Bets on companies that drive the development of artificial intelligence and the infrastructure that supports it have served as a haven for investors looking for profits.
They poured cash into major companies like Nvidia (NVDA) and its competitor AMD (AMD), which provide hardware to support AI development. The company's stock price has increased approximately 204% and 72%, respectively, over the past 12 months. Additionally, there are large language model developers such as Microsoft (MSFT) and Google (GOOGL) who are building their own versions of generative AI. The company's stock price has increased about 43% and 49% over the past 12 months.
Ultimately, investors feared that trading would become too crowded and, as a result, prices would be too high. They started looking for his AI-related interests elsewhere. A memo from Goldman Sachs in August suggested that the smart option is to ignore the descriptive name and focus on the long-term beneficiaries of AI: companies that use the technology to improve labor productivity. presented to investors. We call this strategy “post-trade AI trading” and identified 50 stocks that may fall into this category. The downside to this approach is that you may have to wait years before you see any benefits. And even if that happens, there is no guarantee that management will be able to strategically guide the company through the turmoil and emerge successfully.
But for die-hard investors not ready to throw in the towel on AI bets, there's another sector expected to be an early beneficiary of its development: power and land.
AI development doesn't happen on everyday computers. Large data centers are required to train, publish, and distribute LLM. This type of infrastructure means real estate and power usage increases on demand. An April 17 memo from Bank of America, led by research and marketing director Thomas Thornton, estimates that data centers under construction will initially increase electricity usage from these facilities by 50%. . Once construction is complete, usage is expected to double again.
This creates pick-and-shovel type opportunities, a term used to describe companies that provide basic products and services that support the development of end products. It is considered a low-risk bet because it is in the early part of the supply chain.
For example, the power grid and the infrastructure that transmits power will need to be upgraded.Stocks rated as buys Eaton (ETN) and aspentech (AZPN) is well-positioned to benefit from this demand. When it comes to electrical and thermal equipment needed to operate a data center, investors can look at: Vertive (VRT) Bank of America Research Analyst Andrew Aubin said:
These centers need to operate without interruption, so caterpillar (CAT) is well positioned as a backup power supplier. Research analyst Michael Feniger said the company offers generators, automatic transfer switches, switchgear and remote monitoring.
For real estate exposure, investors can look to buy-rated REITs for large public data center providers. digital reality (DLR) and Equinix (EQIX). As demand for data centers increases, these companies have more pricing power, said research analyst David W. Baden.
