How much juice do investors have left to take advantage of AI development?

That’s a question facing Joe Davis, global chief economist at Vanguard.

Even accounting for some recent stumbles, hyperscalers and AI hardware makers have seen stellar gains in recent years. Davis believes aggressive spending will continue for another year or two, but worries it’s already priced in.

While popular AI stocks may continue to rise in the near term, Davis warns that the upside won’t last and that it is AI users who will eventually begin to unlock value and earnings growth.

“History offers a clear lesson here,” Davis wrote in a June report for Project Syndicate republished by Vanguard. “Companies that create transformative technologies rarely capture the most long-term value. Instead, those benefits accrue to users.”

“Electricity created more wealth for manufacturers who could operate assembly lines 24 hours a day than it did for electric companies. The automobile enriched suburban developers and retailers more than it did the automakers themselves,” he continued. “AI could well reproduce this pattern.”

That said, Davis said it’s time to start positioning for a transition from AI infrastructure stocks to AI beneficiaries.

He highlighted three operations with attractive “risk-return profiles” to make this transition over the next five to ten years: Value-oriented US stocks, developed markets outside the USand high quality fixed income.

As examples of the types of companies in these categories that could benefit from AI, he pointed to healthcare providers and financial and business services companies, which could automate tasks and offer more personalized services.

“The point is not to abandon exposure to the technology or try to time the market. It is to recognize that in a world transformed by AI, we will have moved from the current phase, where AI creators dominate, to one in which AI users should increasingly attract attention,” he wrote. “It happens every time a big technology transforms the world.”

These trades are not only well positioned to get a boost from AI usage if the technology reaches its potential, but they can also act as defensive investments in case AI trading fails and investors flee growth stocks, Davis said.

Examples of funds that offer exposure to these trades include the iShares Core S&P US Value ETF (IUSV), the Schwab International Equity ETF (SCHF), and the Vanguard Total Bond Market ETF (BND).