Investing in Generative AI: Lessons from Blockbuster

Finding Perspective in a Period of Innovation

Generative AI is reshaping industries and expanding what is possible in ways few could have imagined just a few years ago. For investors, it represents both opportunity and uncertainty. As with every period of rapid innovation, maintaining balance, discipline, and perspective is key to long-term success.

While technology continues to transform the world, one story from my own childhood offers a helpful reminder of how change unfolds and how we can learn from it.

A Lesson from Blockbuster

While computers and cell phones were the defining technologies of my childhood, I credit Blockbuster with teaching me one of the most important lessons about innovation. Walking to Blockbuster was a favorite pastime for my brother and me during the summer. I still remember when they replaced VHS tapes with DVDs. I thought, “That will never work; most people don’t even have a DVD player.”

As we now watch Generative AI reshape our world, I think about how VHS became DVDs, DVDs turned into mail-order Netflix, and Netflix evolved into streaming. Even the devices we use have transformed from televisions to computers to tablets and phones. Standing in Blockbuster looking at DVDs, I had no idea what the world would look like 30 years later.

“The question for investors is not whether change will come, but how to engage with it thoughtfully.”

Unquantified Opportunity

Companies involved in AI infrastructure, such as chip manufacturers, cloud service providers, and data center operators, are experiencing rising demand as businesses explore how to integrate AI into their operations. Over time, these advancements may help drive productivity, efficiency, and new applications across industries.

It is likely that we have not yet begun to imagine where this technology could take us over the next several decades.

Unquantified Headwinds

The scale and speed of AI development also present meaningful challenges:

• Valuations for many AI-related companies have risen sharply, leaving limited margin for disappointment if growth expectations slow.
• A small number of companies now account for a significant share of major equity indexes, increasing concentration risk and sensitivity to sentiment shifts.
• Regulatory scrutiny and rapid competition may alter existing business models.
• AI requires substantial capital investments in data centers, chips, and power infrastructure, which can strain profitability if returns take longer to materialize.
• Revenue interdependence among key players can create circular investment patterns, where the same firms fund and purchase from one another.
• Energy infrastructure remains underdeveloped relative to the anticipated power needs of AI expansion.

Our Investment Approach

The Blockbuster story reminds us that innovation and change often move faster than we expect. The question for investors is how to participate in that change responsibly and with intention.

We approach Generative AI through the same lens that guides all our investment decisions, anchored by the principles of discipline, research, and long-term perspective.

Discipline is Everything

Our discipline keeps us focused on process and research rather than emotion. We emphasize broad diversification and remain mindful of concentration risk, favoring companies that integrate AI into sustainable business models rather than speculative trends.

Investing is Both Art and Science

We combine analytical research with sound professional judgment. Data helps identify opportunity, while experience allows us to interpret trends and evaluate the durability of innovation. This balance enables thoughtful participation in technological change without losing sight of valuation discipline.

Time Matters

Transformational change takes time. We view AI as a long-term theme that will evolve across market cycles. For clients with shorter-term goals, we may consider strategies designed to manage volatility and preserve flexibility.

Depth of Research Forms Decisions

We rely on diverse research and analysis to evaluate both AI leaders and the broader ecosystem—semiconductors, cloud infrastructure, cybersecurity, energy, and productivity platforms. As market leadership shifts, we adjust based on research, not the latest headline.

Risk Must Be Considered

Generative AI offers promise but carries uncertainty. We manage these risks through diversification and thoughtful portfolio design, balancing innovation with stability. Liquidity and short-term needs are planned carefully so investors can remain invested through market fluctuations.

“We do not need to fear innovation, but we do need to approach it with awareness, patience, and perspective.”

A Mindful Future

The story of Blockbuster is often told as a warning, but it can also be seen as a lesson in adaptation. The technologies that replaced it opened new ways to connect, create, and experience the world. Progress does not have to inspire fear; it simply requires mindfulness.

Generative AI may lead us toward a future that feels as unimaginable today as streaming once did in a world of VHS. Our goal is to help investors engage with that future thoughtfully. By staying disciplined, diversified, and informed, we can embrace innovation without losing sight of the timeless principles that guide sound investing.