Arif Hilali of Bain Capital Ventures warns investors against mistaking Silicon Valley hype for mainstream adoption. He uses cloud computing's slow, multi-decade rollout as a parallel for AI, suggesting that even when a trend seems obvious inside the tech bubble, its true market penetration takes much longer than anticipated.

As AI infrastructure giants become government-backed utilities, their investment appeal diminishes like banks after 2008. The next wave of value creation will come from stagnant, existing businesses that adopt AI to unlock new margins, leveraging their established brands and distribution channels rather than building new rails from scratch.

Early tech giants like Google and AWS built monopolies because their potential wasn't widely understood, allowing them to grow without intense competition. In contrast, because everyone knows AI will be massive, the resulting competition and capital influx make it difficult for any single player to establish a monopoly.

The most significant companies are often founded long before their sector becomes a "hot" investment theme. For example, OpenAI was founded in 2015, years before AI became a dominant VC trend. Early-stage investors should actively resist popular memes and cycles, as they are typically trailing indicators of innovation.

The current AI boom may not be a "quantity" bubble, as the need for data centers is real. However, it's likely a "price" bubble with unrealistic valuations. Similar to the dot-com bust, early investors may unwittingly subsidize the long-term technology shift, facing poor returns despite the infrastructure's ultimate utility and value.

Instead of betting on unknowable AI winners, a better strategy is to find quality companies the market has written off as "losers" due to AI fears. Similar to the unloved "old economy" stocks during the dot-com bubble, these perceived victims could offer significant upside if the disruption threat is overblown.

Analysis shows that the themes venture capitalists and media hype in any given year are significantly delayed. Breakout companies like OpenAI were founded years before their sector became a dominant trend, suggesting that investing in the current "hot" theme is a strategy for being late.

The dot-com era saw ~2,000 companies go public, but only a dozen survived meaningfully. The current AI wave will likely follow a similar pattern, with most companies failing or being acquired despite the hype. Founders should prepare for this reality by considering their exit strategy early.

Drawing a parallel to the early internet, where initial market-anointed winners like Ask Jeeves failed, the current AI boom presents a similar risk. A more prudent strategy is to invest in companies across various sectors that are effectively adopting AI to enhance productivity, as this is where widespread, long-term value will be created.