3 Industries That Are Growing Thanks to the AI ​​Boom and How to Invest in ETFs

The technology landscape is expanding, and artificial intelligence (AI) is poised to play a key role in the next generation of computing. While Nvidia has been the biggest beneficiary of the current AI wave, several non-tech asset classes are benefiting from the proliferation of AI and are poised to continue to do so in the future. This article will highlight the indirect investments through which investors can benefit from AI.

Data Center Focused ETFs

Nvidia’s latest earnings report highlighted the importance of data centers to its long-term growth, as the majority of the company’s revenue comes from them. But what exactly is a data center? Simply put, a data center is a physical facility that an organization uses to store its critical applications and data.

Data center design is based on a network of compute and storage resources that enable the delivery of shared applications and data. Key components of data center design include routers, switches, firewalls, storage systems, servers, and application delivery controllers. Modern data center infrastructure has moved from traditional on-premises physical servers to virtual networks that support applications and workloads across pools of physical infrastructure and in a multicloud environment.

Nvidia recently announced collaborations with several industry partners to build AI factories and data centers for the next industrial revolution. In the announcement, NVIDIA founder and CEO Jensen Huang said, “The next industrial revolution has begun. Companies and countries are working with NVIDIA to transition traditional trillion-dollar data centers to accelerated computing and build a new type of data center—AI factories—to produce a new commodity: artificial intelligence.”

Data Center Approach

The rise of AI will benefit data center REITs like Digital Realty, Equinix and Iron Mountain.

Digital Realty is one of the largest data center operators in the world. In addition to renting space in its facilities to companies to store networking and storage equipment, Digital Realty also leases entire data center enclosures to other operators. Digital Realty owns more than 300 facilities in 28 countries on six continents and has partnerships with established technology companies such as Nvidia, Amazon, Microsoft and IBM.

Equinix is ​​also one of the world’s largest digital infrastructure companies, owning and operating a network of 260 International Business Exchange™ (IBX®) data centers in 72 major cities around the world. The company recently announced first-quarter 2024 results of $2.1 billion in quarterly revenue, marking 85 consecutive quarters of revenue growth, the longest streak of any company in the S&P 500.

Finally, Iron Mountain is a name that many people are familiar with, given its expertise in information storage and management. The company has gradually expanded its data center capabilities over time. Its platform spans over 25 data centers across three continents.

For ETF investors looking for data center exposure BMO Brookfield Global Real Estate Tech Fund ETF Series (shortcut: TOWR)should be considered first because it provides exposure to all three REITs, given that its investment objective is to capitalize on the growth in demand for technology infrastructure, including data centers, communications and industrial infrastructure.

AI Energy Shift: Clean Energy and Key Minerals

A common concern among AI companies is the high cost of energy, especially in data centers. Against this backdrop, many companies are exploring clean energy sources that rely heavily on key minerals to power their AI data centers.

Recognizing the high demand for energy in data centers, major technology companies like Amazon.com Inc., Alphabet Inc. and Microsoft Corp. are among the first to explore the use of sustainable energy sources, including wind and solar, to power their business operations, such as data centers. Brookfield Asset Management and Brookfield Renewable recently announced a more than $10 billion deal with Microsoft to develop renewable energy capacity to power its data centers. Under the agreement, Brookfield will provide 10.5 gigawatts of renewable energy to Microsoft between 2026 and 2030 in the U.S. and Europe. Google has also invested billions in data centers over the past few years, increasing its current count to 23 data centers in 15 states. Amazon Web Services recently acquired a 960-megawatt nuclear-powered data center in Pennsylvania from Talen Energy.

As big tech companies find different ways to power their data centers, demand for key minerals needed to generate, transport, and store cleaner energy will increase. This creates an opportunity for investors, as having significant exposure to these essential resources allows them to benefit from the gradual price increases that will come.

Given copper’s importance in electricity transmission, it will play an increasingly important role in the development of clean energy, which is needed by big tech companies as they pursue their AI goals. Global Copper Producers ETF X (COPP) provides exposure to copper mining companies listed on select North American exchanges by replicating the performance of the Solactive North American Listed Copper Producers Index. The use of nuclear energy to power data centers means an increase in demand for uranium, a heavy metal that can be used as an abundant source of concentrated energy for nuclear reactors. Global X Uranium ETF (short: HURA) reflects the performance of the Solactive Global Uranium Pure-Play Index, which provides exposure to companies whose significant business activities are, or are likely to be, related to the uranium industry.

To go

The rise of AI is not just benefiting large technology companies and those directly involved in semiconductor development, as some related industries and businesses are also benefiting from the current growth that will continue into the future.

Please note that this article is for informational purposes only and does not in any way constitute investment advice. Before making any investment decisions, it is essential that you seek advice from a registered financial professional.