When there’s a gold rush, it’s not just the prospectors and miners that make the big money. History has shown that the biggest fortunes often go to those selling the picks and shovels.

Today, we’re in the middle of an AI gold rush. The hype is deafening, valuations on well-known AI names are high, and retail investors are piling into many stocks without considering the actual underlying business and profitability.

The hype is high, but the underlying numbers also support a great deal of the excitement. McKinsey estimates AI-related infrastructure spending could top $6.7 trillion by 2030. Investments have skyrocketed, with the top seven U.S. tech stocks (Mag 7) expected to spend record dollars on rapid build-outs of their AI infrastructure — and this trend so far shows no sign of slowing.

At KeyStone, we believe there’s a way to invest in this trend without chasing the hype. The answer is to focus on profitable “pick-and-shovel” companies that meet our GARP (Growth at a Reasonable Price) criteria — stocks with real earnings, strong balance sheets, and valuations that make sense.

The AI Opportunity Is Measured in Decades, Not Months

The AI boom isn’t a short-term fad. The workloads are real, the adoption curve is steep, and the capital commitment from both the private and public sectors is staggering.

We’re seeing:

• Soaring compute demand as AI models grow larger and more complex.
• Enterprise adoption of AI across industries from finance to healthcare.
• Sovereign AI initiatives from governments racing to secure their own infrastructure.

For context, Deloitte’s 2025 semiconductor outlook highlights a strong upcycle driven largely by AI and data center demand. Networking companies are reporting record AI-related orders. And power utilities are openly discussing how they’ll meet unprecedented electricity requirements. The opportunity is real — but so are the risks.
 

The Risks of Chasing the AI Boom

This isn’t our first tech investment cycle. If you’ve been around long enough, you’ve seen it before:

• Valuation risk – Many front-line AI names are priced for perfection. Paying 60–100× forward earnings leaves no margin for error.
• Overbuilding risk – In past booms, capacity has often outpaced demand, leading to painful downturns.
• Cyclicality – Semiconductors and hardware remain tied to capital cycles.
• Concentration risk – Many suppliers rely on a handful of hyperscale customers, which can amplify volatility.

For retail investors, this means discipline matters more than ever. We want exposure to the theme, but we want to do it without betting our portfolio on perfect execution and sky-high multiples.

The Pick-and-Shovel Approach: Where AI Is Investable

The beauty of a pick-and-shovel strategy is that it opens up an entire ecosystem of potential winners. Here are the key industries supporting AI’s growth — areas where we’re focusing our research for GARP-qualified opportunities.

1. Semiconductors & Compute Hardware
   These are the brains of AI — GPUs, AI accelerators, CPUs, and high-bandwidth memory (HBM). While some names are priced for perfection, others have diversified revenue streams and attractive valuations.
2. Semiconductor Manufacturing & Equipment
   From foundries like TSMC to equipment makers like ASML and Applied Materials, these companies make the production of advanced chips possible. Many also benefit from recurring service and parts revenue.
3. Networking & Connectivity
   AI workloads require moving massive amounts of data — fast. High-speed networking gear, optical interconnects, and data center interconnect (DCI) solutions are critical. This segment has several profitable mid-cap players that don’t get the same attention as the mega-caps.
4. Data Centers & Colocation
   The physical real estate of AI. Select data center REITs and operators have strong lease visibility, high occupancy, and AI-ready capacity — without overpaying for the growth story.
5. Power Infrastructure
   AI is energy-hungry. Electrical equipment makers, backup power providers, and even renewables with direct data center contracts could benefit. The winners will be those with scale, reliability, and long-term customer relationships.
6. Cooling & Thermal Management
   High-density AI workloads generate enormous heat. Liquid cooling and advanced HVAC systems are becoming essential. Some established industrial players are already pivoting aggressively into AI cooling solutions.
7. Cloud & AI Platforms (Enablers)
   While the hyperscalers are expensive, there are niche infrastructure software companies with recurring revenues and defensible positions. These can offer exposure to AI growth without overpaying.
8. Specialized Components & Support Services
   From precision manufacturing for server racks to environmental monitoring systems, these smaller suppliers can be overlooked — but profitable — AI plays.
9. Real Estate & Construction
   Firms specializing in designing and building mission-critical facilities for data centers. They may not get the AI headlines, but they get the contracts.

The GARP Lens Still Applies

AI doesn’t get a pass on fundamentals. Rules don’t change just because there’s a new growth story:

• Profitability – Positive free cash flow, strong ROIC, and sustainable margins.
• Quality – Clean balance sheets and manageable leverage.
• Valuation discipline – PEG ratios that make sense; we avoid paying 3–4× growth.

A company can be in the perfect spot for AI growth and still be a poor investment if you overpay. Our job is to find those that have both — the growth tailwind and the price discipline.

Final Thoughts — And What’s Next

The AI infrastructure build-out is one of the biggest secular trends of the next decade. But the biggest winners may not be limited to the companies developing advanced AI models — they may be the suppliers, enablers, and service providers behind the scenes. That’s why we’re doing deep research across these nine industries, screening for profitable, growing companies trading at reasonable valuations. Some will be familiar names. Others will be companies you’ve never heard of — yet.

Because in a gold rush, the right picks and shovels can be worth their weight in gold.

Want to see where the real AI opportunities are? Join KeyStone’s upcoming How to Find the Next 10x Stock Live Webinar, where our analysts will reveal six hand-picked small-cap recommendations — including an AI-driven digital lender posting some of the fastest growth of any Canadian financial, and a semiconductor equipment manufacturer strategically positioned to power the global AI build-out. Don’t chase hype; discover profitable, growing companies with true 10x potential.