NVIDIA Just Bought the Grid — 3 Stocks to Cash In!!

Welcome back to the channel everyone. Now, if you think Nvidia is just a hardware company selling graphics cards to tech startups, Jensen Hong's massive announcement this week, I think it proves that we're entering an entirely new era of tech investing. So, Nvidia is expanding its business model from selling the silicon to securing the actual land, the gigawatts of power, and the physical data center shells required to host the future of artificial intelligence. So Nvidia announced that they're investing $1.5 billion directly into SoftBank's SB Energy to secure land, power, and shell infrastructure at the Port Spike technology campus. Nvidia is backstopping up to $105 billion in credit support for an initial 4.25 gawatt of capacity. There's an option for up to 8 gawatt total though, and that's going to be leased exclusively to OpenAI for a term of 20 years. So this credit support guarantees that the Ohio facility will run Nvidia's proprietary DSX AI factory platform closes out some of the competitors from OpenAI's largest single deployment pipeline. But also importantly bolstering this power deal is a separate arrangement where Nvidia has partnered with alternative asset giants. We're talking the likes of BlackRock, Blackstone, and KKR to establish a half trillion dollar pool of third-party capital. So this essentially shifts the risk of building data centers off Nvidia's balance sheet. It's also ensuring that its customers have infinite funding to buy its GPUs. So what this means is Nvidia is actively underwriting the foundations of the growing and rapidly changing AI economy. They're stepping in to guarantee the infrastructure for Frontier Labs whose growth is already constrained by the lack of physical data center capacity. And by jumping straight into the land and utilities market, Nvidia is signaling that physical capacity is the primary bottleneck standing between them and a multi-year hardware monopoly. And I'll note this make a deal also very much aligns with Nvidia's broader corporate strategy to turn AI factory compute into a standardized investable asset class. So, in this video, Jose and I are going to be breaking down three powerhouse stocks that we think are well positioned to ride the coatales of Nvidia's multi-billion dollar infrastructure land grab. Let's dive right in. >> Now, before we continue with today's episode, if you want market beating stock picks from our analyst, make sure to check out the pin comment and the description. Using that link gets you a promotional offer as our thanks for being a viewer. Thank you. And let's get back to today's episode. Hey, Rachel. Hey, fools. Welcome back to another episode. Great introduction here. And first, let me just say I'm super super excited for Nvidia's earnings. They will be out in the next in less than 7 days. So fools, if you are curious about Nvidia's earnings, I'm pretty sure Rachel and I are going to talk about it later next week. So make sure to stay tuned to the overall channel. Uh so yeah, I mean three stocks that can really be impacted by this major move. And I'm going to guess during the earnings call for Nvidia. This is going to be a lot of the questions that are going to come out during the Q&A session uh portion of the earnings call discussing, hey AMD, uh Nvidia, how are you going to be able to kind of have this credit support? How many companies are you going to be able to do this with? We keep hearing these hundreds of billions of dollars being thrown out. Uh so I I believe a lot of great of wealth of information is going to come from the earnings call. But one thing that we can see is Nvidia is trying to de-risiskify or or or debottleneck pretty much its supply chain issues. And the first stock I want to talk about Rachel is TSMC. I mean TSMC in their quarter 2 earnings which they reported in mid July showed that the AI cycle is still growing at healthy levels. Revenue was up 36% year-over-year with their high performance computing now 66 of total revenue. and and Nvidia has mentioned every incremental gigawatt for Nvidia is roughly 50 to $60 billion in revenue. All that money is going to flow through TSMC's leading edge. Nvidia to make these AI data centers, they need CPUs, they need GPUs, they need networking solutions, they need various optics stuff, they need various memory solutions, they need various storage solutions, and all that gets built gets built through TSMC. So, this is to me one of those like not necessarily a no-brainer, but the closest we can get to a no-brainer of a winner if this AI ecosystem continues to evolve and if Nvidia continues to debottleneck some of the lab and power solutions. The other stuff that gets me pretty excited here for TSMC is guidance, right? TSMC in their most recent earnings showed that full year 2026 growth is expected to be slightly above 40. uh and and the Ohio compute doesn't come online until 2028. So if you're already seeing this type of growth for TSNC this year, can we imagine kind of the type of revenue potential growth we might see when these types of data centers that are multi- gigawatts for just one locations can mean for TSMC. So the visibility for them starts to get even larger and larger and that's exactly what we have gotten from TSMC's management report, right? that they are getting confident with uh the visibility of how much demand demand they see in 2027 potentially 2028, 29, 2030 that they have increased their capex, right? The confidence of visibility in revenue gives them the confidence to increase capex and all this is kind of going back into it is all starting to make sense. Why did TSMC give us some crazy AI revenue growth? Why are they so confident in capex? Well, it's because Nvidia is seeing that demand on themselves that they're able to say, "Look, we're going to need these many chips in 2028, in 2027, and so on and so forth. Now, it is important if obviously I'm excited for TSMC, but one thing that should be seen as a bearish case. There's there's always the bearish case out of this is the fabs that TSMC is building into domestically here in the United States. Uh, they do come with gross margin dilution, right? right? I mean they they talked about 2 to 3% gross margin hits in the early stages. They're also doing massive ramp up across various other supply chain lines as well. So all that requires money and if for some reason if for some reason I don't believe it but if for some reason this AI story is not as crazy as I think TSMC is going to be left with a lot of supply chain line that aren't doing anything. But right now, as where we stand, Rachel, I think I think things look pretty exciting for TSMC as a long-term potential winner. >> I think one of the things that's also really interesting about this is how we've seen TSMC's manufacturing utilization cycles shift through the years. I mean, once upon a time and and up until the recent past, you know, their financial performance had been very dependent on a lot of the consumer upgrade windows for, you know, smartphones and PCs. So, there was a lot of seasonal volatility for those foundaries, right? Obviously, they are a key player in the AI revolution. And when you're looking at Nvidia's recent announcement and how they're anchoring these multi-gawatt facilities on 20-year that the compute hardware upgrades become more standardized, it becomes more predictable. This could allow TSMC to optimize, for example, its long-term extreme ultraviolet lithography deployments for ASML with a lot more visibility. So, there are a lot of kind of downstream effects from these announcements. And I think, you know, as well, it's going to be really important to watch how TSMC's future margins develop. I mean, it's going to depend a lot on their ability to execute on their international factory buildouts while keeping up with the complex requirements of of nextgen packaging architecture. So, this deal is huge for them, but there's also a lot of internal deployment complexities for TSMC that investors need to watch. >> Agree, Rachel. This is why it's it's amazing to do these episodes cuz obviously we have to learn both sides of the story and technology innovation is a form of risk, right? So, we have to make sure that this company continues to involve in this complex chip architecture space and how that plays out has a massive effect of how things like margins, like yields, like demand play out in the future. Now, now Rachel, I'm going to jump into stock number two. So, if if I was to say stock number one was almost kind of like a again not there's never a no-brainer in the stock market, but the closest thing to like a no-brainer I would say was TSMC. The second one is a little bit more of like there is growth opportunity here, right? And with growth opportunity comes bigger risk cuz there's no free lunch in the overall market. So, it's going to be IN ticker IN. Now, funny enough, this also reports earnings next week. So if you are curious about this stock, I'm pretty sure we're going to talk about it in this channel. Now the reason I bring Iran into this deal where into this video where Nvidia is locking in land power and shell is pretty much the P side the power is a moat in the current market that we're in and Iran has secured roughly 5 gawatt of power globally. management has said on the call on its previous earnings that the AI infrastructure demand far outstrips supply and that 2027 and 2028 power capacity is already scarce. Now Nvidia kind of moving into this massive deal with a third party kind of confirms that claim in my opinion. The other thing is Nvidia is literally an Iran counterparty. Iran recently signed a 3.5 billion 5-year AI cloud contract with Nvidia, plus a 5 gawatt partnership. And Nvidia has rights to buy up to 30 million shares at $70, which is potentially, I think, a a $2.1 billion investment, give or take a few hundred million that is vested as GPU infrastructure is deployed. So, Nvidia's doing LPS deals validates that exact scarcity that Iran is trying to monetize, right? that land, the power and the shells that Iran is doing pretty good at building up. Now, one of the big flags here for Iran is this is transforming from a Bitcoin mining to an AI cloud play. And that takes time, right? Super small. The company, I think, is now close to 12 billion, maybe even higher than that, maybe $15 billion in market cap, but they're still only doing about $20 million or so in AI revenue. The main reason it takes time to build up these data centers, it takes time to power them up. It takes time to finally start collecting revenue from these GPUs as you have all this to do ahead of times. But under contract, they do have roughly expectation of 3.7 billion ARR by the end of the year. They have this massive 9.7 billion 5-year Microsoft contract online. And I'm pretty sure as they expand expand more the Nvidia partnership 3.4 billion with Nvidia. So just on two players they have nearly $14 billion in in in contracts and I'm pretty sure that's not going to be the first. So overall good opportunity for the NeoCloud space. The bad is the competition. It takes time for revenue to collect and obviously buying GPUs and building data sensors are a bit of an expensive hobby. if you were to say a hobby right now. >> Yeah. One of the things that I think really sticks out to me when you look at what it takes to actually power the AI revolution, you realize there's this huge gulf between the stat standard data centers and the intense power requirements of modern AI computing clusters. You know, we talking about Nvidia's recent news, but it really highlights as well this shift towards the facilities that could support high density loads. They're often exceeding 100 kilowatts per rack. That's essentially cramming the power consumption of an entire suburban neighborhood into a space the size of a refrigerator just to give a bit of an analogy. So when you look at an infrastructure provider like Iran, you know, they're really having this task of building or retrofitting the the massive electrical substations that can handle this continuous high voltage capacity without having an adverse effect on local uh utility grids. And what's interesting as well is it's kind of rewriting some of the rules of corporate finance and the tech sector. You know, traditional cloud hosting relied on a flat rate or simple net leases where tenants would pay a predictable monthly fee. But what you're looking at now is these immense power requirements are forcing the industry towards much more complex power purchase agreements with variable energy pass through setups, which essentially means in layman's terms, the tenants absorb the volatile costs of the electricity spikes they generate. And we are seeing that. So, Microsoft just handed Iran uh I think a nearly $10 billion 5-year AI cloud contract, right? You have Microsoft that's accepted official delivery of their first 50 megawatt liquid cooled cluster in Texas. Nvidia locked in a multi-billion dollar agreement with Aren as well for those internal workloads. The final note I'll make for Aren, I mean they are operating with steep net losses as well. Even with billions under contract, the upfront capital intensity it's significant. So, I think the big test for management going forward is going to be whether they can fund these upfront electrical layouts and hardware pipelines before that long-term rental revenue from the tier one tenants uh comes forth into the balance sheet. >> Now, I think that the stock number three that you're going to talk about is also going to discuss kind of like the P side of this LPS solution. So, Rachel, what's stock number three here? >> Well, I'm going to talk about Vertive. And this is an interesting business. sort of ties the the physical, the chemical realities of the the AI revolution together. You know, when you think about packing, you know, one and a half million advanced NVIDIA GPUs into a site like ports Pike that we're talking about, this is unprecedented thermal density and traditional air cooling is incapable of keeping these data center architectures from melting. There are a lot of deep complexities that go into managing these systems. So Vertive is the global leader in this exact kind of critical digital infrastructure space. Management actually raised the company's 2026 revenue guidance recently up to 14 billion on the high end. Uh they're looking for over 30 organic sales growth fueled by this high density AI data center demand. And what's interesting is Nvidia's commitment to underwrite these long live data center sites means that even when the chips themselves get upgraded every few years, the cooling and the power distribution shells that are built by Vertive and companies like them remain in place. So this creates a very sticky high margin services and equipment replacement cycle for Vertive. And what's interesting, I mean, you look at competitors that are dealing with a a major capex depletion at this point. Vertive actually generated over $925 million in free cash flow in the recent quarter even as they're scaling production. And as we're in a time where Nvidia is anchoring a lot of these multi- gigawatt buildouts globally, Vertiv's order backlog is almost guaranteed to expand. So they're very much kind of a pick and shovels play on that physical reality of the AI boom. You know, AI factories are essentially industrial thermodynamic puzzles. And so Vertive solves the heat problem and without them the billions of dollars of computing power from the likes of Nvidia would essentially sit idle or overheat. So those uh you know high margin infrastructure contracts that Vertive closes it makes them a very defensive way I think to play this hardware cycle. And Vertive works handinhand with Nvidia's engineers to actually co-design the power architectures as well as the cooling solutions directly into those building shells from day one. So there's really high switching costs there as well. So essentially that means you know once you've got a multi- gigawatt facility that's optimized for Vertive's proprietary technology swapping it out for a competitor would essentially require tearing out that that the physical infrastructure. So it it essentially guarantees many many years of maintenance servicing and upgrade revenue for Vertive. So it's a really interesting business a little bit different than the other two stocks that that Jose has discussed today. a little bit different, Rachel, but like you mentioned, I think one of the things that I I just want to reiterate is Nvidia and Vertive work together. I know at the intro of this video, right, Rachel, when you were kind of talking about what Nvidia was doing, you talked about this platform called DSX. Now, DSX, for those that weren't familiar, is a platform Nvidia has made to showcase this is how you build a gigawatt data center. A gigawatt data center is massive. It's massive. So, they've kind of created this, I wouldn't say a stepby-step blueprint. This is the power solution that you need. These are the cooling solutions that you need. And a great partner of them for them to do this is Verdive. And I think as we continue to see these land power shell deals arise, a good winner is definitely Verde. Yeah, >> I think the thing we're learning is that the the physical reality of the AI boom is that you can have the best algorithms in the world, but if you don't have the chips, if you don't have the power, and you don't have the cooling infrastructure, your AI factory is going to grind to a halt. And that's why today we we looked at these physical infrastructure plays like TSMC, Iran, and Vertive that we think could be durable winners for long-term investors. Now, if you want more breakdowns just like this, make sure to hit that subscribe button, drop a comment below with your favorite AI infrastructure play, and we'll see you here next