A market bifurcation is underway where investors prioritize AI startups with extreme growth rates over traditional SaaS companies. This creates a "changing of the guard," forcing established SaaS players to adopt AI aggressively or risk being devalued as legacy assets, while AI-native firms command premium valuations.

Traditional value metrics are arbitraged away by quants. The new edge lies in unconventional scenarios like stocks with cult followings and assets fueled by zero-day options, similar to how sports strategies evolve to extremes. Fundamental analysis is now just table stakes.

In the fast-evolving AI space, traditional moats are less relevant. The new defensibility comes from momentum—a combination of rapid product shipment velocity and effective distribution. Teams that can build and distribute faster than competitors will win, as the underlying technology layer is constantly shifting.

During a fundamental technology shift like the current AI wave, traditional market size analysis is pointless because new markets and behaviors are being created. Investors should de-emphasize TAM and instead bet on founders who have a clear, convicted vision for how the world will change.

The current market, with heavy concentration in a few names, is a bubble. However, it's not time to short it. The correct approach is to treat it as a momentum-driven game of 'hot potato,' not a fundamental investment environment. The key is to ride the wave while recognizing its speculative nature.

Companies like Tesla and Oracle achieve massive valuations not through profits, but by capturing the dominant market story, such as becoming an "AI company." Investors should analyze a company's ability to create and own the next compelling narrative.

Investor uncertainty about the long-term viability of software business models due to AI is causing a fundamental shift in valuation. Instead of paying a premium for future growth, investors are now demanding immediate returns like dividends, effectively treating established software firms as value stocks rather than growth stocks.

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.

In the AI era, technology moats are shrinking as tools become commoditized. Consequently, early-stage investors increasingly prioritize the founding team itself, specifically their execution velocity and ability to leverage AI, over any specific technical advantage.