Manufacturing, utility and mining firms hardest hit since June

Caterpillar, Corning among major infrastructure stocks cut in half

Construction of an OpenAI data center in Abilene, Texas, in September last year. [Reuters]
Construction of an OpenAI data center in Abilene, Texas, in September last year. [Reuters]

The so-called "picks and shovels" investment craze — a rush into essential infrastructure plays riding the AI boom — has cooled sharply, wiping $4.2 trillion from the market capitalization of data center construction-related stocks worldwide since June, the Financial Times reported Sunday (local time).

Manufacturing, utility and mining companies — long cited as data center construction plays — bore the brunt of the selloff as investor conviction in the AI boom wavered, the FT said, according to Yonhap. The group surrendered nearly half of the $9.4 trillion in market capitalization accumulated over the preceding 12 months.

Until just a few months ago, markets piled into companies making everything from jet engines retrofitted to power hyperscale data centers to advanced fiber optics needed to connect AI server racks. The mood has since reversed sharply, sending share prices of major players down roughly half from their peaks.

Caterpillar, a leading supplier of gas generators for data centers, has shed $214 billion in market capitalization since hitting an all-time high on June 30, according to market research firm FactSet — a decline of 44 percent from its peak.

Nuclear energy company Oklo saw its share price plunge 49 percent despite signing a contract with Meta earlier this year, while HVAC equipment maker Comfort Systems and fiber optics manufacturer Corning each lost roughly half their market capitalization over the same period.

Analysts pointed to excessive "AI growth stock" premiums attached to traditional industrial companies as the root cause of the selloff. Paul Kedrosky, a venture investor and researcher at the Massachusetts Institute of Technology, said investors had made a critical mistake by valuing conventional industrial firms like chipmakers. "When you talk to hedge fund people, there was this endless idea that everything is a growth stock now," he said. "It's a ridiculous idea."

Markets are growing increasingly worried that a bubble could ultimately burst, as hyperscale cloud operators have ramped up capital expenditure through heavy borrowing while political opposition to new data center projects in the United States has intensified.

Industrial companies with earnings closely tied to data center expansion have taken the hit, posting the worst performance among S&P 500 sectors after technology stocks since this past summer.

"A lot of institutional money went blindly into these investments, which is why some company valuations were probably formed too optimistically," said Brett Ryan, senior US economist at Deutsche Bank.

Some analysts push back, however, arguing that the fundamentals of infrastructure suppliers remain solid. Demand for equipment and materials essential to the data center boom still far outstrips supply, they say. According to the latest US government data, American spending on data center construction over the 12 months through September totaled $96 billion, even excluding IT equipment and semiconductors.


an@heraldcorp.com