Generative AI products like ChatGPT or other tools offer more than just finishing school papers or crafting funny emails in the style of famous authors. They serve as versatile partners, aiding in brainstorming, writing drafts, summarizing documents, content repurposing, learning acceleration, guiding business processes, and even accelerating coding.
The broad applications of generative AI are evident, with 9 out of 10 leading businesses investing in AI technologies. However, only 14.6% have deployed AI capabilities in their operations, highlighting untapped potential and a massive opportunity.
Yet, there’s a challenge. Nearly every S&P 500 company is talking about AI, but not all will hit the mark. This situation resembles the California gold rush, where not every prospector struck it rich, but the suppliers of tools, like Levi Strauss, reaped huge profits.
So, what are the pick-and-shovel companies of AI today?
Semiconductor chip manufacturers like Nvidia, Advanced Micro Devices, and Intel are often the first thought. However, a more intriguing play lies in the infrastructure that brings these chips to life: the large-scale data centres, the beating heart of the AI ecosystem.
Companies transitioning their infrastructure to meet AI demands have a significant first-mover advantage, creating a substantial competitive moat. Equinix (Nasdaq: EQIX), one of the largest data centre operators globally, stands out with an impressive portfolio, including network density, cloud connectivity, and interconnected ecosystems.
As global spending in the AI infrastructure market is projected to reach $422.55 billion by 2029, Equinix is well-positioned for growth. Its financial track record is compelling, with consistent annual revenue increases since 2000 and strong performance in the third quarter of 2023. What sets Equinix apart is not only its tie to one of the fastest-growing industries globally but also its commitment to shareholder value. With eight years of cash dividend growth since becoming a real estate investment trust (REIT) in 2015, Equinix recently increased its Q4 dividend by 25%.
As the AI landscape continues to evolve, investors have the opportunity to not just witness but actively participate in the unfolding narrative of technological innovation.
Sven Franssen