From Chips to Power Grids: The Hidden Plays Behind the AI Gold Rush

Artificial intelligence (AI) is no longer just a technology megatrend. It is transforming how we live, work, learn, and play, and is reshaping the world as we know it.

However, training and running the advanced AI models that drive this transformation requires a massive amount of compute capacity and data bandwidth. Subsequently, the demand for the cutting-edge chips, servers, networking gear, and power systems needed to build massive data center capacity has skyrocketed.

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Nvidia's graphics processing units (GPUs) are being used extensively to enable accelerated computing in AI data centers. Broadcom is also helping these chips communicate efficiently with custom networking and connectivity solutions. But AI isn't only about semiconductors. It also depends on reliable chip packaging, as well as power management systems to make these high-performance servers function efficiently and reliably.

Here are two prominent yet lesser-known companies driving this gold rush from chips to power grids.

Amkor Technology

Amkor Technology's (NASDAQ: AMKR) advanced packaging and testing solutions also play a crucial role in the semiconductor manufacturing ecosystem. The company is the second-largest outsourced semiconductor assembly and test (OSAT) player globally. It assembles, packages, and validates GPUs, application-specific integrated circuits (ASICs), and high-bandwidth memory (HBM) chips used in accelerated computing platforms. These services ensure the performance and reliability of AI and high-performance computing chips.

In the second quarter of fiscal 2025, Amkor's revenue was up 3% year over year to $1.5 billion, while earnings per share (EPS) were $0.22. The company's gross margin was just 12% due to increased preparation costs for upcoming product ramps and headwinds from the early stage scale-up of the high-volume manufacturing facility in Vietnam. Those margin headwinds, however, are temporary.

While Amkor's financial growth doesn't seem explosive, there are still many reasons to keep an eye on the company. The global advanced packaging market is estimated to grow from $48.5 billion in 2023 to $119.4 billion in 2032. This appears to be a conservative estimate, considering the massive demand for AI chips in data centers worldwide.

Amkor continues to strengthen its position in advanced packaging technologies. The company offers advanced packaging solutions, including 2.5D and High-Density Fan-Out (HDFO), that facilitate efficient integration of high-bandwidth memory (HBM) in next-generation computing chips. The next-generation HDFO product has already entered high-volume production for a lead customer.

HDFO helps minimize signal loss and enables high-bandwidth communication between densely integrated, AI-optimized chips. The company's advanced packaging and testing lines in South Korea and Taiwan are working at high utilization levels. Amkor plans to expand capacity at these facilities further.

Amkor carried $2 billion in cash and $3.1 billion in total liquidity, while its total debt was $1.6 billion as of the end of the second quarter. With a debt-to-EBITDA ratio of around 1.5, Amkor maintains sufficient financial flexibility to invest in future growth initiatives.

Amkor trades at almost 20 times forward earnings, which is very reasonable. Coupled with its significant exposure to AI-driven packaging and testing demand, the company seems like a worthwhile pick now.

Vertiv Holdings

Vertiv Holdings (NYSE: VRT) has emerged as a key player in the development of AI infrastructure. The company provides the critical power and thermal management infrastructure needed to operate AI data centers at scale.

Its liquid-cooling franchise has scaled capacity over 40 times since 2024, driven by surging demand from hyperscalers for high-density server racks with larger power utilization. By dissipating the intense heat generated in these high-power AI servers, liquid-cooling systems enhance energy efficiency and minimize performance degradation due to overheating.

Vertiv's financial performance has been impressive. The company's net sales were up 35% year over year to over $2.6 billion in the second quarter. The company's backlog also soared 21% to $8.5 billion. This highlights the company's exceptional revenue visibility for 2025. Vertiv is now guiding for net sales of $10 billion and adjusted diluted earnings per share (EPS) guidance of $3.80 for this year. Management is also targeting an adjusted operating margin of 20% in 2025 and 25% by 2029.

Vertiv is increasingly helping link the power and thermal systems (gray space ) with IT hardware and racks (white space) in the data center. The acquisition of Great Lakes has added data rack enclosures, custom racks, and enhanced cable management solutions to Vertiv's portfolio. This deal has further strengthened Vertiv's capabilities to integrate white space and gray space in data centers.

The company has also strengthened its capabilities for AI-powered monitoring and control of its power and cooling infrastructure by acquiring Waylay NV. Hence, the company is well-positioned to deliver fully integrated and prefabricated systems to hyperscalers, enabling rapid expansion of data center capacity.

Vertiv has collaborated with CoreWeave and Dell Technologies to deploy Nvidia's latest Blackwell architecture-based GB300 NVL72 system. Its alliance with Oklo can help data centers access advanced nuclear power plants. Vertiv's nuclear power plant technology can help data centers manage their long-term energy demands in a cost-efficient manner. All this highlights that the company is at the forefront of AI infrastructure development.

Vertiv expects to generate adjusted free cash flow of $1.4 billion in fiscal 2025. With $2.5 billion in liquidity and net leverage (total debt to earnings) of only 0.6x, the company has ample flexibility to fund future growth initiatives both organically and inorganically.

Trading at almost 33.4 times forward earnings, Vertiv shares are not cheap. However, the premium valuation is justified considering the solid demand for its power and thermal management solutions in the global AI buildout. Hence, the stock can be a smart pick now.

Manali Pradhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.