However, while hardware companies and their data-center counterparts are soaring, software stocks have been largely left behind. This is due to the difficulty for software companies to build around AI and the high comparative valuation of traditional tech stocks associated with software. Despite recent outperformance, it may take years for the data-center boom to fully mature, with the earliest significant impact on corporate earnings estimated to be in 2028. There are also concerns about whether the US has the energy capacity to support the anticipated number of data centers.
Key takeaways:
- Companies that provide electricity and data-center services are expected to be major beneficiaries of the AI boom, with their stocks already outperforming.
- Data centers are predicted to be increasingly important for storing information as AI becomes more mainstream, with Goldman Sachs expecting data center power demand to surge 160% by the end of the decade.
- While software stocks have been largely left behind, hardware-tech stocks have outperformed their software peers by 30 percentage points this year due to skyrocketing demand for GPUs, data centers, and other physical computing equipment.
- Despite recent outperformance, it may take years for the data-center boom to fully mature, with the earliest significant impact on corporate earnings estimated to be in 2028.