The AI Investment Framework Highlighted by Industry Experts

In late 2023, Dominic Rizzo, manager of the Global Technology Stock Strategy Fund, provided an in-depth analysis of AI investment opportunities that has since become highlighted among financial professionals seeking to navigate the rapidly evolving technology landscape. His framework, which was featured in Money Monday and reported by Ming Pao, reveals a sophisticated understanding of how artificial intelligence investments are structured across multiple tiers.

Understanding the Four-Tier AI Architecture

The investment approach outlined by Rizzo demonstrates how AI opportunities are distributed across four distinct layers, each serving a critical function in the broader ecosystem. This tiered structure provides investors with a roadmap for identifying where artificial intelligence is creating value and where the most significant growth potential exists. Rather than viewing AI as a monolithic sector, this framework shows how different categories of companies contribute to the AI revolution at different levels.

Semiconductor Chips: The Foundation Highlighted in AI Strategy

At the base of this pyramid sits the chip ecosystem—arguably the most highlighted layer in current AI investment discussions. Rizzo emphasized that semiconductor stocks represent among the strongest sectors within U.S. technology stocks precisely because they provide the computational power that all AI applications require. Without advanced chips, no AI model can function effectively. This foundational layer includes manufacturers and developers of the processing power that enables everything above it to operate.

Infrastructure and Foundational Models: The Supporting Pillars

The middle layers of the AI architecture encompass infrastructure providers and foundational model developers. Cloud computing platforms offered by tech giants including Apple, Microsoft, Amazon, and Alphabet form the infrastructure backbone. Simultaneously, companies developing large language models—such as Microsoft’s collaboration with OpenAI, Meta’s LLaMA, Google’s PaLM2, and Amazon’s Titan—create the foundational technologies that other AI applications build upon. These layers represent both essential support systems and significant investment opportunities.

Consumer-Facing Applications: Where AI Meets Users

The top tier consists of AI-powered applications that end users directly interact with. Microsoft’s ChatGPT, Google’s Bard, and Amazon’s CodeWhisperer exemplify how foundational models are transformed into consumer products. This application layer is where the visibility and excitement around AI typically centers, though Rizzo’s analysis suggests that the earlier layers represent more fundamental investment opportunities.

This highlighted framework demonstrates that successful AI investment requires understanding the entire value chain rather than focusing solely on headline-grabbing applications. Each layer supports the others, and the strength of the foundational components ultimately determines the success of the entire ecosystem.