Small Companies Rival Big Tech with AI Trade

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