Over the past year, artificial intelligence infrastructure has been a steady investment theme in the US stock market, with many of the best-performing stocks in the S&P 500 for 2025 belonging to this category. However, as some stocks originally seen as winners began to decline, volatility in this sector has increased. Last week, NVIDIA (NVDA.US) CEO Jensen Huang stated that the racks for the next-generation AI chip, Rubin, could be cooled solely with liquid cooling, eliminating the need for water chillers. Shares of cooling technology companies, including Trane Technologies and Johnson Controls, plummeted; both companies were considered beneficiaries of the approximately $475 billion in capital expenditures that Meta Platforms (META.US), Microsoft (MSFT.US), Amazon (AMZN.US), and Alphabet (GOOGL.US) are expected to make over the next 12 months.
On the other hand, SanDisk (SNDK.US) shares surged 37% last week and continued to climb on Monday, driven by Huang's emphasis on the demand for memory and storage. The stock achieved a 559% gain in 2025, making it the top performer in the S&P 500, and it started 2026 with a commanding lead, up another 64%. This indicates that although the AI boom broadened in scope in 2025, it remains a rapidly evolving trend. As major tech companies continue to innovate, second and third-order derivative applications will emerge, but the associated companies and industries will not remain static.
Eric Clark, portfolio manager of the Rational Dynamic Brands Fund, which holds significant stakes in Amazon and Microsoft, stated: "Technology changes so fast, things are always changing; stocks related to liquid cooling certainly carry risk." One method investors are using to navigate market volatility is to hold shares in multiple companies expected to benefit from AI-related capital expenditures. Last summer, Tortoise Capital Advisors launched an AI infrastructure ETF (TCAI.US), which holds stocks in various companies involved in heating/cooling, energy, storage, and construction services. Since it began trading on August 5 last year, the ETF has risen 25%.
Brian Kessens, Senior Portfolio Manager at Tortoise Capital, said, "We're not going to be right every time, but we're going to be right a fair amount of the time." He views market volatility triggered by events like Jensen Huang's comments as a potential buying opportunity. "It might be an opportunity to realize that, from a long-term perspective, these stocks are more attractive to buy now because they will continue to benefit." Others are trying to diversify within the sector, betting on companies like power providers that already have established businesses outside of AI and are well-positioned to benefit from the massive spending by large tech companies.
Brad Conger, Chief Investment Officer at Hirtle Callaghan, said, "Our investment approach is generally to own companies that don't have huge AI growth potential but are participants. They will benefit from it, but it's not their only advantage." The firm holds stakes in Vistra (VST.US), Constellation Energy (CEG.US), Amphenol (APH.US), and Eaton (ETN.US). The biggest question mark in the AI infrastructure trade is whether the hyperscale data center operators will actually deliver on their promised billions in capital expenditure. Any slowdown in pace or reduction in spending could trigger market turbulence.
Furthermore, bottlenecks in areas like water, electricity, memory, labor, and even capital could hinder data center construction, thereby exacerbating volatility in related stocks. Matt Stucky, Chief Portfolio Manager of Equities at Northwestern Mutual Wealth Management, commented, "Healthy fundamentals are healthy fundamentals. I don't think extending the window because of these fundamental constraints is necessarily the worst thing in the world. There's a lot of motivation to solve product or supply chain-related issues."
Of course, the AI industry as a whole is unlikely to disappear anytime soon. Therefore, even if there are temporary pauses in areas like data center construction, a massive amount of building will still be required for the industry's continued development. Tortoise Capital's Kessens said, "The reason we like AI infrastructure, or like its second and third-order effects, is we think it's got a long runway, and we don't think AI is a bubble because the hyperscalers are putting a lot of capex to work and have all sorts of grand plans."
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