There’s an old saying on Wall Street…
Follow the money.
It’s a great way to tell what’s a real investment trend and what’s just hype.
The amount of money that’s flowing into artificial intelligence is staggering. Goldman Sachs estimates roughly $7.6 trillion will be invested in AI infrastructure between 2026 and 2031. The five largest U.S. hyperscalers could spend approximately $1.2 trillion in 2027 alone.
That’s a lot of zeros.
But here’s what investors need to understand: Those companies aren’t spending $1.2 trillion simply because executives are excited about AI.
They’re buying things. Lots of things.
Computer chips and servers. Data center equipment. Power and cooling systems. Networking equipment, storage, specialized components, and everything else required to keep increasingly powerful AI systems running.
I don’t care how exciting a new technology sounds if nobody is willing to pay for it. But when some of the largest and most sophisticated companies on Earth start committing hundreds of billions of dollars to something, I pay attention − because those dollars become someone else’s revenue.
That’s the part of the AI story many investors are missing.
Everyone knows Nvidia, Microsoft, Amazon, and Alphabet, but what about the companies that are receiving their checks?
Those businesses may offer a completely different way to invest in artificial intelligence, and some of them are a fraction of the size.
Imagine a $3 trillion company lands a $1 billion contract. It’s certainly positive, but financially, it barely moves the needle.
Now imagine a company worth a few billion dollars landing that same contract.
That’s a very different situation. It could dramatically increase revenue, improve cash flow, prompt analysts to raise their earnings estimates and price targets, or cause investors to completely reevaluate what the company is worth.
That’s one reason smaller stocks can produce such extraordinary returns during major investment cycles.
But there’s a catch.
Smaller companies also carry greater risk.
A good story isn’t enough. I’ve spent my career studying numbers, and I want evidence. I need to know whether sales are actually increasing, whether the company has a healthy balance sheet, and whether today’s growth could eventually translate into meaningful profits and cash flow.
Those are much more useful than simply asking whether a company has “AI” somewhere on its website.
There’s another encouraging sign for investors right now: Corporate earnings growth isn’t limited to a few giant technology companies.
According to FactSet, the other 493 companies in the S&P 500 aside from the Magnificent Seven grew earnings 31.8% year over year in the second quarter of 2026. That was their strongest earnings growth since late 2021.
In other words, we’re seeing strength broaden beyond the handful of stocks that did most of the heavy lifting early in this bull market.
That’s exactly the kind of environment where investors can start looking beyond the obvious megacap winners for opportunities further down the food chain.
I think there’s a simple lesson for investors…
Don’t chase the AI story. Follow the AI money.
When you’re researching a potential investment, don’t start with how many times management says “artificial intelligence” on an earnings call.
Start with the cold hard facts:
- Is revenue accelerating?
- Are orders growing?
- Are major customers signing contracts?
- Is the company generating cash (or at least moving closer to doing so)?
- Perhaps most importantly, is the business providing something its customers truly need?
Those questions won’t lead you to every winner − nothing will.
However, they can help you avoid paying for a great story attached to a lousy business.
That’s especially important today. Whenever hundreds of billions of dollars flood into a new technology, speculation inevitably follows.
There will be AI companies that justify the excitement, and there will be others that don’t.
My job is to tell the difference.
Right now, I’m especially interested in the companies that are selling the infrastructure required to make this technology work.
Early in my career, I lived and worked in San Francisco during the height of the dot-com boom. I quickly learned that you didn’t want to have to guess which of the unproven startups would eventually win. You wanted to own companies like Cisco (Nasdaq: CSCO).
It was providing infrastructure that many of the flashier names needed in order to survive. So no matter which one of them came out on top, Cisco was in position to benefit.
If AI spending continues on anywhere close to its current trajectory, someone − likely multiple companies − will emerge as this generation’s Cisco. They’ll be selling the chips, power, cooling systems, networking equipment, data infrastructure, and specialized components that will determine the future of AI.
The next time you hear another bold prediction about where artificial intelligence is headed, don’t get distracted by the hype.
Ask a simpler question: Where is the money actually going?
Follow the money, and you may just find the next generation of AI winners before they become household names.