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Key Points
- AI investing has evolved through three waves—starting with infrastructure, expanding to energy systems and now entering widespread adoption across traditional industries.
- The third wave represents a significant opportunity, with AI driving transformation in sectors like retail, health care, finance and advertising.
- Companies are using AI to enhance customer engagement and streamline operations, often at more attractive valuations than early-stage tech firms.
- Like the internet’s evolution post-dot-com boom, AI is becoming a foundational layer for innovation, with value creation beyond the tech sector.
2023 wasn’t just another year for technology, it was the year artificial intelligence (AI) went mainstream. ChatGPT was the first large language model (LLM) to achieve widespread public adoption, launching a wave of consumer interest in AI. It was quickly followed by LLMs from major hyperscalers, which collectively accelerated the democratization of access to LLMs.
We believe this is the "third epoch of technology," a turning point comparable to the dawn of the internet or the rise of the smartphone. AI is racing from experimental novelty to everyday necessity, with its vast potential still unfolding.
The first two AI waves have primarily benefitted large technology companies. The third wave is reshaping traditional industries, poised to create new value beyond the tech sector. For investors, this opens opportunities to discover companies that are transforming their models, boosting efficiency and unlocking innovation—often at attractive valuations.
AI's First Movers: Laying the Foundation
To navigate this dynamic landscape, we utilized Newton's multidimensional research across fundamental, thematic, private market, investigative and quantitative to construct a comprehensive view of the investment landscape. Through this lens, we identified AI investment opportunities in three distinct waves, each representing a phase in AI evolution and expansion into the broader economy.
Major Waves of AI
Identifying Investment Opportunities
What started with OpenAI's "ChatGPT" has led to potential investment opportunities across three distinct waves.
Source: Newton, 2025. ChatGPT is a large language model chatbot developed by OpenAI that can engage in human-like conversations and generate content.
The first wave of AI adoption centered on foundational hardware such as semiconductors, data centers and infrastructure required to power AI. There has been significant capital investment by large hyperscalers, all well-known technology companies, to expand capacity for AI workloads, with strong demand for graphics processing units, AI accelerators and integrated circuits. These companies scaled up data centers and the related infrastructure necessary to meet the surging demand for AI workloads and monetize related enterprise services.
The second wave focused on power systems needed to meet AI’s rapidly growing computational demands. US data-center power usage is projected to rise from 2% of total consumption in 2020 to 7.5% by 2030, fueled by generative AI, onshoring and electrification.1
This shift created compelling opportunities across energy, utilities and industrials—sectors traditionally seen as cyclical but now essential to AI’s scalability.
Unlocking "Value" in AI's Third Wave
The third wave marks a shift from building AI infrastructure toward widespread adoption. In our view, this wave remains largely untapped despite representing a $2-3 trillion opportunity.2 From enterprise applications to agents and consumer tools, this wave broadens the investment landscape beyond tech companies and is now permeating traditional industries such as retail, healthcare, finance and advertising.
Beyond AI: What Comes After Semiconductors and Software?
Energy demand > energy supply > energy innovation + infrastructure
Source: US Energy Information Administration (EIA).
In the third wave, we believe there are two broad categories of AI adoption for more traditional companies.
- Consumer: Deployment of AI-powered agents, decision systems and customer experience platforms that are reshaping how businesses engage and compete.
- Enterprise: The utilization of AI to automate the storage, organization and optimization of data, enhancing operational efficiencies.
This expansion presents a compelling opportunity for investors to and identify companies in legacy sectors that are embracing AI to drive transformation and value creation.
Much like the early days of the internet, we expect to see new businesses built on top of this technology. Whether it's a logistics firm using predictive analytics to optimize delivery routes or a healthcare provider deploying AI for diagnostics and patient engagement, value creation from the third wave of AI will come from companies outside the traditional tech sphere.
From Foundation to Transformation
As we consider the trajectory of future AI winners and losers, parallels can be drawn to the value creation that followed the dot-com boom. Although tech-centric and hype-driven growth companies initially surged, many ultimately collapsed under the weight of unsustainable valuations.
Value outperforms growth after the tech bubble
Value/growth 10-year rolling relative return
Source: Alliance Bernstein, as of April 30, 2025. Performance calculated in US dollars. Empirical Research Partners Analysis. Largest 1,500 US stocks; capitalization-weighted data. Shows the relative return of the cheapest quintile of stocks vs most expensive on a price to book basis. For illustrative purposes only.
While early innovation was concentrated in the tech sector, the internet ultimately became a foundational layer across industries—powering e-commerce in retail, enabling digital payments and mobile banking in finance, and reshaping how businesses operate at scale.
We see the third wave of AI paving a similar path. While hyperscalers and hardware led early stages, they now command elevated valuations. These high-profile names dominate headlines, but AI capabilities are increasingly being embedded into traditional industries, where a new generation of value creation is emerging from companies outside the traditional tech sphere. This shift creates a compelling opportunity for investors to explore the broader landscape. As industries adapt and leverage AI, they are transforming business models, unlocking efficiencies, driving productivity and creating new domains of value—often at lower valuations.
Identifying Early Winners Across Traditional Industries
At Newton, we are positioned to identify and act on the opportunities emerging from the third wave of AI—especially as its influence expands into the broader economy. Our platform is designed to stay ahead of this curve by detecting early signals, identifying companies with meaningful AI integration and surfacing insights from private markets and deep research. We believe that this should enable us to identify differentiated winners and losers before the market prices them in.
1 Source: US Energy Information Administration (EIA).
2 Source: Newton estimates: Implications of DeepSeek discussion and off-site, 2025.
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