AI’s Hidden Enablers: SMID Caps to Consider
Behind the headlines, lesser-known companies are powering billing systems, connectivity, and critical resource solutions for the AI era
SMID caps are entering the AI cycle at a time when monetary conditions are becoming more favorable. As interest rates decline, companies that rely on floating-rate debt or revolving credit gain relief on financing costs, freeing up cash flow for reinvestment.
At the same time, cheaper capital lowers the hurdle for ambitious capex projects, from expanding high-performance data centers to scaling water treatment capacity. Together, these dynamics position SMID caps to capture outsized gains in the next leg of AI growth, offering exposure to the theme at valuations that sit well below the market’s mega-cap favorites.
SMID caps aren’t building the biggest models or data centers but they are supporting the growth of that. There are multiple SMID cap companies that are building the billing systems, the infrastructure that keeps workloads running, and the energy and water resources required to sustain growth.
By operating in narrower niches and moving with greater agility, they are often the first to spot emerging bottlenecks and deliver solutions that translate directly into enterprise adoption. Their role may be less visible, but it is no less important to the long-term monetization of AI.
The three key areas of focus would be:
AI Adoption and Monetization – How enterprises translate AI from a technical capability into real revenue streams, using tools that enable usage-based billing, product analytics, experimentation, and data quality.
Infrastructure – The physical and digital backbone of AI, including data centers, connectivity, and reliability systems that allow workloads to scale efficiently and operate without disruption.
Energy and Water – The critical resources required to power and cool AI workloads, where sustainable energy generation and advanced water treatment solutions are becoming essential enablers of long-term growth.
We’ve reviewed this in slightly more depth, along with possible stocks to look at.
