By Jack Hough
Rocks are now an artificial-intelligence trade, apparently.
Putting up all those new data centers requires plenty of what builders call aggregate, and what the rest of us call rocks that have been broken into smaller rocks. One big infrastructure company, CRH, boasted in its latest earnings call about delivering 1.2 million tons of aggregate for a single Michigan data center in one quarter. That's the weight of three Empire State Buildings.
JPMorgan writes that prices for rocks are on the climb, and aren't yet reflected in earnings estimates. It likes CRH, along with Cemex and Amrize.
This isn't a column about aggregate -- my sandstone versus limestone hot takes will have to wait. My point is that we might be hitting bedrock on the subject of companies that can cash in on the AI buildout.
Let's turn to five stock picks from a sector that has sat out the AI infrastructure rally, but can benefit from all that computing power: healthcare. And further down, I'll bring you up to speed on squishy dumplings. (That's a retail craze, not a recipe.)
The S&P 500's healthcare component is down 4% year to date, and its full-year earnings growth is pegged at just 4%, the lowest of any sector. The government is squeezing drug companies, insurers, and healthcare providers on prices; the expiration of Affordable Care Act subsidies has cut plan enrollment; and Merck took a big one-time charge related to an acquisition.
But there are more-favorable trends in the details. Healthcare tech and tools are growing much faster than the industry. Some drugmakers are thriving.
Healthcare can use AI to cut costs and quicken innovation, says Shivani Vohra, a portfolio manager at San Francisco--based Parnassus Investments, which manages $45 billion. One example is using computer models rather than pipette-wielding humans in preclinical screens of molecules. "Anywhere from five times to 50 times the number of early-stage candidates are being looked at," says Vohra. "That means that you can advance possibly an even better candidate."
Among Vohra's favorite stocks now are Eli Lilly, Intuitive Surgical, Natera, Edwards Lifesciences, and Medline. Lilly is, of course, the leader in GLP-1 drugs for obesity and diabetes. That is creating a torrent of free cash -- estimates put it at $22 billion this year, rising to $47 billion by 2030 -- to fund the company's ventures in cancer and mental health. "If you stripped out the GLP-1 franchise, that underlying business is still one of the fastest-growing pharma companies out there," says Vohra. Shares trade at 31 times earnings.
Intuitive Surgical makes the da Vinci robotic surgery platform, which has become an industry standard. "It's even a recruiting tactic for hospitals because surgeons have trained on Intuitive machines," says Vohra. "And if a hospital doesn't have one, it's almost like, "Why would I go there?'" The company is rolling out its first new da Vinci platform in a decade, with a big step up in computing power, data analytics, and imaging. The stock, down 25% in a year, goes for 40 times earnings, with earnings per share expected to double by the end of the decade.
Natera, which isn't yet profitable but which is seen doubling revenue to more than $5 billion by the end of the decade, has a blood test for pregnant women that can give some insights that previously required drawing amniotic fluid -- a much more invasive affair. Another blood test for cancer gives doctors an early read on how thoroughly their treatments have removed the disease.
Big-words alert: Edwards Lifesciences is expanding beyond its monopoly in TAVR, or transcatheter aortic valve replacement, into fast-growing TMTT, or transcatheter mitral and tricuspid therapies. Both address bad valves without open-heart surgery, typically by going in through the femoral artery in the groin. TAVR replaces an outflow valve, while TMTT can repair or replace a couple of inflow ones. Shares are 29 times earnings.
Something cheaper, you say? Medline went public at $29 a share in December, peaked over $50 in late February, and was recently under $35. Vohra calls it the Costco of healthcare suppliers. Presumably there's no $1.50 hot dog and soda, but the company has had success putting its private label on surgical gloves, baby blankets, and much else. Shares are 23 times earnings.
Now, as promised, or maybe threatened: squishy dumplings. There's a store chain called Five Below that is designed to maximize pester power. Kids beg to go in to hunt for impulse buys, or stuff they saw on YouTube, and parents say yes because, a) just about everything is under $5, and b) they're exhausted from saying no all day on more expensive things. On Wednesday, Five Below reported nearly 23% same-store sales growth, an unheard-of number for a retailer that is now 23 years old.
Squishy dumplings came up 14 times on the earnings call. These are foam or gel-filled toys of various brands shaped like bao buns, and sometimes sold in plastic replicas of bamboo steamer baskets. When squeezed, they return to form -- like if Stretch Armstrong resembled a Chinese delicacy instead of a stocky wrestler. Kids call them fidget toys or stress balls. What these kids are so stressed about, I don't know, but maybe it's that stores are sold out, and if you can't get the Golden Ticket Dumpling at Five Below, how else are you supposed to win the $1,000 shopping spree?
On Thursday, investors sent shares 14% lower despite stellar results. Surely this is as good as it gets, they must have figured. Shares go for 21 times forward earnings estimates, versus a five-year average of 27 times. UBS says to buy, because fleeting trends are a regular part of the business, and this one is generating a lot of cash. Seems sensible, but I've heard about investors getting caught on the wrong side of pump-and-dumpling trading.
For a second opinion with close ties to childhood nonsense, I asked my Magic 8 Ball. "Reply hazy, try again."
Write to Jack Hough at jack.hough@barrons.com and subscribe to his Barron's Streetwise podcast.
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June 05, 2026 10:40 ET (14:40 GMT)
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