Artificial intelligence is no longer a narrow technology trade. We are reshaping energy markets, infrastructure spending, and portfolio construction. Investors who focus only on chips and software risk missing out on where the next phase of value is occurring, investment experts say on this week’s episode of CNBC’s “ETF Edge.”
Some of the market-driving trends and innovations, as well as the rapid expansion of companies, are related to the physical requirements of AI. Power, cooling, grid stability, and data center efficiency are binding constraints. Let’s take a look at Bloom Energy’s stock price. The company has struggled for years to generate returns above its IPO price since its 2018 IPO. Since last year, when the company’s on-site fuel cells began being ordered like crazy for data centers, Bloom’s stock has soared more than 500%, pushing the company’s market capitalization to more than $30 billion.
There are many opportunities emerging in small and mid-cap stocks for investors. Jennifer Grancio, head of global distribution at TCW Group, said on “ETF Edge” on Monday that companies that were once outside the market’s attention are now “moving up the cap table very quickly.” These companies often operate in narrow sectors with limited competition, so their fundamentals improve faster than investors realize.
Energy reliability is a central issue. In recent years, as the cost of renewable energy sources has fallen and become more competitive with fossil fuel sources, the market has debated: “How much regularity can we get from wind power, or how much stability can we get from solar power?” Grancio said. However, AI has changed the discussion as data centers cannot tolerate intermittency and require constant power to avoid unintended downtime.
Grancio said that reality is prompting a “huge transition to nuclear power,” including new investments in servicing existing plants and developing small modular reactors. These projects are creating new suppliers and accelerating the growth of specialized players upstream of utilities and hyperscalers.
Nuclear power ETF
First Trust Bloomberg Nuclear Power ETF (RCTR) VanEck Uranium and Nuclear ETF (NLR) Theme Uranium and Nuclear ETF (URAN) Range Nuclear Renaissance Index ETF (NUKZ) Global X Uranium ETF (URA)
Efficiency within the data center is equally important. As AI workloads grow, cooling and power management become a challenge. Investors are increasingly drawn to companies that are “the best in a particular technology” with “one or two companies in their field,” especially when alternatives are limited, Grancio said.
The structure of these markets is important. In some cases, Grancio said, there is an oligopoly of “a few providers.” That concentration creates operating leverage, but it also means failure can be costly.
As a result, actively managed ETFs are gaining traction. While passive indexes can capture a broad range of market returns and add new companies as their constituents as the index grows, active strategies aim to identify those companies early and retain them through multiple stages of growth.
But the risks can be significant. VanEck CEO Jan van Eck said part of the AI-powered ecosystem includes “smaller, financially weaker companies” that are taking advantage of electricity demand. “That also means there’s going to be a lot of volatility along the way,” he told ETF Edge.
As a result, no single AI theme should dominate investors’ asset allocation, he said. “You don’t need to overweight them in your portfolio,” Van Eck said.
He said the VanEck Nuclear ETF was trading at “nosebleed levels” until last year when it reached a more reasonable entry point for new investors.
ETF experts said that as investors incorporate AI themes into portfolio construction in a more targeted way in 2026, aggressive rebalancing and clear risk forecasting will allow investors to stay invested without chasing peaks or panicking over drawdowns.
