Built To Last? Understanding The Foundation Supporting The Growth Of AI
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William Blair839 FollowersFollow5ShareSavePlay(8min)CommentsSummaryWe believe AI’s growth is grounded in real-world adoption, with companies using it to improve productivity, automate tasks, and enhance decision making.Large companies are predominantly funding substantial AI-related capex from internal free cash flow.We believe investors should focus on durable beneficiaries of AI while avoiding purely speculative bets.
Getty Images Over the past several years, AI has driven a powerful investment cycle, and companies viewed as AI leaders have seen their stock prices move higher. While today’s AI enthusiasm shares some characteristics with prior technology-related bubbles, such as elevated market concentrationThis article was written byWilliam Blair839 FollowersFollowWilliam Blair is committed to building enduring relationships with our clients and providing expertise and solutions to meet their evolving needs. We work closely with the most sophisticated investors globally across institutional and intermediary channels. We are 100% active-employee-owned with broad-based ownership. Our investment teams are solely focused on active management and employ disciplined, analytical research processes across a wide range of strategies. We are based in Chicago with resources in New York, London, Zurich, Sydney, Stockholm, and The Hague, and dedicated coverage for Canada.Quick InsightsHow does current AI capex differ from the 1999 tech bubble?Unlike 1999's overbuilt dark fiber, today's AI capex is demand-driven, with infrastructure deployed at or near full utilization and funded by strong free cash flow.Which software companies offer more attractive risk/reward than Palantir Technologies?ServiceNow, Tyler Technologies, and Intuit are favored for their durable growth and fundamentals, trading at more reasonable valuations than PLTR.What is the portfolio's approach to AI exposure amid elevated market sentiment?We maintain a balanced large-cap growth portfolio, prioritizing structurally advantaged companies benefiting from AI adoption, while avoiding speculative names trading at extreme valuations.Recommended For You