Invest Like the Best with Patrick O'Shaughnessy

Investors should prioritize Vertical AI platforms like Rogo AI and Vanta, which provide specialized automation for high-value sectors like finance and cybersecurity. Focus on "pick and shovel" infrastructure providers such as WorkOS, which powers the enterprise capabilities for industry leaders like OpenAI and Anthropic. In the robotics sector, the highest value is shifting from hardware to "foundation models" and general-purpose intelligence, making software-agnostic firms like Physical Intelligence key players to watch. Look for B2B SaaS companies like Ramp that offer clear ROI through expense automation, as these are more resilient during economic downturns. Monitor the progress of Tesla and Boston Dynamics as hardware costs continue to deflate, but favor companies utilizing End-to-End Learning and Reinforcement Learning to solve complex physical tasks.

Focus on high-quality public software companies where bearish market sentiment has created more attractive valuations than those found in private markets. Prioritize "boring" vertical software leaders like Workday (WDAY) and ServiceNow (NOW), which benefit from high switching costs and dominant distribution moats. Avoid over-leveraged software firms owned by private equity, as high debt often leads to R&D cuts that make them vulnerable to leaner competitors. For exposure to the data boom, look toward infrastructure "picks and shovels" like ClickHouse or Grafana Labs that utilize consumption-based revenue models. Exercise extreme caution with high-valuation AI startups like OpenAI or Anthropic, instead favoring established giants like Meta, Google, and Amazon that possess the data and distribution to monetize AI effectively.

Investors should focus on Embedded Finance infrastructure by identifying vertical software companies like Shopify or Stripe that are integrating deep-stack financial services into their platforms. Look for opportunities in "boring" infrastructure plays like WorkOS, Vanta, and Plaid that solve regulatory and compliance hurdles rather than chasing speculative AI wrappers. Consider exposure to high-growth fintechs such as Ramp, Brex, and Mercury, which are gaining a competitive edge by utilizing Column’s direct-to-Fed banking rails. Monitor "super-app" leaders in emerging markets, such as Kaspi, which are leapfrogging Western banking by integrating government and financial services into single digital ecosystems. For long-term stability, prioritize companies that prioritize early profitability and internal liquidity over the traditional 18-month venture capital fundraising cycle.

Investors should prioritize Palantir (PLTR) as a high-conviction play on the "ontology layer," which serves as a critical, high-moat bridge between raw AI models and actual enterprise decision-making. Focus on the AI Infrastructure theme by targeting software companies that connect models to complex data, as these "middle layer" providers are more defensible than commoditized AI model creators. Look for "Dual-Use" opportunities in the Defense and Industrial sectors, specifically companies that serve both commercial and national security interests to capture a shift away from traditional government-funded contracts. Consider exposure to "picks and shovels" automation tools like Ramp, Vanta, or WorkOS that allow firms to scale operations without increasing headcount. Monitor the U.S. Re-industrialization trend, favoring companies that utilize AI to drive massive productivity gains in domestic manufacturing and supply chain management.

Investors should prioritize Geothermal energy companies that leverage oil-and-gas drilling techniques, as this sector is nearing a major commercial breakout for baseload power. In the automotive space, NIO stands out as a leader in high-end EVs, but the broader threat comes from Chinese firms producing quality EVs under $10,000. To remain competitive against China's rapid industrial execution, Western manufacturing must aggressively increase exposure to Robotics and automation. Within the U.S. energy sector, focus on inter-regional transmission lines and companies positioned to benefit from bipartisan federal permitting reform. Finally, look for residential developers in states like Montana or California where "YIMBY" zoning reforms are stripping local restrictions to unlock new housing supply.

Consider a long-term bearish view on cloud providers like Amazon (AMZN), Microsoft (MSFT), and Google (GOOGL), as their business models face risk from customer concentration in the AI sector. While AI drives short-term growth, these large AI customers may eventually build their own data centers, eroding the hyperscalers' future revenue base. The software sector is also facing headwinds, so investors should be highly selective, favoring companies with defensible "systems of record" that are deeply integrated into customer workflows. Avoid broad software investments, as AI is creating legitimate shorting opportunities against companies that fail to adapt. Lastly, the single biggest risk to the global economy is a potential conflict over Taiwan, which controls the critical supply of advanced semiconductors.

The primary investment opportunity lies in the Artificial Intelligence ecosystem, focusing on a few high-conviction areas. Consider the foundational model layer, where companies like OpenAI (publicly accessible via key partner Microsoft (MSFT)) are building core technology. Also, look at essential infrastructure beneficiaries, such as data platforms (Databricks) and payment processors (Stripe) that will power the AI economy. High-potential applications with unique data advantages are emerging in sectors like robotics and drug development. The core strategy is to make concentrated, long-term investments in these category leaders, especially during periods of market fear.