value, moves with it as always.

So where do you invest when the bottlenecks keep changing?

I don’t have the clean answer to that.

And I think that the honest place to leave it, because part of me still trusts the old stuff.

But I also cannot ignore that the market is chasing something else right now.

Is chasing the scarcity, the control, the scale, the compute, the attention.

I’m not doing, my other video is gonna just be on the attention part of it, ‘cause again, that seems to be where people are putting their value and it hasn’t gone away, it hasn’t gone down.

And the old boring stuff that I always believed in and still put my money into mostly, still grows, but it grows steadily, slowly, slow builds.

And maybe that is what makes this moment so hard to understand is the physical world still matters.

The software layer is exploding again.

The infrastructure is extremely expensive.

All the models are private.

So the retail investor is trying to figure out which layer actually captures the value.

I do not know the answer is one company.

I do not know the answer is one sector.

Maybe the answer changes over time, and it always does.

And maybe that’s the whole point, the value moves.

The hard part is figuring out whether you’re investing in where it is now or where it’s going next or you’re already too late, where it was.

That is what I’m trying to always think through.

I spent a lot of time analyzing in my brain trying to just play different scenarios because it’s not perfect and there’s never a final answer.

I’m just trying to understand.

And this all came about me trying to figure out where people place value.

How is value calculated?

What puts the real evidence behind why money is moving in the different areas that it is currently?

Because a lot of it doesn’t make sense.

But then if you go deeper, it does.

But then if you go a little deeper, it doesn’t.

30:55 — Closing Thought

My thing is a lot of these companies are not run the most efficient.

They burn through a lot of cash, they burn through a lot of money.

A lot of them don’t treat their employees always the best.

They don’t treat their customers always the best, but yet they’re strict and they but they are striving for something better.

Hopefully their intentions are in the right place and when you find a person or a company that is trying to make the world a better place, more efficient, help people, but they might be ruthless in trying to get there and misunderstood.

I believe that is a great place to invest in my mind, but you never know.

Thanks for watching.

Bye.