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AI Killed the Video Star?
In American Psycho, Patrick Bateman nearly has a breakdown over the “Silian Rail” lettering on a colleague’s business card. That used to be the market - obsessing over the presentation and corporate spin of a quarterly earnings result. But the recent volatility has been something else – the stability once provided by human analysts comparing watermarks has been replaced by sentiment-driven churn exacerbated by algorithms digesting massive datasets without an ounce of emotion.
What we ended up with was the “AI Disruption” trade spreading like wildfire last week – what began with SaaS companies has now infected wealth management, commercial real estate, insurance, IT services, drug distributors, and more. Trucking and logistics stocks fell after a former karaoke machine company said it developed an AI tool to help operators scale freight volumes. Property managers, office REITs, and catering companies are down because of the fear that white collar workers will be out of jobs and nobody needs to order catering to offices anymore.
Figure 1 – Timeline of AI Disruption Trades
Has it gone too far? Perhaps, but the indiscriminate selling and the breadth of the damage is directly related to the breakneck pace of innovation in AI and that it is near impossible to predict the capabilities of AI 12 months from now, much less in 5 to 10 years. We have surpassed the point where AI is recursive and as a result, what used to take months of innovation is now happening in days. After all, it was just one month ago when Anthropic’s Claude Cowork was released and since then, there has been a steady stream of new agentic tools and capabilities that threatens to upend traditional industries. This isn’t slowing down, in the next 60 days or so, a steady stream of new AI models and capabilities are expected – a new DeepSeek model, GPT 5.3, Gemini 3 GA, Meta Avocado, etc.
A Simple Test
To navigate this volatility, investors should apply a simple litmus test: What can’t AI do? While an agentic model can optimize a logistics route or draft a legal brief, it cannot physically pump a barrel of oil, harvest a crop, or connect a natural gas pipeline to a datacenter. Indeed these asset heavy companies making real world physical things – Energy, Materials, Industrials, etc. – have been benefitting from the rotation out of the AI disruption victims. Besides having the obvious benefit of being seen as not disruptable from an AI standpoint, many of them also have the additional tailwind of being positioned to benefit from the tremendous capex spending going into the build out of this technology. Moreover, they are also cyclical companies that benefit from a broadening out of stock market leadership. As we detailed in our note last week, in the Ninepoint Global Select Fund we are overweight these areas of the market.
What else can’t AI do? In our view, there is also the irreplaceable value of the live experience. As AI-generated content saturates our screens and agentic tools handle our digital chores, we may increasingly assign a premium towards anything that is undeniably, viscerally real. AI cannot replicate the collective energy of a sold-out stadium, or the sensory nuance of a high-end meal. This creates a powerful tailwind for the live experience economy, where the scarcity of genuine human connection in an AI-saturated world acts as a natural moat.
One company that plays into this is Sphere Entertainment, the owner-operator of the Las Vegas Sphere, a fully immersive entertainment center blending cinema, concerts, and gaming-style immersion. This past week Sphere shares shot up 25% after the company reported strong quarterly results featuring higher utilization (a new Wizard of Oz show and more live music residencies) resulting in higher per-show revenue. Sphere has plans to build new Spheres in Washington D.C. and Abu Dhabi, and we believe its status as a live event destination positions it well in the context of AI disruption.
Figure 2 – More Utilization (LHS), More Residencies (RHS) at the Sphere
Moreover, having growth companies such as Sphere Entertainment has been a natural diversifier in the portfolio, consider that its daily correlation with an AI bellwether stock such as Nvidia over the past year has been just 0.44 – indicating that although the upward trajectory over the past year has been similar to AI-related stocks, it has been less correlated on a daily basis, demonstrating diversification benefits with the AI trade.
Invest like an Optimist
While the market is awash in fears of AI disruption, it’s important to remember that for every AI victim, there is a windfall to be collected elsewhere. The market’s current "sell everything" reflex in certain sectors feels chaotic, but it will ultimately create buying opportunities. When new technologies arrive, there is a visible dislocation, and what is initially less obvious are the new opportunities in new industries that the technology creates. The industrial revolution led to an explosion of production, the internet led to e-commerce and social media jobs, cloud computing led to the SaaS economy. In each of these instances, the pie was not fixed, it grew bigger. Automobiles did not just displace horses – it led to suburbs, motels, highway systems, drive-in theaters, and fast food. Over time, we believe AI will follow the same path, create new opportunities that we cannot imagine yet.
In conclusion, the speed of AI innovation is undeniably jarring, but the history of creative destruction teaches us that while technology changes the how, it rarely changes the what. We still need to generate power, move molecules, and connect in person. In a world of infinite digital content, the real world has become a better investment.
Have a great week!
Cheers,
JLO
Jonathan Lo
Associate Portfolio Manager
Sam Mitter
Senior Portfolio Manager