Enabler-to-Adopter Technology Cycle
Move from infrastructure winners to businesses that monetize the new platform
- Difficulty
- Advanced
- Time to result
- ~months to results
- Steps
- 6
- Confidence
- 96%
The Enabler-to-Adopter Technology Cycle divides a platform shift into two major phases. In the first, infrastructure providers supply the picks and shovels: chips, networks, cloud capacity, equipment, or other foundational resources. These companies attract capital because their demand is immediate and visible. The second phase begins when software developers and operating businesses package that infrastructure into solutions customers can deploy. The strongest long-term opportunities may emerge among adopters that solve costly industry problems, create new business models, or achieve measurable productivity gains without funding the entire underlying network. Investors therefore monitor the maturity and valuation of enablers while searching inefficient sectors for scalable applications. The transition is gradual and constrained by application development, power, capacity, reliability, and enterprise trust.
Origin
On Masters in Business, Mike Wilson compared the emerging AI cycle with the internet buildout, distinguishing infrastructure enablers from companies that later created valuable businesses on top of it.
Core principles
- 01New technology cycles begin with infrastructure buildouts
- 02Infrastructure spending enables later application innovation
- 03The largest long-term winners often monetize rather than construct the platform
- 04Useful packaged solutions unlock enterprise adoption
- 05Industries with severe inefficiencies offer fertile adoption opportunities
How to run it
- 1
Map the Infrastructure Layer
Identify the chips, networks, cloud platforms, power systems, and equipment required to make the technology usable. Determine which providers receive the earliest wave of spending.
Pro tip Distinguish indispensable infrastructure from products benefiting only from temporary shortages or hype.
Watch out Early revenue growth does not guarantee attractive returns when valuations already assume dominance.
- 2
Assess Buildout Maturity
Track capital spending, capacity, adoption barriers, and enabler valuations. Look for signs that infrastructure is becoming sufficiently available for application development to accelerate.
Pro tip Monitor practical constraints such as electricity, cooling, reliability, and deployment time.
Watch out The application phase may take years even when the enabling technology improves rapidly.
- 3
Find High-Inefficiency Markets
Search for industries with expensive manual processes, fragmented data, poor customer experiences, or outdated technology. These problems create economic room for a new application to deliver value.
Pro tip Favor problems where efficiency gains can be measured in money, time, or error reduction.
Watch out A technologically impressive application may have little value if the underlying problem is cheap or infrequent.
- 4
Identify Packaged Solutions
Look for products that customers can deploy without developing the foundational technology themselves. Evaluate integration, trust, workflow fit, and ease of adoption.
Pro tip Use the adoption of packaged office software as a model: customers buy an outcome rather than build the tool.
Watch out Avoid assuming that general-purpose tools automatically satisfy mission-critical requirements.
- 5
Verify Business-Model Improvement
Confirm that the adopter can use the technology to lower costs, increase revenue, improve retention, or create a defensible new service. Separate demonstrable economics from promotional AI labeling.
Pro tip Demand evidence of productivity gains in real workflows rather than impressive demonstrations.
Watch out Unreliable outputs can prevent adoption where numerical or operational accuracy is essential.
- 6
Rotate Toward Sustainable Winners
As the platform matures, compare the remaining upside of large enablers with the growth potential of smaller adopters. Build exposure gradually as viable applications and business models become visible.
Pro tip Maintain a watchlist before the winners are obvious, then require operating evidence before committing heavily.
Watch out The eventual winners may not yet exist, so premature concentration creates unnecessary risk.
In the wild
Telecom, fiber, and equipment companies initially benefited from building the internet's underlying network. Later, businesses such as online media, search, streaming, and social platforms used that infrastructure to create scalable models without bearing the full cost of constructing the network.
→ Long-term wealth creation shifted from many infrastructure builders to successful platform adopters.
A healthcare software company packages machine learning into a reliable workflow that reconciles records, reduces administrative errors, and replaces fax-based coordination. Hospitals purchase the finished solution rather than build models and computing infrastructure internally.
→ The adopter captures value through measurable cost savings and better workflow execution.
Common mistakes
Chasing Every Picks-and-Shovels Winner
Infrastructure demand can be real while the stocks remain unattractive because expectations and capital requirements are excessive.
Buying AI Labels Instead of Outcomes
A company qualifies as a meaningful adopter only when the technology improves a real workflow or business model.
Assuming Adoption Is Immediate
Power, capacity, trust, application development, and integration constraints can delay the second phase.
Is it for you?
Best for
It is best for long-term investors evaluating platform transitions such as the internet, cloud computing, and artificial intelligence.
Not ideal for
It is not ideal for short-term momentum trades or investments based only on broad technology branding.
From the transcript
“You buy the picks and shovels or the enablers initially, and then the real money, the real opportunity, is with the companies that can actually…”
“There will be use cases in business models that are very profitable built on the backbone of those cloud networks.”
“We just need the development of those applications. That's the second phase.”
From the episode
From Investment Banker to CIO with Mike Wilson
Mike Wilson