Don’t forget the picks and shovels
- Options traders active in NVT on Wednesday
- Stock up more than 146% from April low
- Shares in consolidation since Oct. 31 earnings
For most of us, AI likely conjures images of the highest of high tech—sophisticated semiconductors, bafflingly complex code—and, likely, their application in things like driverless cars and humanoid robots.
All valid, but taking a small step back from the most headline-grabbing, futuristic possibilities of AI reveals its industrial foundation. The massive data centers—not to mention the utilities required to power them—require lots of less-than-sexy, nuts-and-bolts infrastructure. So, while the “AI trade” always seems to revolve around a handful of megacap tech companies, there’s another layer of businesses—energy, electrical components, construction, and engineering—that are integral to its growth.
Many of these “picks and shovels” of the AI world have enjoyed robust rallies this year. One of them, UK-based electrical equipment company nVent Electric (NVT), is up 64% for the year and roughly 147% above its early-April low of $45.20:
Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)
For comparison, AI chipmaker NVIDIA (NVDA) rallied around 104% over the same period, while Alphabet (GOOGL)—the strongest “AI hyperscaler” in recent months—climbed 97%.
Like these higher-profile stocks, NVT has pulled back recently, consolidating after the new record high it hit after releasing earnings at the end of October. As of Wednesday, NVT was less than 3% below that high. The stock did, however, buck Wednesday’s soft market, which was highlighted by continued AI-stock weakness. Shares rallied more than 1%, while LiveAction scans showed traders more active than usual in call options:
Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)
In early trading, call volume was roughly 238 times put volume, and nearly 30 times average. While there are two sides to every trade, the contracts with the most activity suggested some buyers were potentially leaning on expectations for the stock to resume its uptrend, at least in the near term: 3,200 contracts traded in the November $120 calls, while 2,100 traded in the December $125 calls.
The AI story is a big tent, gathering a wide range of stocks in and out of the tech industry. While investor focus is, understandably, on the high-profile “AI miners,” it may make sense to continue to watch for opportunities in the wider universe of AI picks and shovels.
Market Mover Update: Reports that OPEC had reversed its expectations for a 2026 oil-supply deficit sent December WTI futures (CLZ5) tumbling more than 4% on Wednesday. Prices turned lower in the vicinity of a former support level that had provided a price floor throughout most of July, August, and September:
Source: Power E*TRADE. (For illustrative purposes. Not a recommendation.)
Airline stocks shrugged of Wednesday’s market weakness, with United Airlines (UAL), American Airlines (AAL), and Delta Air Lines (DAL) all rallying more than 3% (see “Airlines seek altitude”). Airlines were the strongest S&P 500 industry group in the industrials sector, and the second-strongest overall.
Today’s numbers include (all times ET): EIA Petroleum Status Report (12 p.m.).
Today’s earnings include: Applied Materials (AMAT), Alibaba (BABA), Canadian Solar (CSIQ), Walt Disney (DIS), JD.com (JD).
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