Small Companies Rival Big Tech with AI Trade
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Artificial intelligence is no longer a narrow technology trade. It is reshaping energy markets,infrastructure spending,and portfolio construction. Investors who focus only on chips and software risk missing where the next phase of value is occurring,according to investing experts on this week’s episode of CNBC’s “ETF edge.”
Some of the trends and innovations driving the market, and the rapid scaling of companies, are tied to AI’s physical requirements. Power, cooling, grid stability, and data centre efficiency have become binding constraints. Just look at the stock price of bloom Energy, which for years after its 2018 IPO struggled to eke out a return above its IPO price. Since last year, when its onsite fuel cells began being ordered furiously for data centers, Bloom has seen its shares shoot up over 500% and the company reached a market cap above $30 billion.
Many opportunities are being created in small- and mid-cap companies for investors.Firms that once sat outside the market’s focus are now “very quickly moving up the cap table,” TCW Group global head of distribution Jennifer Grancio said on “ETF Edge” on Monday. In many cases, these companies operate in narrow segments with limited competition, allowing fundamentals to improve faster then investor awareness.
Energy reliability is the central issue. In recent years, as the cost of renewable energy sources came down and became competitive with fossil fuel sources, the market debated “How much regularity could we get out of wind, or could we get out of solar?” Grancio said. But AI has shifted the conversation since data centers cannot tolerate intermittency, requiring a constant supply of power to avoid unintended downtime.
That reality has driven “a huge shift towards nuclear,” according to Grancio, including renewed investment in servicing existing plants and