While AI chips represent the bulk of a data center's cost ($20-25M/MW), the remaining $10 million per megawatt for essentials like powered land, construction, and capital goods is where real bottlenecks lie. This 'picks and shovels' segment faces significant supply shortages and is considered a less speculative investment area with no bubble.

The massive, direct, and geographically concentrated energy demand from AI data centers makes local U.S. power markets the most effective AI-related commodity trade. With 72% of data centers in just 1% of counties and a constrained grid, local power prices are poised to rise significantly, offering a targeted investment thesis.

Amid uncertainty about which AI applications will win, Blackstone's strategy is to invest in the essential infrastructure all AI companies need. This "picks and shovels" approach targets data centers and electricity, guaranteeing exposure to the boom without betting on specific, high-risk application companies.

Instead of betting on which AI models or applications will win, Karmel Capital focuses on the infrastructure layer (neocloud companies). This "pick and shovel" strategy provides exposure to the entire ecosystem's growth with lower valuations and less risk, as infrastructure is essential regardless of who wins at the top layers.

The insatiable demand for data centers is creating an upstream bottleneck: access to power. With grid connections backlogged for years, the most valuable asset is becoming 'powered land'—parcels where developers can bring their own power sources, creating a new and crucial real estate sub-market.

The biggest investment opportunity lies in the beneficiaries of big tech's massive AI capital expenditures. This "food chain" includes data centers, power grid upgrades, and industrial suppliers who are seeing unprecedented demand for the foundational infrastructure AI requires.

Beyond being an inflation hedge, infrastructure represents a key constraint on AI's growth. Investing in areas like power capacity and data compute allows investors to "own the constraint on AI," providing a diversified way to gain exposure to the dominant technology theme.

AI is driving power demand at an unprecedented speed ("internet time"). However, building new power infrastructure takes decades ("geological time"). This massive mismatch creates a prolonged period of tight supply, making existing power assets incredibly valuable.

Rather than picking a winning AI or crypto, the smarter investment is in the 'picks and shovels.' This means focusing on the infrastructure every autonomous agent will require to transact—such as wallets, custody services, and blockchain rails—regardless of which specific application succeeds.