Beyond NVIDIA: Picks-and-Shovels AI Plays with Strong Momentum

Key Points

• AI infrastructure stocks are emerging as the next phase of the AI trade as investors look beyond NVIDIA for long-term growth opportunities.
• Vertiv, Cadence Design Systems, and Ciena provide critical cooling, chip design, and networking technology needed to support expanding AI data centers.
• These picks-and-shovels AI companies are benefiting from strong earnings momentum, rising analyst expectations, and growing demand tied to the global AI buildout.

It’s not hyperbole to say NVIDIA Corp. NASDAQ: NVDA has made many investors millionaires.

NVDA is up more than 1,300% in the last five years. Go back 10 years, and NVDA has delivered a staggering total return of over 23,800%. That means an investor who put about $3,500 in NVIDIA stock 10 years ago and held it would be a millionaire.

Of course, the issue is that many investors didn’t see NVIDIA’s key role in the artificial intelligence (AI) revolution. It’s been a transformative event that continues to ripple through the economy.

But it’s also changing the outlook for where the smart money is going. To be sure, NVDA will continue to do well. But it’s “only” up about 11% in 2026, and prior to mid-April, it was negative for the year.

The AI Infrastructure Story Is Expanding

A bearish view on NVIDIA is that the AI bubble is getting ready to burst. This earnings season doesn’t clearly support that take, but the narrative won’t die easily.

A more accurate reason for the slide in NVDA is a rotation within the AI story. Specifically, investors have realized that NVIDIA isn’t the only game in town.

The market has increasingly treated AI as a full-stack buildout—compute, power, cooling, networking, and software—rather than a single-company trade, and there are other companies that are critical to the AI buildout that are part of an “NVIDIA and” portfolio.

These stocks fit into the picks-and-shovels theme that is gaining momentum. Although they sit in different parts of the AI infrastructure chain, they are each tied to the physical and technical requirements for scaling AI. And a common denominator for the group is their strong growth since April 1, which is likely to continue for several years.

Vertiv Is Solving the AI Data Center Cooling Problem

Data centers require massive amounts of energy and give off tremendous amounts of heat. That requires thermal management solutions, which is why Vertiv NYSE: VRT is up over over 100% in 2026, and up nearly 260% in the past year.

The company is the equivalent of the person selling umbrellas on a rainy day. Hyperscalers have a problem; Vertiv has the solutions.

Vertiv reported Q1 2026 earnings on April 22. The only blemish in an otherwise strong report was possible headwinds from tariffs. Since the earnings release, some analysts have been raising their price targets, but the updated targets are mostly in line with VRT's current share price. One could argue that this indicates new investors should wait for a better entry point.

On the other hand, analysts are forecasting 33% revenue growth, which makes the company’s forward price-to-earnings (P/E) of around 50x seem like a premium worth paying.

One concern is that Amazon.com Inc. NASDAQ: AMZN, a current Vertiv customer, is developing its own liquid cooling solution. This could be a longer-term headwind, but it only impacts about 10% of the company’s revenue base.

Cadence Design Systems Powers the Next Generation of AI Chips

Chipmakers are getting a second wind in the AI trade. That explains why shares of Cadence Design Systems NASDAQ: CDNS are up around 27% over the past month. And it’s a good bet that the stock has further to run.

Cadence provides electronic design automation (EDA) software, hardware and intellectual property that chip makers need, particularly the companies making the most advanced chips.

The company reported Q1 2026 earnings on April 27 with a beat on the top and bottom lines. A recent acquisition may pressure earnings for the remainder of this calendar year. But the long-term outlook for CDNS looks strong and is backed by analysts who are raising price targets since the earnings report. KeyCorp has the highest target of $425, up from $405.

That said, Cadence has a forward P/E of around 57. That could be seen as an aggressive valuation if the company’s earnings are impacted in future quarters.

Ciena Is Building the High-Speed AI Networking Backbone

Ciena Corp. NYSE: CIEN is an optical networking company, specifically focused on the high-speed optical connections that data centers require.

It’s hard to understate Ciena’s relevance as vast amounts of data move between servers, storage, and the outside world.

Ceina reported Q1 earnings on March 5, with record revenue and a backlog approaching $7 billion.

The only “problem” in the report is the company’s ability to meet that demand. In the report, Ciena said it anticipates supply constraints preventing it from realizing all its revenue. This is coming despite the company’s accelerated capital expenditures to meet capacity.

CIEN has a consensus price target of $367.56, which is around 30% lower than its current share price. However, price targets have been rising since the “Big Tech” earnings were reported at the end of April. Patient investors should eye any pullback as an opportunity to get in on CIEN.