Data Centers Soak Up Billions in AI Funds

We can’t get through a single day of news without another headline about the advanced AI chips built by Nvidia, AMD, and TSMC. And they’re now joined by Intel, which is putting a whopping $100 billion into building an even-more powerful chip called the Gaudi 3.

The market attention surrounding these chips is greater than the entire economic output of most small countries.

But while it’s the new AI chips that are making all the headlines, some of the biggest stock returns (one made over 850% gains in the last 12 months!) are coming from a short list of overlooked mid-size companies that operate the data centers that house them.

After all, it’s the data centers that actually make AI technology operations possible. And it’s the lowly cooling equipment, power modulators, and fans that keep these racehorse AI chips running.

AI chips are pushing data centers to the very limit of what they can support.

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As one industry head put it:

“Power consumption and heat generation from AI chips are orders of magnitude higher than conventional IT equipment. Power and cooling infrastructure designs are being transformed as traditional cooling technologies might not measure up to the needs of AI workloads.”

Or consider this statement from Intel CEO Patrick Gelsinger, who describes what an enormous feat this is:

“In semiconductors, every new wafer is a new experiment... We’re going to push the very edge of the human understanding of physics.”

And as you might expect, when the Googles, Amazons, and Facebooks of the world plunk down billions to buy new AI chips, they’re not going to trust the data center setup to just anyone.

It’s a very practical but very real problem. Only a handful companies in the world have the expertise to literally take these chips out of the box, place them in racks, and then attach newly-built cooling tubes and power modulators — infrastructure equipment that is itself brand new, and built to satisfy requirements that didn’t even exist a year ago.

For example, one new process involves attaching cold plates directly to the AI chips, which are connected to a network of coolant tubes from a nearby liquid heat exchanger.

direct-to-chip schematic.png

The cold plates in use for Intel’s new Gaudi 3 AI chip are nearly as complex as the processor itself.

The moment you turn it on, the experiment begins. Many of these companies are putting their new AI chips into arrays that have never been tested before. And if they get it wrong, they can melt their fancy new hardware.

And it’s only going to get more intense.

As Jensen Huang, the CEO of Nvidia, said during a recent interview in Wired Magazine:

“We’re building a new type of data center. We call it an AI factory. The way data centers are built today, you have a lot of people sharing one cluster of computers and putting their files in this one large data center...

An AI factory is much more like a power generator. It’s quite unique. We’ve been building it over the last several years, but now we have to turn this into a product.”

In other words, in this new next-generation model of cloud computing, AI data centers become the entire backbone of technology.

And it’s going to take an army of power, cooling, and fan operators to make it all work. As we’ve seen so far this year, those data center infrastructure contracts are where the money is. 

We’re about to invest in another one...

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Billions of dollars in equipment will melt without the daily support of these infrastructure companies. We believe companies like this are the true “pick and shovel” plays of the AI revolution — and will show investors the biggest returns.

Make it your own,

John Carl

John Carl
Editor, Daily Profit Cycle