(Bloomberg) — The artificial intelligence trade is moving, and investors seeking cutting-edge ways to play it are snapping up technology “pick-and-shovel” stocks as massive cloud service providers pour billions into new data centers.
Data storage companies dominated the S&P 500 Index in 2025, with Sandisk Corp. shares soaring almost 580% to make them the benchmark’s best performer, with Western Digital Corp. in second and Seagate Technology Holdings Plc in fourth. Meanwhile, AI-linked power providers and cable and fiber producers such as Amphenol Corp., Corning Inc., NRG Energy Inc. and GE Vernova Inc. were among the Top 25.
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That’s a shift from the last few years, when Nvidia Corp. — the original AI pick-and-shovel company — was entrenched among the top stocks in the S&P 500. The chip giant gained 40% in 2025, making it the 71st best performer in the index this year. While Nvidia and cloud hyperscalers Microsoft Corp., Meta Platforms Inc. and Alphabet Inc. are still powering the market due to their sheer size, their percentage gains have started to wane.
“When the benchmarks are fairly concentrated, it’s important to look for themes that are gonna drive sales and earnings growth,” said Jake Seltz, portfolio manager at Allspring Global Investments. “AI is kind of one of those dominant themes right now, that’s nothing new. So we’re just looking, broadening our horizons beyond tech.”
Investors can find room to grow and better valuations by buying into the next wave of companies that are set to benefit from the billions of dollars hyperscalers are spending to build data centers.
“What we are focused on are the picks and shovels of where that money is being spent,” said Matt Sallee, a portfolio manager at Tortoise Capital Advisors, which doesn’t own shares of any hyperscalers. “The chips to a degree, but more so some of the names that you haven’t really heard of.”
Of course, there are some fears on Wall Street that the spending could slow, reversing gains in stocks tied to AI. It’s similar to what happened during the pandemic, when demand for basic home health products took off.
“Covid hit and this world needed way more face masks, hand sanitizer, all those things,” said Jed Ellerbroek, portfolio manager at Argent Capital Management. But within six to 12 months there was a glut, and “those businesses that supplied those things went from the best times ever to the absolute worst times ever.”
Still, investors remain bullish on the AI trade as the hyperscalers keep pledging to spend. Here’s what investors are buying now to play the tech infrastructure buildout.
Data Storage
Wall Street expects data storage to remain hot in 2026 after Sandisk, Western Digital and Seagate surged in 2025. However, the boom times for this year’s winners may be coming to an end. For example, the average analyst price target for Sandisk in 2026 is $264, which would be a roughly 8% gain from where it currently sits at around $244.
Analysts see much bigger upside in a company like Pure Storage Inc., which is trading for $68 but is projected to reach $94 in 2026, a 38% leap. Other digital storage shares tied to AI include NetApp Inc. and Dell Technologies Inc.
Construction and Power
A range of stocks associated with building and powering data centers are expected to keep running. Quanta Services Inc., which provides specialized contracting for utilities and telecommunications companies, is a top pick for Tortoise Capital’s Sallee. Other contractors include MYR Group Inc., Primoris Services Corp. and MasTec Inc.
Companies involved in wiring are also popular. They include Amphenol, which designs and manufactures high-speed fiber and copper interconnect solutions used in data centers, and Emcor Group Inc., which does mechanical and electrical construction. Other power infrastructure names include Vistra Corp., Constellation Energy Corp., GE Vernova and Generac Holdings Inc., which makes backup generators.
Bitcoin Miners
Bitcoin miners represent a potential “total revaluation story” as they pivot toward powering data centers and away from mining the cryptocurrency, according to Sallee.
“They have the electricity already, they’ve had it for five-plus years to produce Bitcoin,” he said. “They’re going to redirect that electricity to higher-value, long-term contracts for high performance computing hosting.”
Names in this area include Bitdeer Technologies Group, whose shares jumped in October after the company announced plans to move further into AI. Shares of IREN Ltd., Cipher Mining Inc., Riot Platforms Inc. and WhiteFiber Inc. have also received a boost from the companies’ intentions to convert to high-performance computing data centers.
Heating and Cooling
Data centers require specialized precision controlled heating, ventilation and air conditioning systems, creating demand for the companies that make them. Vertiv Holdings Co., which provides power systems and cooling solutions for data centers, is up 46% in 2025 and remains a stock to watch. Eaton Corp., another power management firm, overlaps with Vertiv but is less of a pure play, according to Seltz.
Other names in the space include Comfort Systems USA Inc., which provides heating ventilation and air conditioning system installation and maintenance, as well as water providers Xylem Inc., Ecolab Inc. and American Water Works Co.
Software
Some investors with longer time horizons are looking to software as future beneficiaries of AI as large language models improve and more applications are built.
“Investors are, I think, naturally inclined to look for companies that have cheaper valuations with terrific magnitude of growth that are potentially gonna really benefit from the application of AI,” said Melissa Otto, head of technology, media and telecommunications research at Visible Alpha.
Software stocks have generally underperformed this year, with the S&P 500 Software Industry Index rising 12% in 2025 compared with a 17% gain in the overall benchmark. But that has made the stocks’ valuations more appealing.
“I don’t think those stories are dead,” said Allspring’s Seltz, who is watching names such as Snowflake Inc., Datadog Inc. and ServiceNow Inc. “It feels like it might be a little early, but the stocks do look attractive.”
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