Understanding AI Investment Opportunities Through Fund Structure Analysis

When mapping out technology stock investments, portfolio managers increasingly turn to structured frameworks rather than picking individual opportunities. Dominic Rizzo, who oversees the Global Technology Stock Strategy Fund, presented a compelling investment architecture in his mid-2023 analysis for Money Monday. His model reveals how the fund structure of AI investments can be organized into four distinct layers, each offering different risk-return profiles and strategic positioning opportunities for institutional investors.

The Four-Tier Framework Reshaping Tech Investment Strategies

Rizzo’s layered approach breaks down the artificial intelligence ecosystem into components that institutional investors can methodically evaluate. At the foundational base sits the chip ecosystem—the semiconductor sector that powers all downstream AI development. This tier represents the most essential component: without advanced processing power, no AI application can function at scale.

The third layer encompasses infrastructure and enablers, dominated by the cloud computing giants. Microsoft, Amazon, Apple, and Alphabet operate the data centers and computing platforms that serve as the backbone for AI services. These companies provide the middleware that connects raw computing power to actual AI applications, making them crucial intermediaries in the fund structure equation.

From Chips to Chatbots: How Each Layer Powers AI Investments

The second tier focuses on foundational models—the companies creating large language models and base AI systems. Microsoft’s partnership with OpenAI, Meta’s LLaMA, Google’s PaLM2, and Amazon’s Titan all represent investment positions at this level. These entities develop the core AI technologies that subsequent layers build upon, serving as the intellectual foundation for the entire ecosystem.

At the top layer sit the consumer-facing applications: chatbots and productivity tools. Here we find Microsoft’s ChatGPT integration, Google’s Bard, and Amazon’s CodeWhisperer. While these applications generate the most user engagement and media attention, they represent just the uppermost component of the complete fund structure.

Why Semiconductor Stocks Lead the AI Investment Fund Rotation

The analysis underscores a critical investment insight: chip stocks consistently rank among the strongest performers in U.S. technology indices specifically because they occupy the foundation of AI’s infrastructure hierarchy. Every advancement at higher layers—whether new models, better cloud services, or more sophisticated applications—drives demand for more powerful semiconductors.

Understanding this layered fund structure helps investors identify which sectors may outperform as AI adoption accelerates across industries. Rather than chasing the most visible applications, sophisticated investors recognize that the structural positioning within each tier determines long-term returns.