Capital Thinking: The ‘Picks and Shovels’ in Today’s Data Center Gold Rush

Nicholas V. Beare

Throughout nineteenth century gold rushes, few prospectors struck it wealthy, however retailers made actual fortunes by promoting important instruments for the job—giving rise to the time period “choose and shovel companies.”

Quick-forward, whereas right this moment’s information headlines heralding the rise of synthetic intelligence (AI) deal with chip innovation or software program advances, an equally vital story unfolds within the background—huge infrastructure improvement that allows this technological revolution to even occur.

In response to McKinsey research, a staggering $5.2 trillion in information heart capability growth is required by 2030 to deal with AI processing hundreds, far outstripping the extra $1.5 trillion wanted for conventional IT purposes.

Whereas it might be too quickly to choose long-term winners within the AI gold rush now, an immense funding alternative lies with the trendy ‘choose and shovel’ firms—design corporations, contractors and others answerable for creating and powering the huge information facilities that underpin AI and make up a bunch that’s regular, important and sometimes missed.

Building sector corporations are twenty first century ‘choose and shovel’ firms in AI, offering important companies for that sector’s progress   Credit score: Getty Pictures/Rawf8                                              

Advanced necessities

Information heart development shouldn’t be new, however services now pushed by the scope of AI calls for are on a completely completely different scale. These are sometimes a number of occasions bigger than legacy websites and eat exponentially extra vitality—in some circumstances sufficient to match the wants of a small metropolis. The dimensions and technical sophistication of knowledge facilities now and the velocity at which builders and customers need them constructed is creating demand for firms that practice and make use of expert engineers, craft staff. technologists and managers who perceive and might execute advanced necessities of those tasks.

Cooling is a very crucial problem. AI processors generate immense warmth, prompting the trade to maneuver past conventional air cooling and towards liquid and immersion techniques. Companies with experience in offering these superior options are seeing demand speed up as new information facilities come on-line.  

Hyperscalers additionally search consultants who can discover giant sufficient websites to accommodate these services, together with entry to reasonably priced and considerable energy and water provide.  This has reshaped the geographic panorama and want for native development assets and experience. Whereas Virginia was an early hub for information heart improvement, the buildout has shifted to Southeast and Midwest states similar to Texas, Georgia, Louisiana, Ohio and the Dakotas the place mission siting and allowing have fewer potential hurdles.

Tapping into the tailwind

Know-how cycles might be unstable, and AI has skilled bouts of exuberance and uncertainty. However information facilities’ vital want for up-front funding, land acquisition, lengthy lead time tools orders and a number of approvals have created a multi-year backlog of demand—which insulates contractors and suppliers from any short-term swings in sentiment.

This actuality has not gone unnoticed by strategic and monetary patrons who’re more and more drawn to development sector corporations with vital information heart publicity. Stephens just lately labored on the sale of a multi-generation, family-owned mechanical contractor. Earlier than the present AI phenomenon, potential acquirers might have considered the corporate’s publicity to new development as a threat. However seeing a significant portion of its pipeline in information heart work, personal fairness pounced with bids to buy the corporate at a premium a number of to capitalize on this sturdy, multi-year tailwind.

Public markets are additionally rewarding corporations making the pivot. One civil contractor additionally acknowledged the chance and bought a personal electrical contractor specializing in semiconductor and information heart work. The client’s repositioning to achieve publicity to one of many fastest-growing development markets has been a driver of its share-price increase lately.

Nobody is aware of exactly how the AI ecosystem will evolve over the following decade. There can be winners, losers and inevitable hype cycles. But when the infrastructure to help this transformation is to be constructed, development companies companies will stay in excessive demand to do the constructing. In response to ConstructConnect, US information heart begins—each AI and conventional—reached $26.9 billion over the primary seven months of 2025. The determine is nearly triple the quantity for a similar interval in 2024 and practically ten occasions higher than 2023.

Many development sector firms capitalizing on the present surge in information heart development are privately held, multi-generational companies with sturdy regional ties which have discovered easy methods to have endurance. These legacies could make them particularly enticing to acquirers and capital companions because the regular ‘choose and shovel’ suppliers within the new period of AI—however also needs to assist them survive if AI’s present hyper-growth market of hyperscaling falls quick of the present rosy predictions.

Nicholas V. Beare is a managing director within the funding banking division of New York Metropolis-based monetary companies agency Stephens. He heads its constructing and infrastructure group and co-heads its industrials group, additionally overseeing mergers & acquisitions, administration buyouts and unique gross sales and divestitures, amongst different areas.