There is no doubt for economists and technology luminaries that artificial intelligence will be a watershed event for many industries, redistributing value chains and wealth creations.
For wealthy families, ultra-high net worth investors, and family offices, two questions now dominate boardroom conversations: How can I capitalize on AI? And more urgently, how do I protect my portfolio from being hollowed out by it? This sort of brainstorming is complicated by endless chatter about a possible AI bubble, similar to the dot-com bubble of the late 1990s.
OPINION: ARE WE IN AN AI BUBBLE?
The answers hinge on the time horizon. In the short term — the next three to four years — the knowledge economy is squarely in the crosshairs. Consulting, finance, customer service, and Software as a Service industries are already under pressure. Twenty-five years ago, the internet blindsided legacy fortunes in media and retail.
This time, disruption will come faster. What unfolded over 15 years will now unfold in less than five. Customer service, call centers, and consulting fortunes are already dented, and if some argue that there is still value to salvage at the right price, it is more likely than not that such bottom-feeding investing is akin to catching a falling knife. Entire swaths of the SaaS industry are also threatened: AI is reducing margins in this business, commoditizing software (as anyone can create their own agent and application), and sometimes turning software into a simple, cheap add-on. AI is eating the SaaS economy; if the software industry were capitalizing on the digitalization of our economies with AI, the internet and cloud-based digital infrastructure could be quickly commoditized.
Family offices might think that brick-and-mortar businesses are insulated from the AI revolution. That could be a safe bet for the next five years, but going into the next decade, physical and embodied AI (robotics) will not just be confined to domestic chores; the whole manufacturing and construction complex will be dramatically changed, with margin compression and clear winners and losers. High net worth individuals should constantly monitor their companies and positions, always asking the only two questions that matter: “Is my company threatened by an AI disruption?” and “How can I capture back part of the AI upside?”
RESTORING AMERICA: BUILD THE INFRASTRUCTURE, BUILD THE AI BOOM
Family offices are already scouting the world for AI investments, beyond just picking Big Tech stocks: data center investments, chip companies stakes, AI start-ups, as well as secondary plays essentially on infrastructure companies (providing picks and shovels to the AI infrastructure backbone): energy, utilities, electronics, plumbing and construction companies involved in building data centers and chips. The safest and most conservative AI investments for family offices are probably in that latter category.
If one needs to be convinced that AI is at the core of high net worth individuals’ concerns and agenda, one only needs to look at the agenda of the upcoming Global Family Offices Summit in Miami on Nov. 19 (in the wake of a Cannes gathering): AI’s effect on business and wealth, but also AI start-ups, dominate the agenda and the whole summit, dedicated to wealth and investments, showcase AI investment as the priority for family offices. Wealth boutiques or events eschewing AI and crypto are rapidly becoming obsolete. Given the ramifications of incorporating AI into all corners of the economy, even a dot-com crash-like market correction will probably not thwart this wave of investment and recalibration of fortunes around AI.
Sebastien Laye is an economist and AI entrepreneur.
