The “Lego Blocks of AI” – A Special Situation, And the Data-Center Dominator Stock
Ways to invest during the "AI Era" that everyone else is overlooking ...
My son Joey is 17 and a junior in high school this year. And he’s gone through all the “phases” most kids go through …
Kid’s parties. Thomas the Tank Engine. Gaming (and Minecraft). Little League baseball. Slime (if you’re a parent … you know). Legos. And, now that he’s driving … cars (he’s currently lobbying to soup up a mid-2000s Mustang).
When I took Joey to the NASCAR race at Dover Motor Speedway in Delaware a few weeks ago, he managed to combine two of them: Legos – and cars.
To help pass the two evenings we had in the hotel, he’d brought along a Lego model kit of the 2024 “Dark Horse” Mustang, the $60,000, 500 horsepower muscle car that Ford Motor Co. F 0.00%↑ unveiled to celebrate the Pony Car’s silver anniversary.
As I watched Joey work, I remembered just how cool – how amazing – Legos really are. You start with this amorphous pile of colorful but unrelated parts. And by following the “blueprint” – and putting in the work – you end up with something pretty special.
And as I saw the joy on Joey’s face, I had a sudden epiphany: We’re going to see the same thing with artificial intelligence (AI) – a similarly disparate pile of parts that’ll come together and create something similarly special.
With one key difference.
While Joey’s Lego Dark Horse Mustang is going to look great on the shelf, the AI “model” is going to power decades of economic productivity, lifestyle enhancements and geopolitical competitiveness.
It’s also going to create massive piles of wealth – but only for investors who can look at the “parts” … and visualize the finished whole.
Here today, I’m going to give you a quick tour of this “Lego AI” opportunity.
I’ll give you a rundown on some of the “parts.” I’ll give you a glimpse of the blueprint. And I’ll give you a rundown on the finished product – including opportunities for Wealth Builders.
A Not-So-Artificial Parts List
I’m intentionally oversimplifying this – but that’s what I do here at Stock Picker’s Corner (SPC): I believe that the only way to be wealthy is to make yourself wise.
If you’re looking at a “parts list” for the AI Revolution, you’re looking at:
Commodities like gold … silver … copper … and coal.
Components like semiconductors, cables, solar panels, software and networking gear.
Systems like high-performance servers, quantum computers and special power and cooling systems.
And “building blocks” – the sprawling data centers that, to many, represent the physical embodiment of AI’s growth. And make no mistake, data-center growth is zooming.
Besides being simple, I also believe that (wherever possible), it’s better to show than to tell. So let me show you three examples from that last bullet point (data centers):
At the end of April, Alphabet Inc. GOOG 0.00%↑ said it would invest $1 billion in data centers in Northern Virginia.
As a part of a busy week, Microsoft Corp. MSFT 0.00%↑ said its data center in Mexico Central was “available” to provide cloud services for organizations across the world. The next day, in a deal closer to its Redmond headquarters, Microsoft announced build-out plans for a $3.3 billion data center in Racine County, Wisconsin.
And not to be left out of the “Data Center Party,” Apple Inc. AAPL 0.00%↑ is reportedly developing chips to run AI software in data centers; these chips will be focused on running AI models rather than training them.
This “Building Block” Is Ready to Rock
Data centers are a critical AI “building block.”
So it’s no surprise – as shown by the examples I’ve shared – we’re seeing a massive buildout.
In recent decades, we were already dealing with exponential growth in the data that needs to be stored, organized and managed.
Supercharging that data’s importance are such innovations like driverless vehicles, drones (aerial and seagoing), cryptocurrencies, digital payments, e-commerce, drug discovery and personalized medicine, cybersecurity and cyberwarfare, virtual working and virtual learning – and scads of other key pieces of our modern digital lives.
And don’t forget about AI – which uses all that data to “learn” from.
The goal, of course, is to find a place where that data can be stored, managed, updated and easily accessed.
Enter the “data center” – a high-tech metropolis where all that digital “stuff” lives, works, grows and sleeps.
America accounts for about 40% of the worldwide data center market.
And consultant McKinsey & Co. says power consumption is a good proxy for data center growth here in the U.S. market. And power consumption, which reflects the number of computer servers a data center can house, is projected to grow from 17 gigawatts (GW) in 2022 to 35 GW in 2030. Data centers will grow at 10% a year during that stretch.
Special Stock/Special Situation
As companies push to offer better, faster and more advanced AI products and services, they’ll need data centers to handle the bandwidth.
And there are two “not-so-obvious” ways to make your money grow here.
The first is a stock.
The second is a “special situation.”
AI Play No. 1 - The “AI Landlord” Stock: I’m talking here about Blackstone Inc. BX 0.00%↑, the world’s largest private-equity player. Remember that “blueprint” I promised to share? Well, the New York-based Blackstone is building the blueprint to follow – in the form of a $25 billion “data-center empire,” Bloomberg said. In 2021, it snagged QTS Reality, which owned data centers across North America and Europe. It also has a Phoenix campus that was fully leased before it was completed – with Microsoft as a tenant. You can see my report on Blackstone here.
AI Play No. 2 - The Special Situation: Copper. That’s right … as in … the metal. Along with silver and gold, copper is a highly “conductive” metal, meaning it effectively transmits electricity from one point to another. In that vein, copper is needed for connecting circuits. It’s needed in AI data centers for the cabling that ties towers of computers together. And it’s needed to build the electrical grids for those data centers. New York City-based S&P Global believes that copper supply may fall short of demand by as early as next year. And wealth management business J.P. Morgan believes that the rise of global data center power demand will lead to 2.6 million tons of new copper demand by 2030. I recently sat down with ORO Capital CEO Danny Brody for a deep-dive interview about the looming copper shortage. Plus, Danny shares four ways to profit from copper in this “AI subplot.” That’s available here.
To provide you folks with as much context as possible, I also have a full outline of the “AI Era” available to all members of SPC here.
And for members of SPC Premium, I’m working up a special dossier (even as we speak) about one of my favorite AI companies.
Turns out, Legos aren’t just a great teaching device.
They provide some needed epiphanies, too.
See you next time.