BlackRock bets on 'picks and shovels' as AI spending boom shows no signs of slowing

BlackRock bets on 'pick and shovel' trade, singling out clear winners in AI spending spree

Ben Powell, chief strategist for Middle East and Asia Pacific at BlackRock Investment Institute, during a Bloomberg Television interview at the Abu Dhabi Finance Week (ADFW) conference in Abu Dhabi, AD, United Arab Emirates, on Monday, Dec. 9, 2024. The wave of capital pouring into artificial intelligence infrastructure is far from peaking, said Ben Powell, chief investment strategist for APAC at BlackRock, arguing the sector's "picks and shovels" suppliers -- from chipmakers to energy producers and copper-wire manufacturers -- remain the clearest winners as hyperscalers race to outspend one another. The surge in AI-related capital expenditure shows no sign of slowing as tech giants push aggressively to secure an edge in what they see as a winner-takes-all contest, Powell told CNBC Monday on the sidelines of the Abu Dhabi Finance Week. "The capex deluge continues. The money is very, very clear," he said, adding that BlackRock is focused on what he called a "traditional picks and shovels capex super boom, which still feels like it's got more to go." AI infrastructure has been one of the biggest drivers of global investment this year, fueling a broader market rally, even as some investors question how long the boom can last. Nvidia, whose GPU chips are the backbone of the AI revolution, became the first company to briefly surpass $5 trillion in market capitalization amid a dizzying AI-fueled market rally that sparked talk of an AI bubble. Microsoft and OpenAI also reached a restructuring deal in October to support the ChatGPT developer's fundraising efforts. OpenAI has reportedly been preparing for an initial public offering that could value the company at $1 trillion, according to Reuters. The build-out has set off long-term procurement efforts across the tech sector, from chip supply agreements to power commitments. Grid operators from the U.S. to the Middle East are racing to meet soaring electricity demand from new data centers. Companies, including Amazon and Meta, have budgeted tens of billions of dollars annually for AI-related investments. S&P Global estimates data-center power demand could nearly double by 2030, mostly driven by hyperscale, enterprise and leased facilities, along with crypto-mining sites.

BlackRock Sees AI Capex Boom Far From Peaking, Hardware And Energy Firms In Spotlight: 'The Money Is Very, Very Clear' - BlackRock (NYSE:BLK), NVIDIA (NASDAQ:NVDA)

Ben Powell, the chief investment strategist for the Asia-Pacific region at BlackRock Inc., predicts that the current wave of capital investment in artificial intelligence (AI) infrastructure is far from its peak. AI Capex Boom Favors Chipmakers, Suppliers Powell, on the sidelines of the Abu Dhabi Finance Week, highlighted that the suppliers of AI "picks and shovels" such as chipmakers, energy producers, and copper-wire manufacturers are the primary beneficiaries of the ongoing capital influx, reported CNBC. He noted that AI-driven capital spending is accelerating with no signs of easing, as major tech firms race fiercely for dominance in what they view as a winner-takes-all battle. Powell added that major tech companies are only beginning to tap credit markets to finance the next wave of AI growth, signaling that even more capital is on the horizon. He said "the money is very, very clear," adding that BlackRock expects the broader capex boom to continue. Powell said the hyperscalers are acting as though anything short of first place would push them out of the market, prompting an aggressive ramp-up in spending, even if it risks overshooting. Powell said much of this capital will likely move toward the companies enabling the AI build-out rather than the model makers themselves, echoing a rising belief among global investors that the most durable gains from the AI boom may come from the hardware, energy, and infrastructure supporting it. See Also: Trump Says 'I Will Be Involved' In Netflix-Warner Bros. Mega Merger As He Praises Ted Sarandos For Doing 'Legendary Job' AI Growth Shifts From Spending To Execution In its new global outlook, earlier this month, BlackRock argued that the U.S. economy is entering a capital-intensive regime driven by massive AI investment, one that keeps growth resilient even as traditional business-cycle signals cool. The firm estimates that global AI capex could reach $5 trillion to $8 trillion by 2030, with the U.S. leading the buildout. However, concerns about a potential AI bubble have long centered on whether demand would justify the sector's explosive valuations. Jordi Visser of 22V Research says the next phase of AI investing won't hinge on who spends the most, but on who can execute under constraints. As the industry shifts from capital limits to delivery limits, he argues that success will depend on execution, infrastructure readiness, and project management. By 2026, the winners will be the companies that can turn contracts into real capacity while protecting margins despite rising costs and tighter deadlines. Amid this optimism, I/O Fund's CEO Beth Kindig predicts Nvidia Corp (NASDAQ:NVDA) valuation to reach $20 trillion by 2030. Wall Street keeps revising AI infrastructure spending higher: from an initial $280 Billion peak to McKinsey estimating $5.2 trillion for AI data centers. If Nvidia holds or grows its ~50% market share, the potential $20 trillion could be a reality. READ NEXT: Kevin O'Leary Says AI Is Nowhere Near Bubble -- Real Crisis Is Global Power Shortage As Data Center Demand Explodes Image via Shutterstock Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors. BLKBlackRock Inc$1073.310.11%OverviewNVDANVIDIA Corp$182.39-0.01%Market News and Data brought to you by Benzinga APIs