The AI Immunity Premium: Deconstructing the Great Asset Mispricing
The Era of AI Immunity
Investors have transitioned from chasing growth to seeking shelter. This shift manifests as a massive capital rotation into low-innovation sectors, a phenomenon driven by the perceived threat of Artificial Intelligence. Companies producing consumer staples—think toothpaste and detergent—now command valuations traditionally reserved for high-growth tech. This 'AI immunity' premium reflects a market terrified that mid-tier software and services will be hollowed out by automation, leading them to overpay for the safety of physical goods.
Scott Galloway says buyers are paying a premium for 'AI immunity'
companies, once the darlings of Wall Street, are facing a brutal repricing. Despite maintaining 70% to 90% gross margins and robust recurring revenue models, these entities have been demolished. The narrative suggests that AI will eventually gut these companies' value propositions. Consequently, investors are ignoring the defensive moats provided by network effects and pricing power in favor of 'boring' stocks like
trade at forward P/E ratios of 20 to 25, the upside becomes capped. These legacy giants lack the structural capacity to double in value within a year. In contrast, the battered software sector now offers a basket of companies with high-margin profiles at a steep discount, creating a setup for massive recovery as the market corrects its overreaction to AI displacement fears.
The Outlook for Capital Allocation
The current predicament forces a choice between overvalued stability and undervalued innovation. While the
have seen nearly $1.5 trillion in market value erased, the pendulum has swung too far toward consumer staples. Smart capital will eventually rotate back to the high-margin, recurring revenue models of software once the 'AI immunity' hype reaches its mathematical limit. Diversification must account for these valuation extremes rather than following the crowd into low-growth bunkers.
