Get Ahead of the $1 Trillion Data Center Spending Spree

Colin’s Note: If you aren’t already positioned to profit from the $1 trillion data center investment boom… now is the time to get ahead of the spending spree.

Maybe you look at the past year and a half of the artificial intelligence boom and think the biggest gains are behind us… or that as markets get more fraught, you’re just not keen on getting into semiconductor or tech stocks… or adding onto your existing positions.

But we are right on the precipice of another surge in the AI boom… this time, it’s all centered on the major data center buildout I’ve been talking about here at The Bleeding Edge.

And even if you’re hesitant to dive into data centers… there are other ways to capitalize on the flood of spending going toward data centers in the coming months and years without touching a single tech stock.

We’ll get into it today. Just click below to watch or read on for the transcript.

Bleeding Edge subscribers, happy Monday. Welcome back.

Today, I’m going to show you a method to capitalize on the $1 trillion data center investment boom.

Guess what? You won’t need to purchase a single tech stock or another semiconductor stock to get it done.

That’s right… the $1 trillion investment cycle is really just kicking off. And over the coming years, the stocks I’ll discuss today are potentially poised to gain substantially.

This could be an excellent addition to your portfolio, especially if you’ve already invested in semiconductor stocks. And even if you’ve missed out on investing in Nvidia, Super Micro, or AMD, I’ll provide you with some alternative strategies to get you caught up there too.

But let’s first look at the magnitude of this opportunity.

In just the first three months of this year, four companies collectively invested $45 billion in property, plant, and equipment.

Amazon invested $15 billion. Google invested $12 billion. Microsoft invested $11 billion and Meta nearly $6.5 billion.

A significant portion of these expenditures were directed toward developing data centers that power artificial intelligence (AI) technologies. Now, I understand, $45 billion is a staggering sum of money… But consider this: $45 billion exceeds the annual revenue of all but 93 companies in the S&P 500.

These four tech giants are outspending what more than 80% of the S&P 500 companies earn in revenue in an entire year… and they’re doing that in just three months. And if you’ve been keeping up with the newsletter, you’re aware that this figure is expected to grow significantly in the coming years.

Back in February, Nvidia CEO, Jensen Huang, made the following prediction…

We’re at the beginning of this new era. There’s about a trillion dollars’ worth of installed base of data centers. Over the course of the next four or five years, we’ll have $2 trillion worth of data centers that will be powering software around the world.

So what should an investor do in this environment?

First off, I’ve been strongly advocating for semiconductors for about a year now. At a minimum, consider increasing your exposure to the sector through a cost-effective but broadly diversified ETF like VanEck (SMH) or iShares (SOXX).

I recommend considering this strategy because a significant portion of the trillion-dollar investment cycle will flow into various semiconductor technology companies. However, you might already have plenty of exposure to this sector… so how can you further enhance your investments without continuing to add to your semiconductor holdings?

Well, the trillion dollars in spending isn’t solely directed at semiconductors. This funding is also earmarked for large-scale infrastructure projects, including the construction of sprawling new buildings.

Moreover, every new data center requires the construction of additional power plants and office spaces, significantly boosting the construction industry.

One strategic investment opportunity lies in tool rental. Companies like United Rentals are poised to experience increased demand as construction projects emphasize the need for rented equipment.

Data centers necessitate a range of heavy machinery… from forklifts to security cameras, fencing, and other equipment. Tool rental companies, such as United Rentals, are well-positioned to benefit from this surge in demand.

Also, investing in tool rental companies provides diversification to your portfolio beyond technology stocks which you might already have significant positions in. Other benefits from the tool rental industry include lower interest rates, which reduce the borrowing costs for companies like United Rentals to acquire new equipment to rent out.

And the potential election of either a new or returning administration later this year will probably prompt increased government spending, believe it or not, on various infrastructure, energy projects, and other construction projects. That could further boost this sector.

So, the $1 trillion data center investment boom presents a unique and compelling opportunity for investors looking to diversify and strengthen their portfolios beyond traditional tech and semiconductor stocks.

By capitalizing on the massive infrastructure needs that accompany the growth of data centers – such as the construction of new facilities and the associated demand for heavy equipment rental – you could position yourself to benefit from the significant expenditures by industry giants like Amazon, Google, Microsoft, and Meta.

That was The Bleeding Edge for today, I’ll be back again later this week. See you then.

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