Companies linked to artificial intelligence (AI) have become highly coveted stocks to buy. We’re mainly talking about US tech shares like Nvidia, whose semiconductors power advanced AI models, and businesses like Microsoft, Meta, and Alphabet that are integrating AI into their existing operations.
Many investors worry that these AI shares now command sky-high valuations. They fear this leaves them at risk of price corrections if the stocks’ momentum slows.
But investors don’t need to buy these pricey US stocks to target large returns from the AI boom. Here are two UK shares to consider for the new tech revolution.
Riding the data centre boom
Sophisticated AI models require thousands of chips working in tandem, meaning small server rooms just don’t cut it anymore. This is driving demand for industrial-sized data centres with sophisticated cooling systems and robust power infrastructure.
This provides an enormous opportunity for warehouse operators like Tritax Big Box (LSE:BBOX). Accordingly, the FTSE 250 real estate investment trust (or REIT) — which chiefly rents it large-scale spaces out to delivery companies, retailers, and fast-moving consumer goods (FCMG) companies — is pushing aggressively into data centres.
The company acquired its first data hub site in January, which it predicts will be “one of the largest data centres in the UK“. And it followed this with a second shortly afterwards. The sites — which have a combined potential capacity of 272 MW — are in well-connected locations in London and have scope for long-term expansion.
With a pipeline of another 1 GW, Tritax is positioning itself as a major player in the digital infrastructure boom.
The UK currently has 477 data centres in operation. And construction firm Barbor ABI believes almost another 100 new sites will be needed between now and 2030 to meet demand. This provides a wonderful growth opportunity for the likes of Tritax.
Be mindful, though, that data centre development carries risks. Like its logistics and storage hubs, returns are at the mercy of rising build costs and interest rates.
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Cable maker Volex (LSE:VLX) is another great data centre play to consider. The high-speed cables it manufactures are essential tools in ensuring a reliable and fast-moving data connection.
More specifically, the company is a pioneer in the direct attach cables (DACs) segment. These are especially critical for AI applications, as they facilitate high bandwidth with minimal latency. And they are helping to drive business with both new and existing customers.
Volex sells its cables across the world, leaving it exposed to trade tariff-related pressures. But these troubles haven’t yet derailed its ability to deliver strong revenues growth — organic sales leapt 10.4% at constant currencies between April and June.
The business said its latest sales numbers reflect “continued momentum in the Electric Vehicles and Complex Industrial Technology end-markets, notably among Data Centre customers“.
As well as data centres, Volex has exposure to multiple other growth areas like electric cars, renewable energy, healthcare, and automation. This provides added profit-making opportunities, while simultaneously broadening its sales base and reducing reliance on any single market to drive earnings.
I think it’s a great all-rounder to consider for the booming digital economy.
