So I was listening to The Compound earlier this week and they discussed the fact that AI is destroying most “asset light” companies. Either they are turning into asset heavy companies (hyperscalers + meta) or their moat is being eroded by AI (SaaS).
This doesn’t mean that asset light companies will no longer command a premium, it’s quite the opposite. Asset light companies that are able to maintain their moat will command an even higher premium.
I believe there will also be a new form of company deemed “employee light”. It will probably have a more diplomatic name than that, but companies that are able to run with very few employees will be a popular investing theme.
A perfect example of both of these is RDDT. The company is extremely asset light and only has 2500 employees. They can probably reduce that headcount significantly with AI.
I also believe that Reddit has a much stronger moat than people realize. They are the one social media platform that Meta cannot copy. They have an extremely strong network effect which is why there isn’t a viable competitor to Reddit. People try and when there’s no one to interact with, they go back to Reddit. The way Reddit is organized also gives it a unique value proposition compared to other platforms. People without a following can have their voice heard by thousands or even millions of people. The same is not true for any other popular social media platform. Since most people in the world don’t have a following, this is extremely valuable.
I don’t see a significant threat from AI as people want exactly what Reddit currently offers. Public, anonymous human interaction. AI can’t offer that. Now Reddit does need to deal with the bot problem but fundamentally it is a human driven platform.
Asset light and employee light often means moat light. But there are a few companies that will be able to maintain their moat while continuing to be asset and employee light, and I believe these will be the biggest winners over the next 5-10 years. Reddit is a prime example and is a fantastic buy right now - what others do you have in mind?
Disclosure: Long 1000 shares of $RDDT