Got $1,000? 3 Stocks Building the Physical Artificial Intelligence (AI) Era

In recent years, artificial intelligence (AI) has been predominantly viewed as a software-driven phenomenon. Investors have been heavily invested in graphics processing units (GPUs), cloud platforms, and model companies that facilitate AI model processing for end-users. However, another critical aspect of the AI boom is gaining prominence: AI heavily relies on robust physical infrastructure.

The server and rack environments that house accelerators demand significant power, data transfer, and cooling mechanisms. This presents an attractive investment opportunity for those seeking exposure to AI without concentrating their portfolios on a limited range of megacap stocks. The article highlights three companies that are instrumental in building the physical foundations of the AI era.

Astera Labs (NASDAQ: ALAB) is a relatively lesser-known company that plays a vital role in the AI infrastructure chain. Its technology is positioned between computing components, enabling data movement between CPUs, GPUs, memory, and networking equipment. As AI systems become increasingly complex, the importance of Astera Labs' role grows.

The company's newest Scorpio X-Series 320-lane fabric switch is designed for rack-scale AI systems and is intended to connect a large number of accelerators. Moreover, Astera Labs is expanding its offerings to include CXL memory controllers, Ethernet connectivity, and optical interconnects. The company's strategy centers on becoming a comprehensive connectivity platform rather than relying on a single product, which the author finds compelling.

Modine Manufacturing (NYSE: MOD) represents a less apparent investment opportunity in the AI infrastructure space. The company specializes in designing cooling systems for data centers, including its TurboChill 3+MW platform for high-density GPU environments. As powerful AI servers generate considerable heat, Modine Manufacturing's focus on cooling solutions becomes crucial.

The company has secured a long-term agreement worth over $4 billion for its Airedale cooling products, backed by a $165 million upfront payment from a customer. This commitment to cooling infrastructure is essential as increasing computing density necessitates thermal management as a fundamental aspect of data center architecture.

Flex (NASDAQ: FLEX) is the most practical investment option among the three. The company manufactures complex electronic systems, now applying its expertise to AI infrastructure. Flex's AI factory reference designs integrate power, high-density racks, networking, and liquid cooling into modular systems, designed to expedite deployment.

The company claims a potential 30% reduction in deployment timelines using this approach. Furthermore, Flex manufactures Advanced Micro Devices (AMD) Instinct AI systems in the United States, including complete platforms equipped with eight AMD GPUs, high-bandwidth memory, high-speed interconnects, and liquid-cooling hardware provided by its JetCool business.

This position allows Flex to contribute to the physical implementation of AI architectures rather than solely focusing on model development.

The author suggests allocating approximately $350 to Astera Labs, $350 to Modine Manufacturing, and $300 to Flex. Each investment targets a different facet of the AI infrastructure, offering diversified exposure to the physical components that support the burgeoning AI industry. The article concludes by emphasizing that investors do not need to own the company developing the most advanced AI models to benefit from the AI boom.