AI is changing the game. It’s disrupting industries, boosting efficiency, and reshaping the future of business. So, if you want to invest smartly, you cannot ignore AI. But it’s not as simple as it sounds. AI can disrupt even AI-driven companies. Let’s break it down.
There are three main types of AI companies you can invest in:
- The Builders: Companies creating new AI models.
- The Innovators: Companies using AI to create new solutions.
- The Transformers: Companies leveraging AI to enhance their operations.
Each category offers a way to potentially earn big returns, but there are risks and challenges you need to be aware of.
The Builders: AI Model Creators
This is the big leagues. Companies like OpenAI, Meta, Google, and Microsoft dominate this space. Developing a new AI model (like the popular large language models, LLMs) requires enormous investment and computing power. It’s a high-risk game, even for the big players.
But don’t think it’s all about LLMs. There’s so much more to AI, like innovations with numerical data that haven’t hit the mainstream yet. There’s always a chance for someone, somewhere, to develop the next big thing that disrupts even the current heavyweights. As hardware costs drop, creating advanced models will also get cheaper.
The Innovators: Building on AI
This is where startups thrive: developing industry-specific or niche AI solutions using publicly available AI tools. It’s fast, efficient, and can be very profitable. However, the risk is that general AI is improving rapidly, potentially rendering these niche solutions obsolete.
But fear not! Success here depends on how unique and defendable the solution is. If you can create something the big AI players can’t replicate, you’ve got a solid investment.
For example, many businesses have a lot of proprietary data that general AI can’t access. Combine that with your own models, and you can build a solution that’s accurate, reliable, and tailored to a specific need. That’s where the value lies; creating a business model others can’t easily replicate.
The Transformers: Supercharging Your Business with AI
This should be the easiest way to use AI, simply apply it to make your existing operations more efficient. Whether you’re in banking, law firm, consulting, or media, AI can cut costs and help you deliver better value to your customers.
But it’s not that simple. If your company sticks to the old way of doing things, AI can only take you so far. It’s not enough to just adopt the tech, you need to rethink how you operate entirely. A traditional supermarket won’t turn into Amazon overnight by using AI.
Companies that see AI as just a cost-cutter are missing the point. AI should enhance your offerings and add more value for customers, which they’ll gladly pay for. The real challenge is transforming your business model to leverage AI fully.
Beware of Easy Answers
AI investment isn’t about jumping on the latest shiny tech. It’s about understanding what a company is truly doing with AI. Don’t get swept up by exciting buzzwords. Dig deep and ensure the company’s AI position is defendable.
On the flip side, don’t miss out on an opportunity just because you think the solution is easy to replicate with ChatGPT next year. The real value often lies in unique models, proprietary data, and domain expertise. There’s no shortcut here, you need to fully understand the company’s AI strategy, competences and strengths.
Investing in AI is complex, but with the right approach, it’s one of the most rewarding opportunities today.
Jouko Ahvenainen
