AI "Picks and Shovels"

Investing in “picks and shovels” (companies that provide the infrastructure and tools necessary for developing and deploying AI, rather than those directly developing artificial intelligence applications or algorithms) is a standard way for investors to approach a new theme such as AI. 

 In 2024, that arguably includes semiconductor manufacturers such as Nvidia, AMD, and Qualcomm; data storage and management firms such asSeagate, Western Digital, and NetApp. Some might also mention STMicroelectronics and Analog Devices in the pick-and-shovel areas. 

Among the most-popular pick-and-shovel choices are the cloud computing “as a service” suppliers such as Amazon Web Services (AWS), Microsoft Azure, and Google Cloud Platform.

Suppliers of AI development tools such as Palantir, Dataiku, and C3.ai also might be viewed as plays in the infra and tools areas. 

Cybersecurity suppliers such as Crowdstrike, Palo Alto Networks, and McAfee might also come to mind. 

For many, it might appear the obvious plays are cloud computing as a service and sellers of GPUs. 

Study Name	Publication Venue	Date	Growth Prediction (Specific Provider)	Revenue Assumptions
AI as a Driver of Cloud Differentiation	Morgan Stanley	December 2023	AWS: 30% of new revenue from AI-powered CaaS by 2027	Focus on AWS's existing AI offerings and investments in areas like machine learning and natural language processing.
The AI Cloud Race: Azure vs. AWS vs. Google Cloud	Goldman Sachs	November 2023	Microsoft Azure: 45% premium on AI-powered CaaS solutions by 2030	Emphasis on Azure's strong partnerships with AI leaders and focus on enterprise AI applications.
Unlocking the Next Wave of Cloud Growth: AI on Google Cloud Platform	Jefferies	October 2023	Google Cloud: 25% CAGR for AI-powered CaaS from 2024 to 2030	Highlights Google Cloud's strengths in big data analytics and AI talent, leading to innovative AI-powered services.
Cloud Wars 2.0: The AI Arms Race	Bank of America	September 2023	All major providers: 20-35% of total CaaS revenue from AI by 2029	Assumes gradual but persistent adoption of AI across all cloud segments, with increased demand for AI-driven personalization and optimization.
The AI Advantage in Cloud Infrastructure	Citigroup	August 2023	AWS and Azure: 30% faster growth in AI-powered CaaS compared to non-AI CaaS offerings by 2025	Predicts higher customer preference and premium pricing for AI-powered solutions, favoring established providers with strong infrastructure.
AI in the Cloud: A Market Landscape Analysis	Statista	October 2022	All major providers: 15% CAGR for AI-powered CaaS market through 2027	Steady growth in AI adoption across various industries, driven by major cloud providers' investments and marketing efforts.
The Future of AI-Powered CaaS: A Competitive Landscape	Cowen & Company	August 2022	All major providers: 20-25% of CaaS revenue attributable to AI by 2028	Focuses on the competitive landscape, suggesting differentiation through specialized AI tools and industry-specific solutions.
Cloud Providers in the Age of AI: A Growth Drivers Analysis	Credit Suisse	July 2022	All major providers: 25% of incremental CaaS revenue from AI-powered solutions by 2030	Highlights the potential for AI to unlock new revenue streams through automation, improved resource utilization, and enhanced customer experiences.
AI and the Cloud: A Transformative Partnership	Deloitte	September 2022	All major providers: 30% increase in CaaS revenue attributable to AI-powered solutions by 2026	Emphasizes the role of AI in optimizing existing CaaS offerings and driving increased customer satisfaction.
AI in Cloud Computing: The Next Wave of Innovation	PwC	August 2022	All major providers: 20% of CaaS revenue derived from AI-powered workloads by 2025	Focuses on the continuous advancements in AI technology and its potential to make AI-powered CaaS solutions more accessible and affordable.

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