The rise of artificial intelligence (AI) has sparked discussions about potential bubbles and overvaluations in the market, particularly among the companies directly associated with AI technologies. DeepSeek has recently shown us all how fragile the AI ecosystem can be.

However, history has shown us that the real value of a new technology often lies, not in the building of the technology itself, but in the economic transformation that lies beyond. Consider the airplane: the globalization of business and the huge boom in international pleasure travel have created much more wealth than the aircraft companies ever did. Likewise, the internet revolutionized countless industries – and, in some cases, creating new ones out of thin air – with most of the value accruing to companies other than the early internet pioneers.

AI’s impact is likely to be similar. It will be felt across a vast array of businesses that adopt and integrate AI into their operations. Most of these businesses are so far removed from the current hype about AI that we can scarcely see the connection. But we will see it as it emerges over time.

In reflecting on the lessons of the internet bubble, we’ve come to understand that while some companies like Netscape captured early attention, the long-term beneficiaries were the businesses that leveraged the internet to improve their products, services, and delivery modes. Similarly, AI’s transformative potential spans industries as diverse as education, healthcare, agriculture, manufacturing, and entertainment. These industries are poised to reap significant rewards not because they produce AI technology, but because they will harness its power to deliver better solutions to their customers.

Identifying the True Winners

Consider education as an example. AI promises to democratize access to learning, enabling students worldwide to gain personalized instruction and real-time feedback. While we do not know which education technology (edtech) company will emerge as the leader, the industry as a whole stands to benefit tremendously. Companies that integrate AI into their platforms to provide tailored solutions for students and educators are likely to outpace their peers. And such companies can learn from the mistakes of the online education pioneers of the last two decades. Pioneers get shot – those who come behind them can get rich.

Likewise, manufacturing firms are leveraging AI to optimize production processes, reduce waste, and increase precision. These enhancements may seem incremental and do not grab headlines in the way that AI-powered chatbots and language models do, but they enhance profitability and scalability nonetheless. Companies that specialize in electricity distribution, for example, can integrate AI to enhance efficiency. Automated systems for watering and feeding crops – and even animals – can deliver a different mix of water and fertilizer to each plant on a farm, or to each cow. Imagine the increase in yields if this could be done in the famously low-yielding farms of sub-Saharan Africa! These are use cases far removed from the sensationalism surrounding AI, but potentially just as impactful.

AI's Subtle, Pervasive Influence

It’s also important to recognize that many of AI’s beneficiaries may not even be obvious at first glance. Consider the dating industry. Dating platforms, some of which have seen their stock prices decline significantly, may be undervalued despite being well-positioned to leverage AI. By improving matchmaking algorithms and user experiences through advanced data insights, these platforms could see renewed growth. The same concept applies to emerging social and companionship platforms, which are expanding beyond traditional dating to connect people in new and innovative ways.

AI can also enhance creativity and collaboration tools, such as apps for bringing musicians together in bands or connecting people with similar hobbies. These are the types of seemingly niche applications where AI quietly works in the background, creating value and reshaping industries without drawing much attention.

Avoiding the Bubble Mentality

One of the major differences between the current AI moment and the internet bubble of the late 1990s is the concentration of overvaluation. In the 1990s, overpricing was widespread across markets. Today, only a few companies, many of which are household names, carry extremely high multiples. Meanwhile, numerous other businesses across a range of industries are trading at reasonable valuations despite being likely beneficiaries of AI advancements.

As my friend Dr. Mihir A. Desai, a professor at Harvard Business School and Harvard Law School, points out in his guest essay for the New York Times, the recent plunge in Nvidia’s stock price signals deeper structural issues in financial markets. The "Magnificent 7" Big Tech companies have been driving up each other’s valuations by buying each other’s products and through stock buybacks. These practices have created an illusion of invulnerability. However, as we’ve seen in the past, such patterns of mutual cannibalization may lead to lower returns and eventual market disillusionment.

These observations suggest that, to invest in the future profits from AI, horizontal thinking is needed. Rather than focusing solely on the obvious AI leaders, investors should look at the broader economic landscape and identify companies that are poised to benefit indirectly. These businesses often operate in established industries, where AI can drive incremental improvements rather than revolutionary changes.

Even after the recent decline, the valuation gap between the "Magnificent 7"—Microsoft, Apple, Amazon, Nvidia, Tesla, Meta, and Alphabet—and the rest of the market remains striking. (I wonder what my father, who would have been 97, would think if he could see that these are the names of the seven biggest companies!)

These seven companies still account for over 30% of the S&P 500’s total market capitalization and are trading at multiples two to three times higher than the average of the bottom 493 stocks in the index. In many cases their multiples are even higher when compared to companies worldwide.

A Global Perspective on AI’s Potential

AI has profound implications for the economy and society, going far beyond its impact on individual companies. In countries like Japan, where low birth rates and aging populations present economic hurdles, AI could play a role in fostering solutions. For example, remote work and flexible scheduling—facilitated by AI tools—could make it easier for families to balance work and childcare, potentially encouraging higher birth rates. The ability of AI to reduce costs, streamline operations, and improve the quality of life may help address complex challenges that now seem almost intractable.

Conclusion: Broad-Based Opportunity

In sum, the greatest beneficiaries of AI may not be the companies developing cutting-edge AI technologies, but the much larger number of businesses leveraging AI to enhance their operations, products, and services. As investors and observers, we must avoid being captivated by the hype surrounding the AI giants. Instead, we should focus on the broader, more nuanced opportunities—those businesses that are quietly integrating AI into their processes to increase long-term value. The breadth and depth of AI’s influence ensure that its impact will be felt far beyond the confines of the current bubble, touching nearly every corner of the global economy and of human life.

***Certain of the statements may be statements of future expectations and other forward-looking statements that are based on Quent Capital’s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. All content is subject to change without notice. All statements made regarding companies or securities or other financial information on this site are strictly beliefs and points of view held by Quent Capital and are not endorsements by Quent Capital of any company or security or recommendations by Quent Capital to buy, sell or hold any security. The content presented does not constitute investment advice, should not be used as the basis for any investment decision, and does not purport to provide any legal, tax or accounting advice. Please remember that there are inherent risks involved with investing in the markets, and your investments may be worth more or less than your initial investment upon redemption. There is no guarantee that Quent Capital’s objectives will be achieved. Further, there is no assurance that any strategies, methods, sectors, or any investment programs herein were or will prove to be profitable, or that any investment recommendations or decisions we make in the future will be profitable for any investor or client. For full disclosures, please go to our Disclosure page.