The Motley Fool·2026-01-02 05:00Core Viewpoint - The article discusses the rapid growth of "pick-and-shovel" companies in the AI sector, suggesting that these companies may offer better investment opportunities than traditional AI firms like OpenAI, Microsoft, and Alphabet due to their impressive revenue and profit growth rates [1][2]. Revenue Growth - Alphabet has increased its trailing-12-month (TTM) revenue by 37.3% over the last three years, while Microsoft has seen a TTM revenue growth of 44% during the same period [4]. - In contrast, Vertiv Holdings has experienced a TTM revenue growth of 70.4%, and Arista Networks has achieved a remarkable 92.8% growth over the same timeframe [6]. Profit Growth - Microsoft’s net income has grown by 55.5% since December 2022, and Alphabet's net income has more than doubled, with a three-year growth of 107.2% [9]. - Arista Networks has reported a net income growth of 148.2%, while Vertiv has seen an extraordinary 1,250% increase in net income over the same period [9][10]. Market Valuation - Vertiv is trading at 40.6 times forward earnings, and Arista at 45.8 times forward earnings, compared to Microsoft and Alphabet, which are valued at approximately 30 times and 29.7 times forward earnings, respectively [12]. - The higher valuations for companies like Vertiv and Arista indicate investor confidence in their growth potential within the AI infrastructure space [13]. Investment Strategy - Investors are encouraged to monitor "pick-and-shovel" AI companies for potential short-term price dips that may present attractive buying opportunities as the AI buildout continues [14].