The Pick-and-Shovel Phase of AI Has Arrived: 3 Stocks to Watch

Although ChatGPT creator OpenAI may capture a lot of headlines, especially amid speculation that it's preparing to go public, the company continues to bleed money. Some estimates suggest it will need to spend more than $200 billion to achieve its ambitious growth plans.

Rather than wait for OpenAI to become investable, a better strategy may be to buy shares of businesses that serve as the pick-and-shovel plays of the artificial intelligence (AI) gold rush. These companies operate in the background, providing essential services to the sector as the technology evolves toward more sophisticated capabilities, such as agentic AI.

Astera Labs (NASDAQ: ALAB), Iren (NASDAQ: IREN), and Nokia (NYSE: NOK) are pick-and-shovel businesses poised to reap years of financial success from the AI megatrend, and their stocks are well worth considering now.

Image source: Getty Images.

Astera Labs' key AI products

Astera Labs focuses on offerings that enhance connectivity within AI data centers.

AI systems churn through mountains of data to execute tasks. This requires tremendous computing horsepower, which is housed in massive data centers. In fact, the computational needs of AI are so great that they necessitate the construction of even larger facilities -- some data centers being built today are the size of small cities.

As a consequence, within those facilities, large volumes of data must travel quickly over relatively long distances. Astera's hardware and software products accelerate that data flow, boosting the speed, efficiency, and overall performance of AI systems. The company's solutions also address bottlenecks and ensure the data moves without degradation.

Unsurprisingly, Astera is seeing strong demand, and its sales are soaring. In the third quarter, the company's revenue rose an impressive 104% year over year to a record $230.6 million.

Management expects demand to remain robust. It was projecting Q4 sales to come in between $245 million and $253 million. That would be an impressive increase over the prior-year period's then-record revenue of $141.1 million.

Iren feeds AI's insatiable hunger for compute

Iren began as a Bitcoin mining business, so it built up a set of GPU-heavy data centers that it powered with renewable energy. But in 2024, it began to pivot: Now, it's expanding its footprint and renting some of its cloud computing capacity out to hyperscalers, which are hungry for more processing power to support AI models.

That's why Microsoft recently signed a five-year deal with Iren worth $9.7 billion. But Iren's shift to landing hyperscalers as clients isn't the only reason to consider the stock.

A key strength of the company is its vertical integration. It doesn't just own the computing hardware and data centers -- it also owns much of the electrical infrastructure and power-generating systems that power its operations.

This helps Iren manage costs as it expands to meet demand for AI processing power. Consequently, Iren exited Q3 with a solid balance sheet. Total assets were $4.3 billion, of which cash and equivalents represented $1 billion. Total liabilities were $1.4 billion, with convertible notes debt of $964.2 million. The company has committed to "maintaining a prudent balance of debt and equity" as it constructs additional AI computing capacity.

Iren's revenues have increased every quarter for the past year. In Q3, the company achieved revenue of $240.3 million, an impressive 355% year-over-year increase. The company is also profitable, with Q3 net income of $384.6 million.

Nokia's wireless AI

Nokia's share price has surged by about 40% over the past 12 months, a gain driven largely by its successful pivot to AI. The company is working to deliver artificial intelligence to edge networks.

Nokia is developing 6G wireless technology to provide the next generation of mobile network service. 6G will be far faster than the current 5G networks, and better able to handle the substantial volumes of data required to support AI applications. It will not only be used for your smartphone, but also to enable agentic AI, as well as artificial intelligence systems that interact directly with the physical world, such as robots and self-driving cars.

AI tailwinds are already acting as a catalyst for the company's business. In Q3, sales grew 12% to 4.8 billion euros, largely due to AI-related demand.

In addition, Nokia has successfully diversified beyond its traditional reliance on telecom operators, and is now providing its tech to AI data centers. As a result, its optical networking segment sales soared 114% year over year to 782 million euros in Q3, and total revenue rose 12% to 4.8 billion euros.

Nokia, Iren, and Astera Labs may not receive the level of media attention that OpenAI does, but as suppliers of technology that underpins artificial intelligence systems, they are well positioned to sustain their sales growth in the coming years.

Robert Izquierdo has positions in Microsoft. The Motley Fool has positions in and recommends Microsoft. The Motley Fool recommends Astera Labs and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.