Artificial Intelligence: From Hype to Proof
Artificial Intelligence (AI) has dominated the headlines for the past two years. From boardrooms to dinner tables, few topics have captured as much attention — or driven as much market enthusiasm. The excitement has been especially visible in the stock market, where the so-called Magnificent Seven companies invested billions into AI infrastructure, lifting valuations to historic levels.
But in 2025, the story is shifting. Investors are beginning to move beyond the initial stage of broad optimism — the “sounds good, I’m in” mentality — toward a more measured demand for tangible results. This transition is critical to understand, because it has significant implications for the way capital is deployed and how companies will be judged going forward.
Looking Back: Lessons From the Dot-Com Era
This isn’t the first time investors have been swept up in the promise of transformational technology. The late 1990s saw a similar wave of enthusiasm during the rise of the internet. Companies raced to establish websites, build infrastructure, and stake their claim in the digital world. Firms like Cisco supplied the routers and switches that powered internet adoption, and valuations climbed rapidly.
Of course, not every company survived. The dot-com bubble burst when investor expectations exceeded what businesses could deliver in the near term. Yet, the internet itself didn’t disappear. Instead, it evolved, and the companies that integrated digital capabilities into their models reshaped entire industries. Retailers, financial firms, healthcare providers, and countless others leveraged technology to become more efficient, more connected, and more profitable over the following decades.
The lesson? Hype alone does not build durable business models. But when real-world adoption takes root, the long-term impact can be transformative.
Where AI Stands Today
AI today may be at a similar turning point. In the early phase, the focus was on infrastructure: data centers, chips, and cloud computing capacity. Companies such as Nvidia have become widely recognized for their role in supplying the hardware capable of running AI applications at scale. These investments fueled both innovation and extraordinary market performance.
Now, however, investors are beginning to ask a tougher question: where are the profits? The excitement over AI’s potential must translate into measurable results — improved efficiency, new products, and real returns on capital.
We believe this next phase — moving from hype to proof — is a healthy step. It separates durable opportunities from speculative excess.
Beyond Tech: AI’s Broader Impact
While most attention has centered on technology firms, history suggests the long-term impact of AI will extend far beyond Silicon Valley. Just as the internet reshaped industries from retail to transportation, AI has the potential to touch virtually every business.
Consider a few possibilities already emerging:
Healthcare: Faster drug development through AI-powered modeling could lead to improved health outcomes.
Education: Personalized learning tools can adapt content to each student’s pace and style.
Consumer Goods: Companies can use AI to refine supply chains, forecast demand, and reduce waste.
Service Industries: Even small changes — such as fast-food restaurants using AI at drive-thrus — create efficiency and free up labor for higher-value tasks.
These examples highlight an important point: the most significant winners of the AI era may not be the companies building the tools, but those that find the most effective ways to use them.
Why This Matters for Investors
Periods of technological change often spark periods of volatility. Valuations swing as investors try to gauge which companies will emerge as leaders. In the process, markets can overshoot in both directions — first with excessive optimism, and later with excessive pessimism.
For long-term investors, this volatility is not a threat but an opportunity. When prices disconnect from fundamentals, disciplined investors can step in, buying quality businesses at more attractive valuations.
This is why we focus on individual companies rather than funds. By owning businesses directly, we maintain control, avoid extra layers of cost, and invest selectively in firms that fit our themes and long-term strategy.
The Takeaway
AI is not a passing trend. We believe it represents a structural shift, much like the internet revolution before it. But as with every major technological wave, the challenge for investors is separating hype from reality.
The coming years will likely bring both excitement and disappointment as companies prove — or fail to prove — their ability to use AI to create lasting value. For us, the goal is clear: remain disciplined, focus on businesses with strong fundamentals, and invest when valuations make sense.
That approach has guided us through many periods of change, and we believe it will continue to serve investors well as AI moves from promise to proof.
Nothing contained herein this letter should be considered investment advice, research or an invitation to buy or sell any securities
