A safer way to play the AI boom is to invest in companies selling the underlying compute infrastructure rather than the hyperscalers buying it. This strategy captures the upside of the secular trend while avoiding direct exposure to how the massive capital expenditure is funded, which may involve risky credit.

Instead of betting on specific AI models like ChatGPT, a more robust strategy is to invest in the underlying infrastructure that all AI development requires. This 'onion' approach focuses on second-order essentials like semiconductors and data centers, which are poised to grow regardless of which consumer-facing application wins.

Instead of betting on which AI models or applications will win, Karmel Capital focuses on the infrastructure layer (neocloud companies). This "pick and shovel" strategy provides exposure to the entire ecosystem's growth with lower valuations and less risk, as infrastructure is essential regardless of who wins at the top layers.

Instead of chasing high-valuation, first-order AI players like GPU makers, THL focuses its investment thesis on second or third-degree beneficiaries. These companies provide critical, capital-light IP or embedded software that endures through tech cycles, offering better long-term value for middle-market investors.

While capital chases obvious AI plays, significant opportunities exist in overlooked sectors. For example, life science tools are poised to benefit from two major trends: AI-driven drug discovery and the reshoring of pharmaceutical manufacturing. This makes the space a potential "AI winner" hiding in plain sight.

For a value investor, the AI trade isn't about picking speculative winners. The smarter approach is defensive: avoid companies AI will disrupt ('AI losers') and identify ancillary beneficiaries, like data centers, that can be bought at a discount. This strategy gains exposure to the trend without paying the high premium for direct AI hype.

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.

The AI investment case might be inverted. While tech firms spend trillions on infrastructure with uncertain returns, traditional sector companies (industrials, healthcare) can leverage powerful AI services for a fraction of the cost. They capture a massive 'value gap,' gaining productivity without the huge capital outlay.

Traditional value stocks face an existential threat from AI. The HALO strategy mitigates this by focusing on companies AI cannot replace but can make more efficient, such as railroads or copper mines. This provides a modern framework for finding undervalued assets without the risk of technological obsolescence.