An Angel Investor's Take on the Current AI Bubble.
Yes, it's a bubble. But not everything is a bubble. As an investor, I'm placing my bets on the 'picks and shovels' of the AI gold rush. Here are the three areas I'm most excited about.
The Gold Rush is Here, But I'm Selling Shovels
Everyone is screaming "AI bubble!" and they're not entirely wrong. Valuations are insane. I see pitch decks with zero traction raising millions. It feels a lot like the dot-com boom, and we all know how that ended for many.
But here's the thing everyone misses: even in a gold rush, the smart money isn't always on the miners. It's on the guys selling the picks, shovels, and jeans. That's my playbook for the AI revolution. I'm not chasing every shiny new AI model that comes out. I'm investing in the infrastructure that makes the entire ecosystem possible.
I learned this lesson the hard way. With MovieLaLa, we were trying to build a consumer-facing app. It was a constant battle for attention, for users, for monetization. We had a great exit to Gfycat, but it was a grind. With RemoteTeam, we built a tool for other businesses. It was a B2B play, a "shovel" for the remote work boom. The acquisition by Gusto was a nine-figure exit. See the difference?
My Three "Picks and Shovels" Plays for the AI Gold Rush
So, where am I putting my money? I'm focused on three key areas that are the "picks and shovels" of the AI gold rush.
1. Enterprise AI: The Boring Stuff is the Big Stuff
Everyone is excited about consumer-facing AI toys. I'm not. I'm excited about how AI is transforming large enterprises. The real money in AI isn't going to be in generating funny cat pictures. It's going to be in optimizing supply chains, automating customer service, and providing business intelligence that was impossible a few years ago.
This is why I invested in Scale AI. They provide the data labeling and annotation that is the lifeblood of any serious AI application. It's not sexy, but it's absolutely essential. Companies that can successfully integrate AI into their core operations will have a massive competitive advantage. The ones that don't will be left behind.
2. AI Consulting: The Guides for the New World
The big incumbents are slow. They have the money, but they don't have the talent or the culture to adapt to the AI revolution. They need help. That's where AI consulting comes in.
I'm seeing a huge opportunity for smaller, more agile firms to come in and help these big companies navigate the new landscape. They can help with everything from strategy to implementation. I've personally advised a few companies in this space, and the demand is off the charts. It's a classic "picks and shovels" play. You're not building the AI, you're helping others use it.
3. The Unsexy Infrastructure: The Plumbing of AI
This is the stuff that nobody talks about, but it's what makes everything else possible. I'm talking about the data centers, the networking gear, the open-source libraries. This is the plumbing of the AI revolution.
This is why I invested in Hugging Face and Anthropic. Hugging Face is building the GitHub for machine learning. Anthropic is focused on AI safety, which is going to be a massive issue in the coming years. These are not the kind of companies that get the big headlines, but they are the ones that are going to be around for the long haul.
Don't Bet on the Miners, Bet on the Shovel Sellers
So, is it an AI bubble? Yes. But it's also a massive technological shift that is going to create a lot of value. The key is to be smart about where you place your bets.
Don't get caught up in the hype. Don't chase the latest shiny object. Instead, focus on the "picks and shovels." The boring, unsexy, but absolutely essential infrastructure that makes the entire AI ecosystem possible. That's where the real money is going to be made.
Frequently Asked Questions
What experience informs this perspective?
This perspective comes from over a decade of building companies in Silicon Valley, two successful exits (RemoteTeam to Gusto, MovieLaLa to Gfycat), and investing in 200+ startups including Anthropic, OpenAI, and Scale AI. I write about what I've lived.
Do all experts agree with this view?
No, and that's fine. The best ideas in business are often contrarian. I share my perspective based on my experience and data, but I encourage you to seek out opposing viewpoints and form your own conclusions.
How has this view evolved over time?
My thinking on most topics has changed significantly over the years. Early in my career, I held many conventional views that experience proved wrong. I try to update my beliefs when the evidence changes.