Al Root

In the stock market these days, artificial intelligence rules, Nvidia is the king, and the rest of the Magnificent Seven are royalty.

There are other AI-related stocks for investors to consider. Barron's found 12 with the help of BofA and Wolfe Research.

"Understanding the data center end market has grown in importance, given high growth rates and scale," wrote BofA Securities analyst Andrew Obin in a recent report. That might be an understatement. Demand for AI computing is responsible for Nvidia's sales explosion, and the growing electricity demand.

Nvidia's sales in its most recently reported quarter totaled almost $47 billion. Two years ago, the number was less than $14 billion. A lot of the Nvidia chips sold over that span now reside in power-hungry AI data centers run by the likes of Amazon.com, Alphabet, and Meta Platforms. Electricity for those data centers is the primary reason that BofA estimates annual U.S. electricity demand growth of about 2.5% for the coming 10 years, up from 0.5% growth over the prior decade.

Growth is great. To understand that growth better, Obin broke down the data center into its components.

Inside a data center, there is cooling technology, including chillers made by the likes of Trane Technologies, Johnson Controls, and Carrier, cooling towers made by SPX Technologies, and liquid rack cooling provided by nVent and Schneider Electric. Networking components come from Arista Networks, Ciena, and Cisco Systems. Servers can come from Dell Technologies and HP Enterprise. Power distribution and management are the domains of Eaton, Vertiv, and Schneider. Back-up power comes from Cummins and Caterpillar. And the entire data center can be designed and built by firms like Jacobs Solutions and AECOM. Digital Realty will manage a finished property.

It isn't an exhaustive list of companies, but it's a good start. And there are, of course, companies that supply those companies, including Amphenol and TE Connectivity. And companies helping generate more electricity, such as GE Vernova.

Wolfe Research estimates that 265 gigawatts of power generation capacity will come online through 2029, up from "184 gigawatts projected at this stage last year (from 2024-28)." BofA estimates global data center spending will reach $506 billion in 2025, up 25% year over year. Spending growth should average north of 20% for the coming three years.

A bevy of stocks beyond the Mag-7 can benefit from that growth. BofA analysts recommend Johnson Controls, Eaton, Vertiv, Dell Technologies, Arista Networks, Ciena, Cisco Systems, Caterpillar, GE Vernova, and Digital Realty. Wolfe Research recommends nVent and electrical component distributor WESCO.

That's a dozen stocks benefiting from the AI boom. They aren't cheap. The group trades for an average of 35 times estimated 2025 earnings, according to FactSet, a premium to the 24.5 times multiple of the S&P 500. The dozen, however, are expected to grow earnings at about 22% a year for the next three years. That's roughly twice as fast as the earnings growth of the S&P 500 in recent years.

The rest of Wall Street likes the stocks, too. The average Buy-rating ratio for the group is 68%. The average Buy-rating ratio for stocks in the S&P 500 is about 55%.

To be sure, data center spending could slow down, shaving percentage points off of estimated earnings growth. And a screen is only a start. After identifying ideas comes the harder work of understanding each business and its outlook.

Understanding AI-related outlooks is a good project for investors to undertake. AI is driving the entire market these days.

Write to Al Root at allen.root@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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September 18, 2025 01:00 ET (05:00 GMT)

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