AI isn't just creating the next generation of technology giants. It may be coming for the last generation, too.
Remember the cassette tape? The Walkman? The BlackBerry? At one point, these were revolutionary technologies. Products we couldn't imagine living without. Until something better came along.
Now think about Amazon. Or Google. For the past two decades, a handful of technology companies have seemed almost invincible. Amazon changed how we shop. Google changed how we find information. Microsoft became indispensable to the way we work. They didn't just build successful businesses. They built entire ecosystems around them, creating enormous competitive advantages and extraordinary profits.
But here's the interesting twist.
What happens when the disruptors become the disrupted?
Let's go shopping.
For years, if you wanted to buy something online, you probably started with Amazon. You searched, compared products, read reviews, and eventually clicked "Buy." And along the way, Amazon made money—not just from selling you the product, but from companies paying to advertise to you.
Now imagine telling your AI assistant: "Find me the best carry-on suitcase under $300, compare the reviews, and buy it wherever it's cheapest." No scrolling through sponsored listings. Perhaps no visit to Amazon at all. That's the potential disruption. And it's already beginning.
Now look at Google.
For years, Google's search engine has been one of the greatest advertising businesses ever created. But what happens when instead of searching through links, we simply ask AI for an answer?
Google's latest earnings tell an interesting story. Search advertising revenue is still growing, up 12% in the third quarter. Hardly the picture of a struggling company. But AI searches don't necessarily generate the same advertising revenue as traditional searches. So Google faces a fascinating challenge: How do you embrace the technology that could eventually undermine the economics of your most profitable business? And how much do you have to spend to stay ahead?
The giants are fighting back.
Here's what makes this particularly interesting. Amazon, Google, Microsoft, and Meta just reported strong revenue growth. These are enormously profitable businesses, not companies on the verge of disappearing. And they're investing staggering amounts in AI. Microsoft alone reported more than $45 billion in capital expenditures in its latest quarter. Amazon expects approximately $220 billion in cash capital expenditures this year. They're not standing still.
But they're spending enormous sums to build the next generation of technology, even as that technology could disrupt parts of their existing businesses. And that raises an important question for investors.
Will all this spending create new sources of profit—or simply become the cost of protecting the profits they already have?
The Edit
In this week's episode of Private Wealth: The Edit, I explore the parallels between today's AI boom and the railroad revolution of the 1800s. The railroads transformed America, but not every railroad company—or its investors—prospered.
AI may tell a similar story.
We spend a lot of time looking for the next big winner. The next Amazon. The next Google. But perhaps we should also be asking which of today's winners could be tomorrow's casualties. Because technological leadership isn't permanent. Neither are extraordinary profit margins.
And today's indispensable technology can become tomorrow's cassette tape.
Less noise. Better investing.
