As consumers become inundated with AI and digital experiences, a strong counter-trend is emerging. This creates venture-scale opportunities for companies focused on tangible hardware, 'dumb' phones, and real-world services that facilitate human connection offline, as demonstrated by Greylock's investment in a kids' landline.

Startups are overwhelmingly focusing on rings for new AI wearables. This form factor is seen as ideal for discrete, dedicated use cases like health tracking and quick AI voice interactions, separating them from the general-purpose smartphone and suggesting a new, specialized device category is forming.

To avoid being made obsolete by a frontier AI model, startups need a strong moat. The three most defensible moats are: 1) building hardware, which AI cannot physically replicate, 2) establishing strong network effects where value increases with more users, and 3) operating in a complex, regulated industry requiring human interaction.

In a counterintuitive take, Elad Gil points out that companies without a strong AI angle, like HR platform Rippling, can be more durable because their core business isn't easily displaced by AI. Their main AI-related risk is a potential reduction in customer headcount.

As AI commoditizes software, hardware is re-emerging as a key defensibility layer for startups. A decade ago, VCs avoided hardware, but now a physical device tied to a software subscription creates powerful stickiness and justifies high valuations, representing a major shift in investment strategy.

As AI commoditizes software, the most defensible businesses are no longer asset-light SaaS models. Instead, companies with physical world operations, regulatory moats, and liability are safer investments. Their operational complexity, once a weakness, now serves as a formidable barrier against pure AI-driven disruption.

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 investment thesis for hardware company Nothing is that AI-first software will eventually require tightly integrated hardware for the best user experience. This positions Nothing not just as a consumer electronics brand, but as a strategic acquisition target for a large AI company like OpenAI.

In response to AI's potential to commoditize software, investors are shifting capital to "HALO" businesses like industrial manufacturing and aerospace. These sectors feature heavy physical assets and complex operations that are difficult for AI to replicate, promising lower obsolescence risk.