Generative AI-related infrastructure developments are poised to benefit companies in the Industrials and Materials sectors, according to analysts at Wells Fargo. Governments and private-sector entities worldwide are set to make significant AI-related investments, necessitating upgrades to infrastructure to support these technological advancements.
Investors looking to increase their exposure to industrial and Materials companies should consider the pivotal role these sectors will play in the technology-related infrastructure buildout, the analysts emphasized. While much attention has been on monetizing generative AI technologies, the analysts pointed out that infrastructure updates are essential for widespread adoption.
Industrials and Materials companies offer exposure to AI advancements at lower valuations compared to tech giants. These sectors are crucial for updating and constructing plants and electrical grids to support AI technologies in the future. A substantial portion of revenues for companies in these sectors comes from international markets, indicating that infrastructure projects globally will contribute to their earnings.
Industrials companies involved in construction, engineering, machinery, transportation equipment, and electrical components are well-positioned to benefit from the AI spending surge. Similarly, the Materials sector, including sub-industries like construction materials and steel, will play a vital role in supplying raw materials for building data centers and power grids essential for AI infrastructure.
Overall, the analysts believe that the generative AI push will drive large-scale infrastructure buildouts benefiting basic industries represented by the Industrials and Materials sectors, even in a slower-growth economy.