Why This Matters
Long‑term investors succeed by looking past the hype and focusing on the structural levers that will shape value over the next decade. The tiered framework below lets you quickly assess where each holding sits in the AI ecosystem, spot concentration risks, and identify durable opportunities.
🥇 Tier 1 – AI Choke‑Points (Structural Bottlenecks):
What they are: Companies that form the physical or architectural backbone of AI—systems AI can’t scale without.
Key traits:
- Irreplaceable hardware or IP
- No viable substitutes
- Direct AI‑driven demand lifts revenue
Example – Why it matters
| Company | Why it matters |
|---|---|
| ASML | EUV lithography monopoly – every cutting‑edge chip relies on its machines |
| NVIDIA | De‑facto AI compute standard – GPUs power the majority of AI workloads |
| TSMC | Advanced semiconductor fab – supplies the silicon that runs AI models |
| ARM | Universal instruction set – powers everything from smartphones to data‑center chips |
My take: Treat these as core holdings. They’re unlikely to be disrupted; instead, AI amplifies their importance. Focus on valuation and cash‑flow durability rather than growth fears.
🥈 Tier 2 – AI Platforms, Distribution & Infrastructure:
What they are: Gateways where AI is deployed, monetised, and scaled. They don’t just use AI—they sell it or embed it at massive scale.
Key traits:
- Control over distribution or user access
- AI fuels higher engagement, pricing power, or usage
- Network effects reinforce their position
Example – AI‑related moat
| Company | Moat |
|---|---|
| Microsoft | Azure AI services + Copilot integration |
| Alphabet | Google Cloud AI, Search & Ads ecosystem |
| Amazon | AWS AI/ML services, Marketplace data |
| Meta Platforms | AI‑driven ad targeting & social graph |
| Broadcom | Chipsets that power AI‑centric data‑centers |
| Arista Networks | High‑performance networking for AI workloads |
My take: These are net winners. Look for earnings acceleration and margin expansion as AI adoption deepens.
🥈½ Tier 2.5 – Data, Benchmarks & Financial Rails:
What they are: Providers of trusted data, standards, and financial infrastructure that AI leans on but cannot replace.
Key traits:
- Embedded in regulations, mandates, or contracts
- Sell “truth” – benchmarks, ratings, transaction networks
- AI raises demand for clean, standardized inputs
Example – Role in AI ecosystem
| Provider | Role |
|---|---|
| S&P Global, Moody’s, MSCI | Credit ratings & ESG benchmarks |
| Visa, Mastercard | Transaction clearing & payment rails |
| CME Group | Futures & derivatives clearing |
My take: As AI adds complexity, the market leans harder on these trusted pillars. Prioritise quality of earnings and defensibility of data assets.
🛡️ Tier 3 – AI‑Amplified Security Gatekeepers:
What they are: Companies protecting the expanding AI attack surface. More AI → more security spend.
Key traits:
- Safeguard infrastructure, data, networks
- Benefit from consolidation trends in cybersecurity
Example – Why they matter
| Company | Why it matters |
|---|---|
| Palo Alto Networks | Next‑gen firewalls & AI‑driven threat intel |
| Fortinet | Integrated security fabric for AI workloads |
Quick insight: View these as tailwinds. Look for recurring‑revenue growth and high renewal rates.
🥉 Tier 4A – Strong Holds (AI‑Resilient Systems of Record):
What they are: Core enterprise platforms where AI adds value but cannot bypass regulatory or compliance constraints.
Key traits:
- High switching costs, validated workflows
- AI improves productivity, not replaceability
Example – AI impact
| Company | Impact |
|---|---|
| Intuit (INTU) | AI speeds tax/payroll filing, but compliance stays mandatory |
| Veeva Systems (VEEV) | AI aids life‑science research, audit trails remain essential |
| Autodesk (ADSK) | AI assists drafting, but industry standards persist |
My take: Hold with confidence. Focus on valuation metrics rather than speculative AI upside.
🥉 Tier 4B – Hold, Watch Closely (Higher AI Pressure):
What they are: Companies that still command professional markets but face emerging AI competition.
Key traits:
- Core expertise remains valuable
- AI threatens pricing power or growth margins
Example – Risk/Opportunity
| Company | Risk/Opportunity |
|---|---|
| Adobe (ADBE) | AI‑generated content challenges low‑end market, yet Adobe dominates enterprise creative suites and standards |
My take: Keep the position if you want, but monitor execution, pricing strategy, and valuation compression closely.
⚠️ Tier 5 – Platform Overlap / AI Ambiguity:
What they are: Solid businesses that could be bundled or displaced by larger AI platforms.
Key traits:
- Sell workflow tools, not core infrastructure
- Vulnerable to “good‑enough” integrated alternatives
Example – Potential disruptors
| Company | Disruptor |
|---|---|
| ServiceNow | Microsoft Copilot + Power Platform |
| Salesforce | AI‑enhanced CRM suites |
| SAP / Oracle | Cloud‑native ERP alternatives |
My take: Not broken, but watch for margin erosion. Consider trimming if fundamentals start to fray.
🚨 Tier 6 – Labor‑Heavy Models (Highest AI Risk):
What they are: Firms whose revenue is tightly linked to billable human hours—precisely what generative AI seeks to compress.
Key traits:
- Revenue = people × hours
- AI drives client cost‑savings, not shareholder upside
Example – Why it’s risky
| Company | Risk |
|---|---|
| Accenture | AI automates consulting deliverables, reducing billable hours per project |
My take: These are the first candidates to exit. Look for declining utilization rates or pricing pressure.
📌 How Members Can Apply the Framework
- Map every holding – assign each stock to its tier.
- Assess exposure
- Are we over‑weighted in Tier 5‑6?
- Do we lack exposure to Tier 1‑3?
- Strategic actions
- Trim high‑risk Tier 5‑6 positions if fundamentals deteriorate.
- Add or increase core Tier 1‑3 holdings for long‑term resilience.
- Re‑balance within Tier 4A/B based on valuation and growth outlook.
- Monitor execution – quarterly, revisit the tier assignments as AI adoption evolves and company strategies shift.
✅ Quarterly Quick‑Check
- Do I hold > 10 % in any Tier 5‑6 name?
- Is my Tier 1‑3 exposure ≥ 30 % of total equity?
- Have any Tier 4A/B valuations drifted > 20 % from peers?
🔍 Framing AI in a Portfolio
Imagine AI as a new highway system. Some companies build the roads, others collect tolls by controlling access and platforms, and a few still rely on vehicles designed for a world before highways existed.
Our goal is simple: own the road builders and toll operators, and be cautious with businesses that struggle to adapt. This tier framework keeps the portfolio focused on durable value, not short‑term hype.
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