Forget AMD and Micron — the next wave of AI winners are the ones nobody talks about

During the last two years, the AI trade has increasingly diverged from the broad market. The K-shaped environment, in which investors bought the obvious names—NVIDIA Corp. NVDA, Advanced Micro Devices Inc. AMD, Micron Technology Inc. MU —worked as capital rushed toward silicon.

However, that trade has become increasingly crowded. Valuations have expanded, money has flooded into cap-weighted ETFs, and the market has started treating “AI” and “tech” as interchangeable terms.

Yet the tech market is K-shaped. Just as the S&P 500 has split between AI winners and everyone else, the technology sector itself has broken into multiple independent cycles. Owning “tech” is no longer an investment thesis—it’s simply a basket containing businesses with entirely different economic drivers.

That divergence is obvious when examining the ETF performance. Broad technology funds like the Technology Select Sector SPDR XLK, which is up 28.49% year-to-date, have continued climbing largely because semiconductor giants dominate the index.

Meanwhile, more specialized ETFs such as the iShares Expanded Tech-Software ETF IGV, which is down 12.4% year-to-date, have dramatically lagged. Semiconductor-focused funds like the VanEck Semiconductor ETF SMH, up 69.30% year-to-date, have completely decoupled from traditional enterprise technology.

Solving the Three Bottlenecks  

The irony is that this first wave of AI winners may also be the easiest to identify. The next phase won’t belong to the companies designing chips. It will belong to the firms solving the bottlenecks preventing those chips from operating at full scale.

According to the State of the AI economy report, AI demand is no longer speculative. Even after deducting the circular transactions, annualized GenAI revenue has surpassed $175 billion.

Meanwhile, hyperscalers have committed about $2 trillion of cumulative capital expenditure to build the infrastructure. In that compute supercycle, demand continues to outpace supply across multiple layers – yet bottlenecks are increasingly physical rather than computational.

The first is advanced packaging. Facing practical limits of single-die silicon, manufacturers are opting for stacking rather than a single enormous chip. This approach dramatically increases bandwidth while minimizing latency but requires sophisticated packaging technologies.

The trend shifts value toward the outsourced semiconductor assembly and test (OSAT) companies that actually integrate these designs. ASE Technology Holding Co., Ltd. ASX is the global leader in advanced packaging volumes. At the same time, Amkor Technology, Inc. AMKR has become deeply embedded in high-performance computing and next-generation AI accelerators.

Without advanced packaging, next-generation GPUs simply cannot be manufactured at scale.

The second bottleneck is moving data. Training and inference clusters now contain tens of thousands of GPUs, and traditional copper networking is a constraint since power consumption and signal degradation sharply rise at higher speeds.

AI infrastructure is therefore migrating toward optical interconnects capable of handling 800G today and eventually 1.6-terabit connections. That trend creates an entirely different class of beneficiaries.

Fabrinet FN manufactures many of the high-speed optical transceiver modules enabling these networks. Coherent Corp. COHR and Lumentum Holdings Inc. LITE provide critical optical components and photonics technology that have become increasingly important as NVIDIA’s networking ecosystem expands.

The final, least glamorous opportunity might be the most important one. As AI server racks grow, the heat they generate is increasingly inadequate for air cooling. Direct-to-chip cooling is thus transitioning from an optional upgrade to essential infrastructure.

A liquid-cooling leader, Vertiv Holdings, LLC VRT, reported a record $15 billion backlog as companies race to deploy their tech. Meanwhile, Ecolab Inc.’s ECL $4.75 billion acquisition of CoolIT Systems shows how industrial water management is suddenly becoming part of the AI supply chain.

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This article Forget AMD And Micron — The Next Wave Of AI Winners Are The Ones Nobody Talks About originally appeared on Benzinga.com.