Bank of America has uncovered a significant market setup related to Nvidia, revealing potential investment opportunities in the wake of the artificial intelligence sector’s evolution. According to analyst Andrew Obin, Nvidia’s role in redefining the AI landscape is driving a strategic shift towards key infrastructure stocks, overshadowing the noise surrounding immediate AI developments.
Nvidia has emerged as a major player in the AI arena, witnessing a remarkable stock increase of over 1,082% in the past three years. In the last year alone, shares surged by more than 30%, achieving multiple record highs. Obin believes that the market is currently misinterpreting signals, particularly concerning issues like cooling efficiency and chip thermals. He emphasizes that rather than fixating on Nvidia’s next moves, investors should focus on industrial stocks that are quietly benefiting from these developments.
Nvidia’s Influence on AI Infrastructure
Nvidia is effectively dictating the pace of the entire AI industry. As it transitions to the next generation of platforms, other companies must adapt their strategies accordingly. This includes hyperscalers, who need to strategize their deployments, and server manufacturers, who must redesign their products. Data-center builders are also required to optimize their power, cooling, and networking systems in line with Nvidia’s advancements.
Nvidia’s dominance is further cemented by its extensive ecosystem, which includes more than 6 million developers and approximately 6,000 CUDA applications. This creates a situation where once companies commit to using Nvidia’s technology, switching to alternatives becomes virtually impossible. As a result, Nvidia’s market share in the AI sector is estimated to be between 80% and 85%.
Obin stresses that opportunities lie not in chasing every AI headline but rather in investing in the industrial infrastructure that supports these tech giants. He cites companies like Trane Technologies and Johnson Controls as prime candidates to benefit from this trend. According to him, the market tends to react excessively to superficial chatter while overlooking the substantial demand that is locked in for the upcoming years.
Strong Backlogs Indicate Growing Demand
Both Trane Technologies and Johnson Controls are experiencing significant demand driven by the AI surge. In the third quarter of 2025, Trane Technologies reported an impressive $4.81 billion in bookings, reflecting a 12% increase year-over-year, along with $4.66 billion in sales. The company’s adjusted operating margin reached an impressive 21.8%, highlighting its pricing power.
CEO David Regnery mentioned that Trane has expanded its chiller capacity by approximately fourfold since 2023, with lead times currently stretching from 12 to 18 months. The backlog for Trane’s Commercial HVAC Americas has risen to nearly $500 million year-over-year and is expected to remain high into 2026.
Johnson Controls is in a comparable position, concluding fiscal year 2025 with a substantial $14.9 billion backlog in Systems & Services, marking a 13% organic increase, including a 6% rise in organic order growth in the fourth quarter. The management attributes this growth to advancements in data-center cooling solutions.
The hyperscalers, including Meta Platforms, Amazon Web Services, and Alphabet, are poised to benefit significantly from these trends. These companies are investing heavily in expanding their data-center capacities over multi-year timelines. For instance, Amazon’s Chief Financial Officer recently indicated that its capital expenditure for 2025 would reach approximately $125 billion, following a $89.9 billion investment in AI-related projects during the first three quarters.
Similarly, Meta has raised its capital expenditure forecast for 2025 to between $70 billion and $72 billion, with plans for further growth in 2026 driven by AI infrastructure. Alphabet’s CEO Sundar Pichai also reiterated that Google intends to invest over $75 billion in 2025 to expand its data-center capabilities, with expectations for continued increases in 2026.
As these tech giants prepare to invest nearly $400 billion in data centers, the implications for industrial partners like Trane Technologies and Johnson Controls are significant. Their roles in supporting the AI infrastructure will be crucial as the industry continues to evolve.
