AI’s biggest buildout is here. These stocks offer a way to invest in the data center boom

The AI revolution is leading to a massive boom in data centers. Major cloud service providers like Google, Meta, Microsoft, and Amazon are engaged in a frenzied bid to keep up with the demand for AI services, and are spending hundreds of billions of dollars to compete. The money taps remain turned on full-blast even in the face of a choppy stock market and persistent fears over whether AI stocks are in a bubble.

“Hyperscalers are going to spend maybe between $750 and $800 billion [a year]. Some forecasts even have it up to a trillion, and that would put it at 2.5 to 3% of U.S. GDP, which is just extraordinary for a capital market,” John Mowrey, chief investment officer at NFJ Investment Group, said.

A considerable portion of this spending will go to data centers, which offer a pick-and-shovels options for investors looking to ride the AI wave. Fortune has identified four distinct entry points into the data center economy: semiconductor chips, real estate, energy, and cooling. Experts weighed in on which stocks stand out in each category.

Chips: The brains behind the buildout

The AI data center buildout requires several components to work, but none of it matters without a brain, and that’s exactly what semiconductors provide.

Even as companies focus on constructing the actual buildings to house these facilities, the chips that power them can’t be produced fast enough. Demand for these specialized processors that run AI workloads has outpaced the industry’s ability to manufacture them, making semiconductors one of the most acute bottlenecks in the entire buildout, according to Craig Ellis, research director and senior semiconductor analyst at B. Riley Securities. 

For investors, that shortage isn’t necessarily bad news. 

“We’re at a point where undersupply is so severe that there needs to be a multi-year period of unusually strong capex growth in front of us, and that capex growth is something that is very investable because it has the potential to continue to lift expectations for revenues and earnings,” Ellis said. 

To capture that opportunity, he recommends investors shift their attention away from chip giants like Nvidia, AMD, or TSMC, and instead toward the companies that actually supply the equipment used to make the chips themselves.

Applied Materials (AMAT), the largest semiconductor equipment company in the world, is a key example. Its core Semiconductor Systems division makes up about 73% of the company’s revenue, according to its most recent annual filing, selling to the companies that manufacture chips for computing, logic, and memory. Its benefit is breadth: nearly every advanced chip and display passes through Applied’s tools at some point, spreading its exposure across the whole chipmaking ecosystem instead of betting on one type of chip.

Ellis also flagged Lam Research (LRCX) as a worthy alternative. The company makes equipment for memory and storage chips, and while its product range is narrower than Applied Materials’, he sees Lam as especially well positioned to benefit from a surge in new capacity investment over the next two years, and B. Riley Securities has raised its earnings estimates for the company by 25% to reflect that outlook.

Marvell Technology (MRVL) is another strong contender, particularly excelling at networking, or the plumbing that lets thousands of chips inside a data center talk to each other fast enough to work as one giant machine.........

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