AI Infrastructure Stocks are Fueling the Data Center Boom

AI Infrastructure Stocks are Fueling the Data Center Boom

Artificial intelligence is a $300 billion powerhouse sector reshaping markets in 2025 (and beyond), with the infrastructure powering it, like chips, networks, and cooling systems, outshining broader tech trends. 

Goldman Sachs projects a 165% surge in global data center power demand by 2030, and the Global X Data Center & Digital Infrastructure ETF (NASDAQ: DTCR) climbed 5% year-to-date, doubling the Nasdaq 100’s gains. 

On January 21, 2025, President Trump announced Project Stargate, a $500 billion private-sector venture led by OpenAI, SoftBank, Oracle (NYSE: ORCL), and MGX, to build AI data centers nationwide, starting in Abilene, Texas. 

With political tailwinds accelerating this boom, are AI infrastructure stocks a golden opportunity or a bubble primed to burst?

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The AI Infrastructure Surge

AI’s growth depends on physical infrastructure to handle massive computational loads. CBRE reports a 25% year-over-year spike in U.S. data center capacity, driven by hyperscalers like Amazon (NASDAQ: AMZN) and Microsoft (NASDAQ: MSFT). Market intel firm IDC estimates 40% of 2025’s $300 billion AI spending will flow to infrastructure, fueling:

• AI-optimized chips for networking and storage face shortages, boosting chipmakers.

• High-speed connectivity for AI training requires advanced routers, as evidenced by Cisco's (NASDAQ: CSCO) 15% AI-driven revenue growth in Q1 2025.

• The heat output of data centers has driven a 30% global rise in liquid cooling installations.

Project Stargate amplifies this trend. Its initial $100 billion phase targets 20 data centers, each spanning 500,000 square feet, promising 100,000 jobs and U.S. leadership in AI against China. 

Trump’s emergency declarations to expedite energy infrastructure and permitting, coupled with his reversal of Biden-era AI regulations, signal robust political will. 

Note that, on the flip side of Stargate, critics like Elon Musk question the financing, alleging SoftBank’s $10 billion commitment falls short of the project’s true costs (though OpenAI’s Sam Altman refutes this).

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Risks in the Race

The rally faces headwinds, as any ambitious series of projects of this scale typically does. 

However, these risks are wide-ranging and difficult to diversify on their own, let alone collectively:

• The Global X Data Center & Digital Infrastructure ETF’s 25x forward P/E ratio hints at overvaluation. 

• Chip shortages, tied to Taiwan’s geopolitical risks, threaten supply chains. 

• Data centers’ 3% share of U.S. electricity raises energy cost concerns, with Stargate’s Abilene site requiring a 360.5-megawatt natural gas plant. 

• Environmentalists warn of water usage for cooling, urging renewable energy adoption despite GreenTech’s recent fall from grace. 

• Overcapacity looms if AI hype cools, and Stargate’s reliance on debt financing (i.e., SoftBank’s $10 billion loan from Mizuho) adds risk.

Regardless of the risks, analysts project 10–14% annualized returns for AI infrastructure stocks over a decade, outpacing tech’s 8%.

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The Main Takeaway

AI’s structural growth is unstoppable. McKinsey predicts global AI workloads will double by 2027, and infrastructure stocks offer a less volatile entry than AI software firms. 

Their 1.2% average dividend yield adds income appeal, while a 0.9 beta helps maintain stability in a frothy market. Likewise, Stargate’s scale and Trump’s deregulation make 2025 a pivotal year for U.S. AI dominance, potentially helping to buffer the sector against broader market shifts (the Trump effect).

❌ Don’t chase overhyped names with lofty valuations. Supply chain or energy snags could hurt. 

✅ Diversify across semiconductors, networking, and cooling, favoring firms with hyperscaler contracts.

✅ Prioritize companies tied to Stargate or similar initiatives for long-term growth.