Watchlist: AMZN, PWR, GEV, ETN, VRT, VST

Stephanie Link has plenty of exposure to the companies building AI. But when she joined PreMarket Prep on Monday, her AI pitch wasn’t a chipmaker.

It was everything required to keep the machines running.

“On AI: Power. We need power to make any of this work,” said Link, chief investment strategist at Hightower Advisors.

Link’s view comes as the market begins to widen beyond the handful of semiconductor and mega-cap tech stocks that carried much of the first leg of the AI trade. She said the economic backdrop is “getting close to Goldilocks,” with wage growth cooling, productivity improving and earnings growth spreading into sectors including financials, materials and healthcare.

For AI, that broadening leads into the physical infrastructure behind the buildout.

“The way to play AI is the food chain. PWR GEV ETN VRT VST, you have a host of infrastructure names, picks and shovels, you must own,” Link said.

The basket spans Quanta Services, GE Vernova, Eaton, Vertiv and Vistra, companies tied to grid expansion, electrical equipment, data-center infrastructure and power generation. Link noted that 75% of the U.S. energy grid is more than 25 years old and needs to be upgraded, so the need extends beyond the current data-center boom

Copper is part of the same bet, Link told PreMarket Prep. “On a pullback own more copper. We’re in a deficit this year… caddy-bar the door once we really get going in terms of AI,” she said. Link also pointed to an eventual housing recovery as another source of demand for the metal. 

The other side of the trade is whether the companies spending tens of billions of dollars on AI infrastructure can earn a return on it.

Link believes that answer is beginning to emerge, pointing to 43% growth at Microsoft Azure and 37% growth at Amazon Web Services as signs that the largest hyperscalers are starting to show payoff from their spending. Among them, she has a favorite.

“AMZN is the best of the 3, and the cheapest!” Link said. “Have so many ways to win with Amazon: AWS, via retail, advertising, [and] they’re starting to build their own custom chips.”

For Link, the AI trade is spreading into the grid, the data center, the commodities feeding the buildout and the companies proving they can turn all that spending into growth.