Episode summary
Investing through the AI transition
Capital Ideas Podcast
· · 27 min · Hosts: Debbie Leow · Guests: Brady Enright
Summary
Brady Enright argues that the AI transition rhymes with the dot-com era because both are periods of transformational change, but the setup is different. In 1999, a lot of the promise outran the infrastructure; today, the bottlenecks are more about power and compute capacity, not whether the technology can be deployed at all. He thinks that means some companies will pull ahead and never look back, while others that miss the shift may never catch up.
He also says the market is already creating a gap between stock prices and earnings in some AI-linked names, and that gap will eventually close. His framework is to focus less on predicting every winner and more on whether a company is on the right side of change. He uses Microsoft to show how earnings and stock price can diverge for years, then converge when a company adapts.
Looking ahead, Brady sees the richer opportunity shifting from AI infrastructure suppliers to the users of AI, where competitive differences could widen sharply. He says management quality matters because the best teams compound small, repeated decisions over years, creating durable advantages. His own edge, he says, comes from decades of seeing many business models and being flexible enough to apply different frameworks to different situations.
Key takeaways
- Brady Enright thinks the AI era is more investable than the dot-com era because the physical infrastructure is increasingly being built, even if power and compute remain bottlenecks.
- He expects some AI winners to become massive companies quickly, while some incumbents that miss the transition may never fully recover.
- Brady says stock prices and earnings must converge over time, so large valuation gaps cannot persist forever.
- He sees the next five to 10 years favoring AI users more than AI infrastructure suppliers, with widening competitive gaps inside industries.
- His edge is a flexible, cross-industry process built from thousands of small-cap and generalist reps, not a single proprietary insight.
Notable quotes
“I have not seen a speculative frenzy like that since”
“I think there will be some winners who declare themselves, and they never look back”
“the one thing I can guarantee you, the one thing I know for certain, is that eventually that gap has to close”
“it matters whether or not you're on the right side of change or the wrong side of change”
“the opportunities are perhaps a bit less. And it's transitioning to the users of AI, where I think the opportunity is”
How the episode opens
- Hi, I'm Mike Gitlin. Welcome to another episode of our "Capital Ideas podcast," where we get to know the people behind the portfolios. Today we have Brady Enright with us.
Brady's an equity portfolio manager based in our San Francisco office, and he's been at Capital Group for 29 years. We'll talk about the differences between the dot-com bubble and the current market, Brady's added responsibility of helping to lead our equity group, and a bumper sticker that should be on Brady's car instead of his office wall. Brady, welcome to the podcast.
- Thanks. It's great to be here. - All right, so, I'm going to dial back to 1999, and it's just before the dot-com bubble burst.
And then let's think about now, where people are drawing some comparisons back to then with AI, and they're worried about tech as a component of the broader index. How are you thinking of that time versus now? What's the same?
What's different? - Sure. I guess just as a starting point, that 1999 experience was one of the craziest experiences of my career.
I have not seen a speculative frenzy like that since. - On the way up. - On the way up, exactly.
And so, you know, it's very common to have multiple IPOs every day. They'd get priced at the top of their range. They'd go up 50% to 100% on their first day of trading.
And these weren't always established companies. So, you know, you would hear, we now talk about things like Pets.com. So, they go out, they buy the domain name for Pets, and you get three guys who used to work in a pet store, and all of a sudden you're a public company, and three months later you're a billion-dollar market cap.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- ai transition
- dot-com bubble comparison
- equity selection
- investment fundamentals
- management execution
Companies and tickers mentioned
- Capital Group
Watch the episode
Watch “Investing through the AI transition” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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Capital Ideas Podcast, this episode and its artwork belong to Capital Group. Octagon is not affiliated with the show; this page is an independent summary.
