I Think AI Is A Bad Investment

AI and large language models could be the most revolutionary technology in history.

However, as an investment, I do not think they will deliver meaningful returns. Today, I will explain why.

LFG. 🔥

The Difference Between AI and AI Tools

Before diving in, let me clarify what I mean by “AI.” There will be many excellent AI tools and products. Plenty of money will be made by entrepreneurs who use AI to improve a product or service.

HubSpot is a good example. It is not an AI product but a CRM and sales platform that uses AI to enhance its core functionality.

AI will create value.

However, the core LLM models—the ones powering the tools and applications we use every day—will not be good investments.

Here is why.

Airlines Are Terrible Businesses

Think about how amazing the airline industry is.

Every day, thousands of people board metal tubes and fly 30,000 feet above the ground. Last weekend, I went to Philadelphia and back in a single day.

Air travel is remarkably safe and mostly reliable. It has changed the way humans experience the world.

But the industry itself is a bad business. Why? Because all the value has been captured by the consumer.

Airlines struggle to differentiate themselves. For the most part, they offer the same service and try to stand out through price, luxury, or amenities like internet and snacks. But at the core, all airlines are the same.

Because of this, consumers have leverage. They can push prices down, and airlines are forced to compete primarily on cost.

The Same Problem Exists with AI

Can you tell the difference between Claude, ChatGPT, Grok, or Llama?

Sure, there are differences, but they are largely superficial. The main difference between them is how they are branded.

ChatGPT is marketed as the approachable, all-purpose AI. Claude is positioned as a writer's or developer’s AI, with a more human touch and better API access. Grok leans into being anti-establishment. And to be honest, I am not even sure what Llama does.

The point is, they are all fundamentally the same. The only meaningful way to compete is on price. This means the end consumer will capture all the value, while the companies building and maintaining these expensive models will struggle to generate returns.

The massive infrastructure investments required, such as data centers, energy, and ongoing development, will not be rewarded because the returns will funnel back to the user.

AI’s Gold Rush is FOMO

There is a lot of excitement around AI right now. Investors are scrambling to get in on the next big thing, but I believe they are chasing fool’s gold.

Instead of buying into the hype, I am sticking to what has always worked for me:

• In-person events

• AI tools with specific use cases

• Service businesses

• Real estate

• Membership platforms

I want cash flow. My investment strategy has not changed, and the more I analyze the cost structure of AI companies, the more convinced I am that the real money will be made elsewhere.

The top-level AI companies will not be profitable because they cannot capture the value. It will flow to the end consumer.

No one is going to make any money.

Love you guys. Talk to you tomorrow.

Tim

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