Artificial Intelligence is entering its most important transition yet—from the physical buildout of infrastructure to the monetization of software and applications that harness the intelligence within vast global data ecosystems. The first phase, defined by record capital expenditures from major technology companies on servers, GPUs, and data centers, is maturing. The next phase—AI utilization and application—will determine the durable winners of this technological revolution.

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Historical precedent supports this evolution. Across every mega-trend—from personal computing to mobile, cloud, and the internet—hardware leaders gave way to software and service innovators who captured enduring profitability once physical assets commoditized. The same trajectory is now unfolding in AI. While the “Magnificent Seven” remain dominant, smaller, application-layer companies integrating AI into critical workflows—from manufacturing and defense to simulation and data analytics—offer the most asymmetric long-term upside.

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SLG’s research identifies firms such as CAE, Inc., leveraging AI for immersive defense and aviation simulation, and Jabil, Inc., using AI-driven robotics for adaptive manufacturing, as early examples of this shift. For long-term investors, the opportunity lies in identifying these emerging enablers early—recognizing that even a few well-chosen positions can define portfolio performance in the decade ahead. The AI revolution’s next phase belongs to those who build on intelligence, not just compute it.

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