The AI infrastructure gold rush is nowhere near over, according to BlackRock, with the world's largest asset manager doubling down on the 'picks and shovels' suppliers powering the tech industry's unprecedented spending spree. Chief investment strategist Ben Powell told CNBC that hyperscalers have barely started tapping debt markets, signaling much more capital is coming.
The artificial intelligence arms race isn't slowing down - it's accelerating into what BlackRock calls a 'traditional picks and shovels capex super boom.' Speaking at Abu Dhabi Finance Week, Ben Powell, the asset manager's chief investment strategist for Asia-Pacific, delivered a clear message to investors: the infrastructure suppliers powering AI's expansion remain the clearest winners as tech giants burn through unprecedented amounts of capital.
'The capex deluge continues. The money is very, very clear,' Powell told CNBC on Monday, describing how hyperscalers are behaving as if coming second means being completely shut out of the market. That winner-takes-all mentality is pushing companies to accelerate spending even at the risk of overshooting demand.
The numbers back up Powell's optimism. Nvidia became the first company to briefly surpass $5 trillion in market capitalization this year, while Microsoft and OpenAI restructured their partnership in October to support the ChatGPT maker's fundraising efforts ahead of a potential $1 trillion IPO.
But here's what caught Powell's attention: the debt markets. 'The big companies have only just started dipping their toes into the credit markets... feels like there's a lot more they can do there,' he said. Translation? The current spending spree is just the warm-up act.
Amazon and Meta have already budgeted tens of billions annually for AI investments, but Powell sees room for much more leveraging. The infrastructure build-out has triggered long-term procurement agreements spanning everything from chip supply deals to multi-year power commitments, creating a pipeline of guaranteed revenue for suppliers.
Grid operators from Texas to the Middle East are scrambling to meet soaring electricity demand from new data centers. S&P Global estimates data center power consumption could nearly double by 2030, driven primarily by hyperscale facilities, enterprise deployments, and crypto mining operations.
This creates what Powell calls a 'pretty good place to be' for companies across the AI supply chain. 'Whether you're making chips, whether you're making energy all the way down to the copper wiring,' he expects 'positive surprises driving those stocks in the year ahead.'
The strategy reflects a broader shift in investor thinking. While AI model developers grab headlines, the real money - according to BlackRock's analysis - flows to the hardware, energy, and infrastructure ecosystems enabling the technology. It's the classic Gold Rush playbook: bet on the shovel makers, not the prospectors.
Powell's confidence stems from the competitive dynamics driving hyperscaler behavior. These companies aren't just spending for growth - they're spending for survival in what they view as a zero-sum game. That mentality creates sustained demand for everything from advanced semiconductors to industrial-grade cooling systems.
The timing aligns with broader market trends. AI infrastructure has been one of 2024's biggest investment drivers, fueling a rally that's raised questions about sustainability. But Powell sees structural tailwinds rather than bubble dynamics, pointing to the practical necessities of building out AI capabilities at scale.
BlackRock's bet on AI infrastructure suppliers reflects a calculated view that the current spending boom has structural legs rather than speculative froth. With hyperscalers barely beginning to leverage debt markets and power demand set to double by decade's end, the 'picks and shovels' trade looks positioned to capture the most durable gains from AI's build-out phase. For investors, Powell's message is clear: focus on the companies enabling AI rather than just developing it.
