AI - the Path Less Traveled

---

“This is the industrial revolution.”

- Jensen Huang, Nvidia CEO

---

Every article and talking head is now debating, "Is AI a bubble?" We believe "yes" and "no" - in a way that reminds us of our experience investing through the internet bubble 25 years ago. (Yes, we're that old.) In the following video Steve shares our nuanced view and how we're positioning client portfolios along a path less traveled - one we believe allows us to profit regardless of which AI model or technology ultimately wins the race.  

The Big Bet

A total of $7 trillion has been committed toward artificial intelligence and data center CapEx within the next five years. For perspective, that’s roughly seven years’ worth of U.S. defense spending. That’s the largest capital commitment that we've ever seen in absolute dollars. Why would some of the smartest folks on the planet, like Zuckerberg, Sergey, and Musk be betting the ranch doing this?

The Why

According to Anthropic researcher Julian Schrittwieser, AI models are roughly doubling in capability every seven months. Today’s systems are basically the equivalent of a hyper-diligent, brilliant high-schooler. Yet, within a mere 7 months, they’ll be able to reason with the experience of a seasoned 32-year-old professional.

White-collar wages total roughly $50 trillion globally. It’s easy to imagine AI making a good chunk of that $50 trillion “replaceable” or “augmentable”. If even a fraction of that productivity can be captured, that would mean a huge return on the $7T investment.

The Skepticism

Despite all the enthusiasm, there’s a disconnect between the vast capital outlays and meager near-term cash flows from the AI models. Today’s global AI revenue is only about $40 billion, with nearly all profits accruing to one company: Nvidia. Everyone else is losing money. 

Worse, the LLM’s already feel like a commodity. We observe that many users routinely use multiple models, simultaneously. People do this because they lack conviction that any one model is the end-all, beat-all. Better to ask the same question to a few models and compare answers among them. People also rationally understand that the “best” model today in any given function may well be leapfrogged tomorrow by the new & improved version of a competing model.  

Two years ago, OpenAI was miles ahead. Now there are credible challengers like Google DeepMind, xAI, Anthropic, Perplexity, and a swarm of Chinese open-source models operating at 90% of U.S. models’ capability at 10% of their cost. That’s not monopoly economics. That’s a price war in the making. 

Hence, the murmurs of “bubble” among skeptics. Yes, the AI productivity revolution may arrive — but the profits might not accrue where investors expect.

Echoes from 2000

If all this feels familiar, it should. History teaches that transformative technologies overpromise in the short run and underdeliver in profits — until they don’t. The trick is surviving the hype cycle without missing the structural gains that follow. 

In January 2000, many professional investors worried that the internet boom was in a bubble. And they were right – at least in price terms. The NASDAQ soon thereafter fell ~75% peak-to-trough. Yet the internet’s transformative impact was not a mirage. From the eve of that crash to today, the S&P Tech Index has risen roughly 10–12× — almost twice the total return of the S&P 500.

Today’s AI boom may rhyme with that era’s. Prices may overshoot, yet the technology may still prove transformative. The challenge for us capital allocators is to separate the price bubble from the underlying fundamental revolution.

The Path Less Traveled

While the AI “model layer” looks crowded, the physical build-out beneath it — the data centers, power infrastructure, semiconductors, and cooling systems — is anything but abstract. These are shovel-ready projects backed by signed contracts, zoning approvals, and megawatts of electricity demand.

Today, U.S. data centers consume about ~5% percent of national power. By 2030, that figure could double to 10%. Every “free electron” — whether from West Texas natural gas, Scandinavian hydro, or Middle-Eastern solar — is being spoken for. This is driving a quiet boom in energy infrastructure and industrial metals. Nuclear, gas, oil, solar, wind — even coal, where permitted — are all part of the “all-of-the-above” strategy required to feed AI’s appetite for electrons.

The $7 trillion bet on AI is already underway. The electrons will flow, the models will evolve, and the productivity will come — somewhere. But as investors, our goal isn’t to predict which model wins. It’s to own the assets that get paid no matter who does.

At Fielder, we believe there is more compelling opportunity among the “picks and shovels” — the enabling infrastructure and the downstream beneficiaries of AI’s higher productivity — who may profit regardless of which model wins the algorithmic race.

If you’d like to learn more about how we're positioning and navigating this theme, please reach out.

Yours in the Field,

Frank Byrd, CFA, CFP

---

IMPORTANT DISCLAIMER: This note is for educational purposes only. It is not a recommendation to invest in any particular security or strategy, since anything mentioned herein may be completely unsuitable for some investors. Speak with your financial adviser before investing. While the information presented herein is believed to be accurate, Fielder Capital Group LLC (Fielder) makes no express warranty as to the completeness or accuracy. Fielder is under no obligation to notify you of any errors discovered later or of any subsequent changes in opinions. Fielder’s employees are not attorneys or accountants and do not provide legal, tax, or accounting advice. Financial planning and investment strategies have the potential for loss. It should not be assumed that any of the securities, transactions, or holdings discussed will prove to be profitable in the future or that investment recommendations or decisions Fielder makes in the future will be profitable or will equal the investment performance of the securities discussed herein. Investing involves risk, including the potential of complete loss of principal amount invested. Fielder offers no guarantees or promises of success. Nothing herein should be construed as a recommendation to buy or sell any securities. Fielder or its employees may have an economic interest in securities mentioned herein.