AI Could Turn Software Into “Dumb Data Pipes” | Dom Rizzo

The AI-driven productivity cycle is fundamentally reshaping enterprise technology, shifting value from traditional software models to compute-intensive infrastructure. Because "compute equals revenue," the current capital expenditure boom remains sustainable as major enterprises prioritize securing leading-edge intelligence. Semiconductors, particularly those powering memory and agentic computing, have become essential linchpin technologies, outperforming software firms that struggle to adapt their business models. While software companies historically benefited from recurring revenue and low churn, the rise of agentic AI—where models perform tasks rather than just answering queries—demands a shift toward high-performance hardware. Portfolio manager Dominic Rizzo emphasizes that successful investment in this era requires a disciplined framework: identifying mission-critical technologies, targeting secular growth markets, monitoring accelerating fundamentals, and maintaining valuation discipline. Despite the rapid growth, the market remains in the early-to-middle innings of this transformative cycle.