According to billionaire investor Warren Buffett, the best investment you can make is in yourself. And with artificial intelligence (AI) on the rise, that’s never been more relevant, or more important.
It’s not yet clear what the wider implications of AI will be for jobs and wages. But those who have unique skills and abilities are likely to be in a stronger position than those who don’t.
Inflation
Buffett’s made the point that some people and businesses fare better than others in inflationary environments. That’s because some can raise their prices and others can’t.
The ones that can are the ones with something unique. Whether it’s individuals or companies, the best in the business can increase their prices as costs around them rise. As a result, they avoid being left behind by inflation. Because they’re the best at what they do, people are still willing to buy their products and services at higher prices.
That’s why Buffett said the best protection against inflation comes from investing in yourself, followed by investing in a strong business. And something similar is true of AI.
AI winners and losers
It seems clear that the AI revolution will provide some big productivity gains. What’s less apparent – at least so far – is exactly who or what the major beneficiaries will be.
One potential scenario involves big reductions in employment, especially among white-collar workers. That isn’t guaranteed to happen, but it’s something to take seriously.
I think the best way to prepare is along the lines of Buffett’s inflation strategy. It involves finding ways to add unique value and investing in businesses that can do the same.
The software industry looks like a major casualty of AI with coding expertise being easily replicated. But while there’s some truth to this, I think this view is much too simplistic.
Defensibility
One firm I think is interesting is Axon Enterprise (NASDAQ:AXON). The stock isn’t one I’m looking to buy at the moment, but it’s one I intend to keep a close eye on.
Axon’s software integrates with its hardware, which includes police tasers, cameras, and recording equipment. And regulation in this industry makes these products hard to displace.
That gives the company a competitive position that isn’t just based on having software that’s hard to copy. Its software is protected by its hardware, which is tough to compete with.
The firm pays out $550m a year in stock-based compensation and makes $150m in free cash. Given this, I’m not convinced a price-to-sales ratio of 18 represents an opportunity right now.
Investing in 2026
Investors looking at tech stocks in 2026 have to think about what sets a business apart from AI competition. It’s not enough to just have a large customer base to sell new products to.
I think one of the best forms of protection is being vertically integrated in a regulated sector. And Axon’s mix of hardware and software in the law enforcement industry’s a great example.
The stock isn’t on my ‘to-buy’ list right now, but not because of its business model. The question for investors then, is where else they can find similar companies with more attractive valuations?
