Rocks, Lime, Concrete & Steel: Investing in AI Data Center Building Blocks

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1:46Carol Massar:Hey, listen, we've talked a lot about the AI build, a roughly$1 trillion wave of capital spending tied to artificial intelligence going on overall. In June, Bloomberg reported spending on data center construction in the U.S. eclipsed$50 billion in April for the first time, according to Census Bureau figures that were published at the time. Someone who is seeing this and watching it from a different perspective, because it's not just about semiconductors, although that is a big part, but also things like lime, potash, cement, steel, lots of different things. Back with us to talk about it is Catherine Thompson, founding partner and CEO at Thompson Research Group.

2:22Carol Massar:It's an equity research and advisory firm that focuses on companies in the industrial and construction spaces. She's with us from Nashville. So good to have you here. Thanks for your patience. A lot coming at us today, as is always the case. Tell us about the build and the things beyond semiconductors and the typical technological components that go into data centers, but that what you are focusing on that are needed as well for this build out. Yeah, so, you know, since the end of World War II, a lot of the focus has been on the consumer leading the economy. But we're having a total flip-flop with this now, and it's re-industrialization, which you and I have talked about, but obviously this data center build.

3:03So you're seeing a lot of really sleepy old-world-type industries, a few that you mentioned. But to put this into perspective for size, the build out for data center and AI will eclipse the total spend of interstate build out electrification, U.S. and the early build out of reels. So what are the different categories? Yeah, lime. So when you're building that data center, you have to actually stabilize the soil. And so you have no one thinks about lime. But that is you can't even put a foundation on unless you have the soil stabilized. Then if you've got water infrastructure, you've got to do precast pipes for that.

3:45Then there's actual laying foundation. Then you actually have the steel that's part of the structure of the building. So there's a lot of these old world industries that before you even see any rack, you're dealing with a lot of really basic materials. OK, can the supply chain handle this? Are there enough of these basic materials in the U.S. ready to be deployed for this multi-trillion dollar build out? Yeah, you know, a great question. And it really depends on where you are. And it's by no surprise there are certain states and certain areas who are seeing more data centers that do have more access to things.

4:24I know it sounds so, so basic, but having access to land and having access to cement and rock is so basic. Texas is the biggest producer of cement in the U.S. And so that is, you know, definitely will help them. The areas where it can get tougher can be more the rare earth or rare metals. And some of that's going to chips. But as far as steel, we feel good about cement could get tight. But oddly enough, it'll get tight if consumer, if residential returns. But right now we seem to be okay. but um watch out if you have any recovery in on the resin side so you know what's interesting i

5:10Carol Massar:think about my first kind of foray almost into business news and it was a mutual fund show and we would look at things that were going on in the news and basically what mutual funds how do you target it and sad to say when there was a disaster we talked about cement companies or what was need for for a build lead us to what companies katherine i think cmc is a ticker um that is definitely on your radar. The company is a commercial metals company. It's down about 5 % in today's session. Stock's down about 2.5%. It's not quite, but close to a$7.5 billion market cap company. It's a steel producer.

5:46Yeah. So the original thing was a steel producer, but they've really done a really interesting transformation of their company where they're looking at setting up the early stage of construction solutions. So what that is, it's like I said earlier, they have a grid product that helps stabilize. They're doing the rebar, which is an important part of laying the concrete foundation. And then along with that, they'll have a solution that they do precast concrete products for a wide array of needs. All of those will be needed at these type of data center sites. And they are already doing it now. I mean, in their investor day recently, they just outlined a solution for a$17 billion semi-conductor plant build-out.

6:35And they were providing all of those solutions. It's not sexy, but it's needed. And this is an interesting company in that they're not just about metals, but they're providing solutions now.

6:46Carol Massar:This is a market where we've seen rotation where it's not all about the sexy names. No, but actually, if you look at the best performing groups in the S &P 500, semiconductors are up there, but the steel index is up almost 45 percent year to date. You know, heavy electronics, construction and engineering. These are like the sub indices. Is the trade already behind us or are there specific areas, specific names that you still are seeing good value? I think CMC is a good one. Worthington Enterprises. They've had a variety of different company-specific hydrolytes, but they can provide a really great value.

7:26And they are also, if you think about the big metal tanks or the gases that are needed, but also super basic steel studs and ceiling tiles. They make all of that grid, and it's going to be needed for these projects. So that's a great name. And then finally, it's like super basic, but rocks, Martin Marietta materials. Not only do they produce crush rot, but that lime I was talking about earlier, they are just in the process of buying the West North America, which is the largest producer of lime in the U.S. So there's a couple of different ways you can do it. And I think they're actually really interesting values right now.

8:05Carol Massar:We always love where you go. It just reminds us of the wider world that's out there. And just also when it comes to AI trade, it impacts a lot of different sectors in our world, but also in our marketplace. Catherine, thanks again. And thanks again for the wait as we follow what was going on in the White House. Always appreciate it. Catherine Thompson, she's founding partner and CEO at Thompson Research Group, joining us from Nashville.

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9:07Carol Massar:Healthcare doesn't always work great. If you've ever waited on a refill or couldn't schedule an appointment, you get it. That's the kind of stuff Optum is changing. They're using data and technology to integrate patient care, pharmacy, and everything else. So healthcare is connected, not complicated. What's that look like? Cheaper prescriptions that are easier to get and care that looks at the whole person how you need it. Optum is helping make healthcare work as one for everyone. Learn more at business.optum.com. As industries evolve faster than ever, companies need an environment that accelerates strategic growth.

9:43And Michigan delivers on that promise. From emerging startups to global enterprises, Michigan offers what executives value most, a resilient, innovative ecosystem, diverse communities that attract top talent, and a quality of life that supports work-life balance. With our unified Team Michigan approach, businesses scale faster and compete at the highest level. Michigan, pure opportunity. Seize your opportunity at michiganbusiness.org.