Unlike past tech shifts where imagining the future was the challenge, AI's potential is widely accepted. The primary difficulty for investors is no longer forecasting the technology's success, but determining what that widely-anticipated future is worth today. The problem has shifted from one of imagination to one of financial discipline and valuation.
For institutional investors (allocators), the primary AI challenge is no longer getting into the best private deals. Due to venture capital's power law dynamics, the new problem is managing portfolios that are already heavily concentrated in illiquid mega-winners as they approach the public markets, turning an access problem into a positioning problem.
The current AI boom mirrors the dot-com era. The underlying technology is revolutionary and will transform the economy, but valuations may have already priced in decades of future growth. This means investors buying now risk poor returns even if the companies ultimately succeed, as both technology enthusiasts and valuation skeptics can be correct simultaneously.