"Suppliers of Pickaxes and Shovels": Deutsche Bank Names Five Indirect Beneficiaries of the AI Boom

Deutsche Bank has initiated coverage of several companies that supply equipment and components for data centers and AI infrastructure, according to Seeking Alpha. Analysts advised investors to buy shares in companies such as Lumentum Holdings, a manufacturer of optical components, and Coherent, a manufacturer of lasers and photonics.

Analysts at Deutsche Bank set out to determine which technologies would prove indispensable as artificial intelligence continues to spread. “In 2026, we’ll be consuming massive amounts of data, we won’t be deleting photos and videos from our devices, we won’t be turning our backs on new technologies, and we certainly won’t be ready to give up convenience. AI—whether it’s a chatbot, a network of agents working for a company, or a tool for vibe-coding —makes our lives more convenient,” noted Deutsche Bank analyst Gianmarco Conti, whose report is cited by Seeking Alpha.

According to him, this convenience translates into time savings, increased productivity, and greater efficiency in virtually all areas of life. For investors in the technology sector, it also means a broader range of companies capable of benefiting from the AI boom: attention is gradually shifting from graphics processing units (GPUs) alone to general-purpose processors (CPUs), network infrastructure, memory, optics, and other components necessary for the effective operation of computing systems. It is precisely among these suppliers of “picks and shovels” (by analogy with the “gold rush”) that Deutsche Bank has identified the most attractive stocks.

— Lumentum Holdings and Coherent have become the bank’s top picks. Deutsche Bank notes that the lasers they produce are essential for virtually any configuration of high-speed optical connections for AI data centers.

"Both companies are constrained by production capacity; their products are essentially sold out; they are raising prices; and Nvidia has just invested $2 billion in each of them," analysts noted.

— The bank also takes a positive view of Arista Networks’ stock. In its view, the company’s software advantage persists primarily in the markets for corporate AI infrastructure and so-called sovereign AI—precisely the segments Arista targets. The company forecasts revenue growth of approximately 40% and generates strong free cash flow; however, the bank believes this is not yet fully reflected in its valuation.

— Cisco Systems also received a “buy” recommendation, despite the fact that its stock plummeted in August following its earnings report: investors were concerned about the gross margin outlook, which is under pressure from rising component costs and an increasing share of hardware in sales. Konti noted that Cisco integrates its own chips, optical components, and off-the-shelf networking systems into a single business unit. In addition, its order backlog for AI infrastructure from hyperscalers reached $9.3 billion. According to the analyst, this makes Cisco a relatively low-risk way to bet on the expansion of AI infrastructure.

— The bank also recommended buying shares of HPE, a manufacturer of AI servers.

At the same time, Deutsche Bank initiated coverage of several other companies, but with a “hold” rating: A10 Networks, Dell Technologies, and Ingram Micro Holding Corporation, according to Seeking Alpha.

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