Investors are increasingly turning their attention to technology “pick-and-shovel” stocks as the artificial intelligence (AI) sector continues to expand. Major cloud service providers are investing billions into new data centers, prompting a surge in demand for companies that supply essential infrastructure. In 2025, data storage firms dominated the S&P 500 Index, with Sandisk Corp. shares skyrocketing nearly 580% to become the benchmark’s top performer. Other notable performers included Western Digital Corp. and Seagate Technology Holdings Plc, which ranked second and fourth, respectively.

This shift marks a significant change from previous years, where Nvidia Corp., often recognized as a pioneer in the AI sector, held a top position in the index. Although Nvidia experienced a 40% gain and was the 71st best performer in 2025, its growth has begun to plateau. Companies such as Microsoft Corp., Meta Platforms Inc., and Alphabet Inc. continue to drive market momentum, but their percentage gains are decreasing.

Investment Trends in AI Infrastructure

The current market environment, characterized by concentrated performance among a few major players, has prompted analysts to recommend diversifying investments. Jake Seltz, a portfolio manager at Allspring Global Investments, emphasized the importance of exploring themes that drive sales and earnings growth. “AI is one of those dominant themes right now,” he noted, encouraging investors to look beyond just tech giants.

Portfolio managers are particularly interested in companies that stand to benefit from the large-scale investments in data centers. Matt Sallee, a portfolio manager at Tortoise Capital Advisors, stated, “What we are focused on are the picks and shovels of where that money is being spent.” This includes not only semiconductor companies but also lesser-known firms that provide critical infrastructure and services.

Despite the optimism, there are concerns on Wall Street regarding potential slowdowns in spending that could impact stocks tied to AI. Drawing parallels to the pandemic’s impact on healthcare products, Jed Ellerbroek, a portfolio manager at Argent Capital Management, highlighted how industries can shift rapidly from boom to bust.

Opportunities in Data Storage and Construction

Data storage is anticipated to remain a hot sector into 2026, following the strong performance of Sandisk, Western Digital, and Seagate. Analysts project that Sandisk will reach an average price target of $264 in 2026, reflecting an 8% increase from its current value of around $244. Conversely, companies like Pure Storage Inc., which is currently trading at $68, are forecasted to jump to $94, representing a substantial 38% increase.

In addition to data storage, stocks related to the construction and power sectors are also gaining traction. Quanta Services Inc., a contractor specializing in utilities and telecommunications, is a leading choice among investors looking for growth opportunities. Other notable contractors include MYR Group Inc., Primoris Services Corp., and MasTec Inc.. Companies involved in electrical and mechanical construction, such as Amphenol Corp. and Emcor Group Inc., are also drawing interest.

Power infrastructure firms, including Vistra Corp., Constellation Energy Corp., GE Vernova, and Generac Holdings Inc., are well-positioned to benefit from the ongoing demand for data center construction.

Shifts in Bitcoin Mining and Cooling Solutions

The landscape for Bitcoin miners is evolving as companies pivot from cryptocurrency mining to powering data centers. According to Sallee, these firms already possess the electricity infrastructure needed for Bitcoin production and are now focusing on long-term contracts for high-performance computing. Companies such as Bitdeer Technologies Group have recently announced plans to expand into AI, resulting in a surge in their stock prices.

Data centers also require specialized heating, ventilation, and air conditioning systems, leading to increased demand for firms that provide these solutions. Vertiv Holdings Co. has seen its stock rise 46% in 2025, while Eaton Corp. and other HVAC companies like Comfort Systems USA Inc. are maintaining strong positions in the market.

As investors look to capitalize on the AI boom, software stocks are becoming attractive despite a slower performance in 2025. The S&P 500 Software Industry Index rose 12% this year, lagging behind the overall index growth of 17%. Analysts like Melissa Otto, head of technology research at Visible Alpha, encourage a focus on companies with favorable valuations and significant growth potential, citing names such as Snowflake Inc., Datadog Inc., and ServiceNow Inc. as ones to watch.

Overall, while the AI sector continues to evolve, the focus on foundational companies that support this growth appears to be a prudent strategy for investors navigating this dynamic landscape.