German manufacturing is gaining strength with support from data center investments. That signals real money flowing into the physical backbone that AI needs to run at scale. Instead of chasing every new AI app, some investors are looking at the picks and shovels that keep the servers running and the chips cool. This article walks through three AI infrastructure stocks from our screener that reflect this trend.

The stocks covered below are just a small sample, and the full screen surfaced 52 more AI infrastructure companies with equally compelling stories that are not included in this article. If you want to identify and analyze the highest conviction opportunities across the full universe, head straight to the AI Infrastructure Stocks screener.

Western Digital (WDC)

Western Digital is a global data storage company that develops and sells hard disk drives and related storage platforms, with its high capacity data center HDDs and systems forming part of the storage backbone for large scale AI training and inference. The business generates about US$12.9b in revenue from HDDs, covering everything from internal drives to data center platforms sold through a broad mix of channels worldwide. The stock carries a market cap of about US$165.6b, which reflects the scale of its role in AI infrastructure and broader storage markets.

Western Digital may be worth a close look for investors who want exposure to the physical infrastructure that keeps AI data centers running. Its data center HDDs are tied directly to AI storage demand, and recent results report strong revenue, high gross margins and positive free cash flow as larger hyperscaler contracts provide greater visibility. The flip side is that this is a classic capacity driven cycle, where elevated margins and long order books can attract new supply, while Chinese storage players and the gradual shift toward cheaper flash are often cited as longer term risks. A key consideration for investors is how long Western Digital can maintain a balance of tight supply, solid pricing and disciplined competition.

Western Digital’s AI storage story hinges on capacity cycles and pricing power. To understand how that trade off compares, review the 4 key rewards and 3 important warning signs (1 is major!) and what it indicates about the next phase.

Build your own AI infrastructure shortlist

Western Digital and the two other AI infrastructure stocks in this article all surfaced from a single screen, but the real edge comes when you create your own filters. Use our flexible Screener to mix valuation, growth, quality and risk criteria, or lean on the pre-built themes inside our Investing Ideas.

Lumentum Holdings (LITE)

Lumentum Holdings is a photonics manufacturer that builds the laser chips, optical modules and circuit switches that move data inside and between data centers, with its high bandwidth optical components directly tied to AI and cloud interconnect demand. The company reports its operations as a single Integrated Enterprise segment that generated about US$3.0b in revenue, reflecting a broad product portfolio that also serves telecom, consumer and industrial markets globally. Lumentum carries a market cap of roughly US$77.7b, which shows how much weight investors are placing on its role in AI focused optical networking.

For investors who want exposure to the physical wiring of AI rather than just software, Lumentum is worth attention. Its optical modules and wavelength management components are central to AI data center connectivity, and recent reports highlight revenue, margins and demand from hyperscalers. The catch is that profits and free cash flow have been volatile and the stock price already reflects high expectations, so the AI optics story needs to keep delivering for today’s valuation to hold up. The full picture of how that trade off looks across cash flow and balance sheet strength is where the real insight lies.

Lumentum’s AI optics story is gaining attention, yet the real tension between growth hopes and cash flow volatility sits inside the 3 key rewards and 2 important warning signs

Vertiv Holdings Co (VRT)

Vertiv Holdings Co builds the physical infrastructure that keeps AI data centers running, with its high density air cooled and liquid cooled thermal management systems and modular data center solutions directly linked to the AI infrastructure theme. Alongside these AI focused lines, Vertiv also sells power systems, racks, UPS units and life cycle services into broader communication, commercial and industrial environments across the Americas, Asia Pacific and EMEA, generating about US$7.5b from the Americas, US$2.7b from Asia Pacific and US$2.4b from Europe, the Middle East and Africa. The stock carries a market cap of roughly US$100.8b.

Vertiv may be worth attention if you want exposure to the plumbing of AI rather than another software story. Its liquid and precision cooling systems are wired directly into hyperscale AI build outs and supported by a large installed base, rising margins and strong returns on equity. The trade off is that Vertiv is already priced at a premium and relies heavily on a small group of hyperscaler customers, so any slowdown in AI data center spending or execution hiccup could have a significant impact. The full picture on how that risk reward balance stacks up for Vertiv’s AI infrastructure role is where the key consideration may lie.

Vertiv’s AI cooling story is accelerating, yet the real question is how much of that excitement is already priced in. Review the analyst forecasts for Vertiv Holdings Co to see how current expectations stack up against one underappreciated twist.

Seeking Fresh Alternatives Before Others?

Fresh ideas often move first and the strongest breakouts rarely wait. Scan these under-the-radar-for-now opportunities before momentum is fully caught by the crowd and consider taking action in line with your own approach and risk tolerance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.