Small companies rising quickly to rival Big Tech as AI ‘s best trade
Artificial intelligence is no longer a narrow technology business. It is reshaping energy markets, infrastructure spending and portfolio formation. Investors who focus solely on chips and software run the risk of missing where the next phase of value is happening, according to investment experts on this week’s episode of CNBC’s “ETF Edge.”
Some of the trends and innovations that drive the market and the rapid scaling of companies depend on the physical requirements of artificial intelligence. Power, cooling, grid stability and data center efficiency have become binding constraints. Just look at the stock price Blooming EnergyFor years after its 2018 IPO, it struggled to generate returns above its IPO price. Since last year, when on-premises fuel cells for data centers began to be ordered heavily, Bloom has seen its shares rise over 500% and the company reach a market cap of over $30 billion.
Many opportunities are created for investors in small and medium-sized companies. Companies that were once outside the focus of the market are now “moving up the cap chart very quickly,” Jennifer Grancio, head of global distribution at TCW Group, said on “ETF Edge” Monday. In many cases, these companies operate in narrow segments with limited competition, allowing fundamentals to improve faster than investor awareness.
Energy reliability is the main issue. In recent years, as the cost of renewable energy sources has decreased and they have become competitive with fossil fuel sources, the question “How regularly can we get out of the wind, how much can we get out of the sun?” The discussion started. said Grancio. But AI has changed the subject as data centers cannot tolerate outages and need a constant power supply to prevent unwanted downtime.
This reality has led to a “major shift toward nuclear power,” according to Grancio, including renewed investments in maintaining existing facilities and the development of small modular reactors. These projects are creating new suppliers and accelerating growth for utilities and specialized players upstream of hyperscalers.
Nuclear energy ETFs
- First Trust Bloomberg Nuclear Energy ETF (RCTR)
- VanEck Uranium and Nuclear ETF (NLO)
- Themes Uranium and Nuclear ETF (URAN)
- December Nuclear Renaissance Index ETF (NUKZ)
- Global X Uranium ETF (URA)
Efficiency within the data center is equally critical. As AI workloads expand, cooling and power management have become choke points. Investors are increasingly attracted to companies that are “one or two in their field” and “the best in a particular technology,” Grancio said, especially when alternatives are limited.
The structure of these markets is important. In some cases, there are “only a few providers” on the edge of oligopolies, Grancio said. This concentration creates operational leverage, but it also means missteps can be costly.
As a result, actively managed ETFs are gaining traction. While passive indexes can capture broad market returns and add new companies as components as the indexes scale, active strategies aim to identify them earlier and hold them through multiple stages of growth.
But the risks can be significant. VanEck CEO Jan van Eck said parts of AI-powered ecosystems include “small, financially weak companies” that benefit from electricity demand. “That also means you’re going to have a lot of volatility along the way,” he said on “ETF Edge.”
As a result, no single AI theme should dominate an investor’s asset allocation, he said. “You don’t want to overweight them in your portfolio,” Van Eck said.
He noted that Van Eck’s nuclear ETF traded at “nosebleed levels” last year before becoming a more reasonable entry point for new investors.
As investors more targetedly bring the AI theme into their portfolio structures in 2026, active rebalancing and clear risk expectations will allow investors to continue investing without chasing tops or panicking on dips, ETF experts said.
