Forks and spoons replace picks and shovels

The AI trade first made winners out of chipmakers like Nvidia. As investors realized AI startups would need to build data centers for their LLMs, they poured money into infrastructure companies like Vertiv. Then, they noticed all those data centers will need electricity, so utilities like Oklo became the new hot way to play AI. And today, it’s all about memory and data storage stocks like SanDisk that allow tech companies to train new AI models.

There’s a logical train of thought behind each new phase of the AI trade, and Bank of America analysts believe that they’ve found the next angle before the rest of the market: catering companies.

“The rapid global expansion of data centers represents a new source of structural, multi-year growth for the scaled food service providers,” analysts wrote in a recent note. “We believe the food service providers are in the very early stages of offering fully integrated services (food, hospitality services, transportation, etc) for the build outs of these data centers. In total, we estimate a potential TAM of nearly $100bn in the US, comprised of ~$70bn for construction and ~$20bn for the post-build market.”

Catering to the AI trade

As you read in our first story today, hyperscalers are shelling out hundreds of billions of dollars to build massive data centers. One of the most high-profile of these is the $100 billion Stratos data center that might soon be built in the middle of nowhere in Utah. Clocking in at 62 square miles, this mammoth facility will take years of work from thousands of construction workers in the middle of nowhere, and they all need food, water, and shelter.

Enter companies like Aramark, which BofA says has experience catering to buildouts in remote environments and has created a one-stop shop business that can handle all of a hyperscaler’s needs. If Aramark can secure even a fraction of the massive total addressable market for data center construction, its revenue can soar—which is why the analysts just raised their price target for the company. They’re also bullish on similar companies like Compass Group and Sodexo.

They say that selling shovels is the best business to be in during a gold rush. These days, selling a hearty breakfast burrito might be a better bet.—MR