Artificial intelligence infrastructure has been a solid stock market bet over the past year, with many of 2025’s best performers in the S&P 500 Index falling into the category. But the trade is getting volatile as some of the perceived winners start taking hits.
Shares of water chiller manufacturers Johnson Controls International Plc and Modine Manufacturing Co. got pounded last week after Nvidia Corp.’s Chief Executive Jensen Huang said it’s possible the company’s new Rubin chips can be cooled in water that doesn’t require a chiller. Both companies were considered beneficiaries of the roughly $475 billion Meta Platforms Inc., Microsoft Corp., Amazon.com Inc. and Alphabet Inc. are projected to spend on capital expenditures over the next 12 months.
On the flip side, shares of Sandisk Corp. soared 37% last week and kept climbing on Monday as Huang highlighted the need for memory and storage. The stock’s 559% leap in 2025 made it the best performer in the S&P 500, and it’s way out front again with a 64% jump to start 2026.
The divergence is a reminder that while the AI frenzy broadened out in 2025, it’s still an evolving trend. With the largest technology companies continuing to innovate, there will be second- and third-derivative plays, but the names and industries won’t be static.
“The evolution of technology is such that things change over time,” said Eric Clark, portfolio manager at the Rational Dynamic Brands Fund, which owns sizable stakes in Amazon and Microsoft. “There’s certainly a risk in names that are tied to the cooling side.”
One way for investors to position for the choppiness is to own shares from a range of companies that are poised to benefit from AI-related capital expenditures. Last summer, Tortoise Capital Advisors launched an AI infrastructure exchange-traded fund under the ticker TCAI that holds shares of companies ranging from heating and cooling, energy, memory and construction services. The ETF is up 25% since it started trading on Aug. 5.
“We’re not gonna be right on all of them over time, but we’re gonna be right on a good number of them,” said Brian Kessens, a senior portfolio manager at Tortoise Capital. He sees volatility over things like Huang’s comments as a potential chance to buy. “That might be an opportunity for us to say, well, hey, they’re an even better buy now over the longer term because they’re gonna continue to benefit.”
Others are trying to diversify within the trade, betting on companies like electric power providers that have established businesses beyond AI but also can be winners from Big Tech’s spending spree.
“Our positioning is in general own the things that don’t have the greatest upside exposure to AI, but will participate,” said Brad Conger, chief investment officer at Hirtle Callaghan, which holds shares of Vistra Corp., Constellation Energy Corp., Amphenol Corp. and Eaton Corp.. “They benefit but it’s not the only thing they do.”
The biggest question underscoring the AI infrastructure trade is whether the hyperscalers will actually spend the billions of dollars in capex they’ve pledged. Any slowing in the pace or reductions in the amount would likely roil markets. In addition, bottlenecks to accessing things such as water, power, memory, labor and even capital could stymie data center buildouts, adding volatility to the stocks.
“Healthy fundamentals are healthy fundamentals, and I don’t necessarily think that extending the window because of constraints around those fundamentals is necessarily the worst thing in the world,” said Matt Stucky, chief portfolio manager of equities at Northwestern Mutual Wealth Management, adding that there are huge incentives to solve product- or supply chain-related issues.
Of course, it’s doubtful that the overall AI trade will be going away anytime soon. So even if there are temporary hiccups in area like data center construction, the reality is many still need to be built for the industry to continue growing.
“Why we like the AI infrastructure, or like the second-, third-order impacts, is we do think that it has a cloud of secular tailwinds and don’t necessarily view AI as a bubble because the hyperscalers are spending all this capex and have all of these big plans,” Tortoise Capital’s Kessens said.
Tech Chart of the Day
Alphabet Inc. broke above a $4 trillion market capitalization on Monday, becoming one of the few companies to ever cross the threshold as investors increasingly see the Google parent as one of the biggest winners of the artificial intelligence boom.
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