It promises to be the most revolutionary technology in the history of mankind.
For the first time, we’re creating tools that can replicate – and even improve on – core aspects of human intelligence.
We could be on the road to something close to artificial general intelligence.
And as investors, we’re still early.
This is the kind of moment you dream about. A new wave of technology is on the cusp of transforming the way we live, work, and think. Like the internet and mobile revolutions before it, this creates massive opportunities.
But I don’t just write about AI and recommend ways you can profit. I use it – every day.
And not in some experimental way. I’m talking about practical, timesaving, brain-enhancing help that makes my life easier in real, tangible ways.
It’s how I know this technology is real and not a fad.
The AI revolution isn’t just happening in research labs. It’s happening in households like mine. Maybe yours, too.
So, today, let’s look at some smart ways to invest that go beyond obvious plays such as Microsoft, Amazon, and Google.
First, let me show you some of the ways this technology is making my life easier.
My Buddy, ChatGPT
I signed up for a Bluesky social media account earlier this week.
Someone told me it was like X but without the spam bots and trolls.
I wanted a Freeport Society banner image for my profile, but the ones I had were the wrong size.
It was after hours. And I didn’t want to bother my graphic designer. She has enough on her plate. So, I called on my buddy ChatGPT instead.
I uploaded one of my old banners, asked the AI bot to “create a banner the correct dimensions for Bluesky.” And in the time it took me to hit the return key, I had what I needed.
I’m constantly shocked by what these AI bots can do.
As longtime readers may know, I play the saxophone. Back in the day, I wasn’t bad. As a high school kid, I had a solid grasp of music theory. I could have taken any basic pop song and transposed it for a saxophone quartet.
Those skills atrophied decades ago. And the time it would take me to relearn them is cost prohibitive at this stage of my life. (I’m now, sadly, in my late 40s.) My work is demanding. And I have three children that need my attention. There just aren’t enough hours in the day.
Well, just for grins, my son and I wanted to record a saxophone version of Eric Clapton’s Layla. I couldn’t find that sheet music for sale anywhere. It’s weird and eccentric to play that on the saxophone. So there wasn’t any demand. And it’s far beyond my skill set today to transpose the sheet music on my own.
So, I asked ChatGPT to do it. It took some trial and error… and the bot had to work on it for a few hours. But I got my sheet music in the end. And it worked like a charm.
That’s not the only task ChatGPT does around the Sizemore household.
Last month, I used ChatGPT to plan my daughter’s trip to Disney World. It made a darn good itinerary and gave us tips on when and where to meet every princess she wanted to meet.
I’m now using it to plan a trip to Rome. It doesn’t have the ability to actually book hotels or flights – yet – but it saved me hours.
I’ve also used ChatGPT to write legal contracts… and draft letters I sent to government agencies. And my son uses it to create practice tests to help him study.
I could go on all day. But you get my point – AI is just part of my life now. I’m having a hard time remembering how I functioned without it.
And I’m using the $20 a month retail version. I’d love to get my hands on whatever experimental models Elon Musk or Bill Gates get to play with.
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Law of Diminishing Returns
We’re well past the “investing in AI” stage.
The economics of AI model building are bad and getting worse. That’s because each new generation of AI is exponentially more expensive but only incrementally better.
It’s a classic case of diminishing marginal returns.
I asked ChatGPT (also my research assistant) to summarize the problem for a layman…
In the early days of AI, each dollar spent brought dramatic leaps in performance. Models like GPT-2 and GPT-3 showed huge gains with relatively modest investments by today’s standards.
But as we’ve pushed the boundaries, those returns have started to diminish. Training frontier models like GPT-4 or Gemini now requires tens or even hundreds of millions of dollars, yet the improvements – while real – are often subtler: better reasoning, fewer mistakes, smoother language, but not revolutionary shifts.
This is the classic story of diminishing returns. The easy wins are behind us. Each new advance demands exponentially more compute, data, and engineering effort for incrementally better results. The so-called “scaling laws” that once predicted consistent performance gains with more compute are starting to flatten.
Not a bad summary…
AI models are also getting commoditized. Meta’s Llama AI is open source. So is China’s DeepSeek AI.
Essentially, that means they give the models away for free. The code or model is publicly available. You can use, modify, and redistribute it as you like (with certain restrictions).
If you’re an AI startup, you don’t need to pay the company behind an open-source AI model an expensive license fee.
It’s going to get increasingly hard to justify massive spending on model improvement if you’re not able to charge a premium for the results. For most companies most of the time, a slightly less powerful model might be perfectly fine if the price was significantly cheaper – or free.
So, how do we as investors make money on this?
The Pick-and-Shovel Plays to Make
There are the obvious plays in hosting and cloud services.
This is where Microsoft, Amazon, and Google excel, though they are also playing a brutally competitive game.
And those are just the obvious plays.
Here at The Freeport Society, we’re on a mission to find the best opportunities to profit from this and other forms of exponential tech.
That’s why, last week, I caught up with hyper growth investing expert Luke Lango about other ways to play AI.
Luke favored picks-and-shovels plays in companies making components for what he calls “physical AI” – robots with AI brains.
Sensors are a great example. There can be no widespread automation without quality sensors. That’s true of autonomous self-driving cars, factory robots manning the new assembly lines, and particularly humanoid robots like Elon Musk’s Optimus.
So, if you want to profit from AI, without going down the obvious route, make sure to catch up on the interview I did with Luke.
He shared the name and ticker for one of his favorite AI sensor stocks.
And if you’re not using it already, spend some time getting to know ChatGPT or another leading AI chatbot.
If you use WhatsApp, you already have Meta’s AI built into your phone. (Just look for the colored ring icon in the bottom right-hand corner when you open the app.)
And the other major competitors, like Anthropic’s Claude, are just a download away.
Let me know how you get on. Are there ways you’re using AI to make your life easier that I don’t know about. Write to me at feedback@thefreeportsociety.com.
Then take a minute to watch this video from Luke. In it, he provides more details on the investment opportunities that lie ahead in AI.
To life, liberty, and the pursuit of wealth,
Charles Sizemore
Chief Investment Strategist, The Freeport Society
