Amadeus reinvests heavily in R&D, with a spend equivalent to its #3 competitor's total revenue. This creates a widening technology and product gap that smaller players cannot bridge, fortifying its market leadership and making it increasingly difficult for others to keep up.

Many investors focus on the current size of a company's competitive advantage. A better indicator of future success is the direction of that moat—is it growing or shrinking? Focusing on the trajectory helps avoid value traps like Nokia in 2007, which had a wide but deteriorating moat.

While high capex is often seen as a negative, for giants like Alphabet and Microsoft, it functions as a powerful moat in the AI race. The sheer scale of spending—tens of billions annually—is something most companies cannot afford, effectively limiting the field of viable competitors.

Unlike most technologies that become cheaper over time, developing a new jet engine has grown more expensive, even on an inflation-adjusted basis, with new programs costing over $10 billion. This is because engines constantly push the frontiers of material science and engineering, keeping R&D costs and barriers to entry extraordinarily high.

Intangibles can be systematically analyzed by categorizing them into four key pillars: intellectual property, brand equity, human capital, and network effects. This framework helps investors move beyond traditional accounting metrics to assess a company's true value.

The enduring moat in the AI stack lies in what is hardest to replicate. Since building foundation models is significantly more difficult than building applications on top of them, the model layer is inherently more defensible and will naturally capture more value over time.

Traditional valuation multiples are increasingly misleading because GAAP rules expense intangible investments (R&D, brand building) rather than capitalizing them. For a company like Microsoft, properly capitalizing these investments can drop its P/E ratio from 35 to 30, revealing a more attractive valuation.

Adjusting financial statements to capitalize R&D provides a more accurate book value for tech firms. However, this input-based approach is limited, as the value of an intangible asset, like a successful drug patent, is non-linear and disconnected from its historical cost.