AI Infrastructure Boosting Stock Market Growth
The surge in the stock market and overall economic expansion can largely be attributed to massive investments in artificial intelligence (AI) infrastructure, particularly AI data centers, by major tech companies known as hyperscalers.
These hyperscalers, including the big four—meta platform, Microsoft, Amazon, and Alphabet—are spending hundreds of billions of dollars yearly to establish AI data centers. Remarkably, the capital expenditures (Capex) for AI infrastructure from these companies have more than tripled in just five years.
Last year, companies globally invested around $1 trillion in data centers, as per McKinsey & Company, and this figure is expected to skyrocket to about $4 trillion by 2030. It seems likely that we’ll see revisions of these estimates quite often in the coming months and years. Apollo’s recent research even suggests that projections for capital investment in data centers have been revised upwards multiple times recently.
If these forecasts hold even a fraction of truth, the capital for AI will likely continue to propel economic growth and keep the bull market alive for years to come.
I won’t speculate on which of the four giants will emerge as the leader in this high-stakes race for AI dominance. However, one thing’s for sure: running and expanding these AI facilities is going to demand a significant supply of resources—like electricity, memory, copper, and various electronic components.
That brings me to a brief list of companies involved in these sectors. Many have already seen substantial gains in revenue, profit, and stock prices thanks to the rising demand from data center investments. Honestly, these could be solid stocks to consider holding for, well, the next five years at least.
Copper Demand on the Rise
First on the list is copper. Traditional data centers typically need between 5,000 to 15,000 tons of copper, but AI data centers might consume up to 50,000 tons. Given this spike in demand, it’s no surprise that the price of copper jumped from around $486 per pound a year ago to roughly $656 today—a 35% increase.
If you’re looking to invest, consider the Global X Copper Miners ETF, which tracks a range of global copper exploration and mining firms. Its prices have more than doubled over the past year.
Next up is power. With data centers becoming major electricity users, there is urgent need for investment in power generation. The World Resources Institute forecasts that global electricity transmission and distribution structures must double by 2050 to meet impending demand. GE Vernova, a key player in gas and steam turbines, is benefitting from this trend, with its stock climbing 85% in the past year.
Unending Demand for Memory in AI Data Centers
Then there’s memory, a critical ingredient that data centers can never seem to have enough of. Micron Technology manufactures essential DRAM and NAND memory, but global shortages are pushing prices up. Their stock has skyrocketed over 900% in the last year and has just entered the exclusive $1 trillion market cap club.
Another notable company is Sandisk, which produces large quantities of flash memory for data centers. Their stocks have also seen impressive growth, increasing over 650% in just this year.
Other electronic components are also crucial. Taiyo Yuden creates multilayer ceramic capacitors (MLCCs), which manage power flow in electronic devices—vital for data centers. Currently, there’s a global shortage of MLCCs, and Goldman Sachs predicts a fourfold increase in demand from AI servers by 2030.
And as a bonus to this portfolio, we can highlight Caterpillar, known for construction and agricultural equipment. Each new data center project involves extensive construction, and CAT is well-positioned to meet this rising demand, with a stock price increase of 165% over the past year.
So there you have it: a curated selection of six promising stocks likely poised for growth in the AI infrastructure landscape over the next five years.
