3 Lesser Known Stocks To Benefit From Huge CapEx Spend

Including 1 addition to my portfolio

Hi there fellow investor👋

In the last 4 weeks, we’ve seen these huge CapEx budgets from the biggest companies in the world:

• Amazon: $105B

• Microsoft: $80B

• Google: $75B

• Meta: $66B

That’s $326 billion from just 4 companies that is going to be distributed amongst those companies in the world best positioned to dominate their niche in AI, cloud, data etc.

The most obvious beneficiaries are the likes of NVDA, TSM, AMD, and ASML. However, there’s also companies with smaller market caps than these that are less talked about, and arguably trading at more attractive valuations.

Here’s 3 of my favorites. I have added number 3 to my portfolio in the last week:

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1. Lam Research | LRCX

Introduction

LRCX supplies wafer fabrication equipment to companies like TSM, Samsung, Intel, SK Hynix, and Micron who manufacture the most advanced semiconductor chips. They specialize in deposition, etch, and clean.

Numbers

• Revenue Growth: -14.5%

• Net Income Margin: 27.2%

• NTM EV/Sales: 5.8x

• Market Cap: $105.7B

How they’ll benefit

LRCX has leading market shares in their 3 specialties:

• 35% market share in etch

• 29% market share in deposition

• 25% market share in cleaning

As semiconductor structures shrink, traditional etching techniques fail due to quantum effects and material limitations. LRCX enables sub-7nm EUV lithography with atomic-scale precision. In 3D NAND flash, LRCX’s deep silicon etching achieves aspect ratios of 200:1, allowing for higher memory layer stacking and density scaling. While the industry historically relied on 2D lateral scaling, Lam’s high-aspect-ratio etching is driving 3D vertical scaling, essential for AI, HPC, and HBM. There’s very few companies can achieve such etching precision at high volume which secures Lam as a leader in advanced semiconductor fabrication.

All this technology essentially leads to more etch steps per wafer as the nodes shrink and this is expected to increase ~20% as we go from 3nm down to 2nm. More complexity, more steps, more LRCX demand.

Visual

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2. Vertiv Holdings | VRT

Introduction

VRT designs, manufactures, and services, customizable digital infrastructure that allows data centers (80% of revenue), telecom networks (10% of revenue), and other very IT intensive commercial and industrial businesses (10% of revenue) to keep running smoothly. VRT customers are leaders that operate in Cloud, fintech, healthcare, transportation, e-commerce, energy, and so on.

VRT products include hardware, software, analytics, and servicing which allows customers digital applications to run optimally at scale. More specifically, these products are:

• AC and DC power management products

• Switchgear and busbar products

• Modular solutions

• Integrated rack systems

• Monitoring systems

Numbers

• Revenue Growth: 20.6%

• Net Income Margin: 8.5%

• NTM EV/Sales: 5.5x

• Market Cap: $45.6B

How they’ll benefit

Continued increase in data center traffic compounded by AI. VRT breaks down data centers into Cloud (Microsoft Azure, Amazon Web Services, Google Cloud), Colocation (Equinix, Compass, QTS), and Enterprise (Goldman Sachs, JP Morgan, Walmart, Allianz). Management estimate that the global data center footprint will grow at 24% CAGR through to 2028 of which VRT management are guiding for 15-17% growth. The value that VRT can offer here is their diverse offerings which allow them to create a far more customizable solutions to tackle the complexity of the growth today.

VRT have partnered with NVDA to develop the next generation of the AI factory focused on liquid cooling. Just like with most parts of VRT, they have an extremely wide range of liquid cooling products all the way from rack-level cooling to full data center infrastructure. Not only is the more traditional air cooling technology unable to scale efficiently to the heat demands today, but it’s also being phased out on a regulatory basis in Europe because of high carbon footprint. Liquid cooling is estimated to reduce power consumption by up to 50% and this is just one of the many areas where VRT will have very high demand over the next few years.

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Now let’s dive into the stock I’ve added to my portfolio recently👇