Amid Mideast conflict, investors cling to faith in the AI build-out

Data center build-out stocks showed impressive resilience to the slump that hit big indexes Tuesday.

In fact, construction companies, server system makers, fiber-optic technology stocks, and memory makers — all cornerstones of the AI trade — were having a pretty good day, suggesting the market sees the wave of AI construction continuing, war or no war.

Optical stocks seen as crucial to efficiently transmitting the flood of information AI data centers both produce and depend on were surging. Corning, Lumentum, Coherent, and Ciena Corp. ramped.

Server rack makers HP Enterprise and Dell jumped. Construction and engineering companies like Sterling Infrastructure, MasTec, and Comfort Systems USA, which have benefited from the growth in building data centers, posted solid gains.

Hard disk drive makers Seagate Technology Holdings and Western Digital were also positive, though other memory plays such as Sandisk and Micron were in the red.

It was an impressive display of positivity on a day when the S&P 500 (SPDR S&P 500 ETF) and the Nasdaq 100 (Invesco QQQ Trust) were both fluttering between positive and negative territory for completely understandable reasons.

After all, the 82nd Airborne is heading to the Middle East, suggesting the US is considering sending troops into Iran. US crude oil is back above $90 a barrel and climbing, as the Strait of Hormuz remains essentially shut.

Additionally, the problems in the private credit market continue, with major fund managers preventing investors from withdrawing all the money they would like to. We even had a weak auction for US two-year Treasury notes — investors seemed to think the offered yield might not be sufficient to offset inflation risks stirred up by the war — that sent short-term interest rates up sharply.

But apparently it will take more than all that for investors to worry that the AI build-out may be halted, delayed, or even just trimmed back.