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.

During the dot-com crash, application-layer companies like Pets.com went to zero, while infrastructure providers like Intel and Cisco survived. The lesson for AI investors is to focus on the underlying "picks and shovels"—compute, chips, and data centers—rather than consumer-facing apps that may become obsolete.

When a new technology stack like AI emerges, the infrastructure layer (chips, networking) inflects first and has the most identifiable winners. Sacerdote argues the application and model layers are riskier and less predictable, similar to the early, chaotic days of internet search engines before Google's dominance.

In a new, high-risk category, betting on infrastructure ('shovels') isn't necessarily safer. If the category fails, both app and infra lose. But if it succeeds, the application layer captures disproportionately more value, making the infrastructure a lower-upside bet for the same level of existential risk.

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.

The primary advantage for investors today is an information gap. Most people view crypto as pure speculation, failing to see it as the required infrastructure for the autonomous AI economy. This information asymmetry creates a limited-time opportunity before the narrative shifts and the market catches up.

Using the invention of the car as an analogy for AI, the most significant returns often come from second-order effects (e.g., LA real estate, gas stations), not just the core technology (cars/LLMs). Investors should look for these ripple-effect opportunities.

Concerned about AI's potential to displace white-collar jobs, Wilkinson views investing in the underlying infrastructure as a key strategy. He specifically invested in a Bitcoin mining company pivoting to AI data centers, effectively buying into the "toll bridge" of the future to protect his capital.

To capitalize on the AI boom while mitigating risk, investors should focus on 'enablers'—companies providing essential infrastructure like semiconductors, data centers, and cloud services. This 'picks and shovels' strategy avoids betting on specific application-level winners, which was a losing strategy for many dot-com investors.