Artificial intelligence and related technologies - primarily data centers - are now determining the structure of the stock market. At the same time, the AI boom is creating opportunities to make money not only on shares of IT giants from the "Magnificent Seven", but also on companies from related industries, according to Barron's.

The explosive growth in demand for AI computing power is leading to large-scale construction and equipping of data centers (DCs). This, in turn, is driving demand for power. Ultimately, a whole range of stocks outside the "Magnificent Seven" - papers from the entire data center supply chain, from server manufacturers to developers - could benefit from this trend, the publication argues.

Based on investment recommendations from Bank of America and Wolfe Research, Barron's has compiled a top-12 list of "non-obvious" stocks that will benefit from the AI boom. These stocks can't be called cheap: they trade at an average P/E of 35 - well above the multiple for the S&P 500 (24.5). However, the expected earnings growth rate for these companies over the next three years is about 22% per year, double the average rate for the S&P 500 in recent years, Barron's writes, citing FactSet data.

Wall Street is also much more optimistic about the companies on Barron's list than the market as a whole. 68% of analysts following these stocks advise them to buy. For the average company in the S&P 500 index, only 55 experts out of 100 give such a recommendation, the article says.

Which stocks made it to the top

- Caterpillar is a manufacturer of diesel generators for emergency power supply. The stock trades at a P/E multiple of 25 (compared to Nvidia's P/E of 39). 56% of analysts recommend the stock as a buy;

- GE Vernova - generation and distribution of energy. These securities are the most expensive in the list, their price is 82 times the annual earnings per share. Despite this, 69% of analysts consider them attractive;

- Eaton and Vertiv are manufacturers of uninterruptible power supplies and power distribution units for server racks. These two stocks are trading at P/E 31 and P/E 36, respectively. 70% of experts advise to buy Eaton securities, 79% advise to buy Vertiv securities;

- WESCO is a distributor of electrical components. With a P/E of 16, it is one of the cheapest stocks on the list. 69% of analysts think WESCO should increase its position in WESCO;

- Johnson Controls is a supplier of industrial refrigeration and climate control systems. P/E - 29. 52% of analysts recommend buying the stock;

- nVent Electric is a developer of liquid cooling systems for server racks. The P/E for the stock is the same as that of Johnson Controls - 29. But confidence in them is much higher - 92% of experts consider nVent securities a favorable buy;

- Dell Technologies is a leading manufacturer of servers and storage systems. The stock trades with the lowest P/E on the list - 13. Three out of every four analysts (75%) recommend buying them;

- Cisco Systems, Arista Networks and Ciena are suppliers of network equipment. Exchange valuations of these three stocks are quite close (P/E - 56, 51 and 46 respectively). 56% of experts recommend investing in Cisco at current prices, 75% - in Arista, 61% - in Ciena;

- Digital Realty - construction and management of data center buildings. P/E is higher than Nvidia's 47%. The share of "buy" ratings is 66%.

This article was AI-translated and verified by a human editor

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