As cash flows to data centers, AI investors follow

The artificial intelligence trade is moving, and investors seeking cutting-edge ways to play it are snapping up technology “pick-and-shovel” stocks as cloud service giants pour billions into new data centers.

- CARMEN REINICKE

ONE WILSHIRE, an office building in downtown L.A., has been almost entirely converted into a server farm.

Data storage companies dominated the Standard & Poor’s 500 Index in 2025 —Sandisk Corp. shares soared almost 580% to make it 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.

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.”