AI's Next Phase: Scoring Growth Stocks in Infrastructure, Platforms, and Productivity

The AI investment thesis is maturing. A year ago, the conversation was about basic reasoning and model capabilities. Now, the focus has shifted decisively to scaling efficiency and deploying technology at an unprecedented pace. This evolution is reshaping the investment landscape, moving beyond the initial capex surge in pure infrastructure.

The first phase was defined by a scramble for compute. As chips and compute resources became scarce, companies raced to secure a competitive advantage. That capex boom is now entering a new chapter. The frontier is no longer just raw power, but efficiency and the ability to deploy AI effectively. Experts predict a wave of new chip architectures and system designs will emerge to handle agentic workloads, signaling that the infrastructure build-out is becoming more sophisticated and targeted.

This maturation is driving a clear rotation in investor focus. While the consensus for AI hyperscaler capital expenditure is still climbing, investors have rotated away from AI infrastructure companies where earnings growth is pressured and debt is funding the spend. The divergence in stock performance is stark, with correlations among the largest AI stocks collapsing. Goldman Sachs Research frames this shift, expecting the next phases of the AI trade to involve AI platform stocks and productivity beneficiaries. The market is rewarding companies that can demonstrate a clear link between their massive investments and revenue generation.

The engine for this next phase is rapid adoption, creating a powerful flywheel. Consider that a leading generative AI tool has reached over 800 million weekly users-a scale that took the internet decades to achieve. This isn't just user growth; it's data generation at an exponential rate. More applications are built, which creates more data, which attracts more investment, and so on. This compounding effect is what will ultimately fuel the productivity gains and platform dominance that investors are now chasing. The infrastructure remains essential, but the growth story is shifting to those who can best leverage it.

Assessing Growth Candidates: Lattice Semiconductor and Modine

The shift from infrastructure to productivity is creating clear investment targets. Two companies exemplify this transition: Lattice Semiconductor, positioned in the foundational layer of AI systems, and Modine, a specialized beneficiary of the data center build-out. Their stories are about capturing a growing slice of a massive, secular trend.

Lattice Semiconductor is a prime example of a company riding the foundational technology wave. As a leader in low-power programmable logic, Lattice provides the essential circuitry that manages power distribution and data flow within complex systems. In the context of AI, this translates to critical components for edge devices and the internal architecture of servers and networking gear. The company's narrative is now explicitly tied to AI, with analysts pointing to AI related revenue potential as a key driver for its recent price target revisions. Its long-run revenue growth assumption of 17.53% reflects a high-growth trajectory that must outpace the broader semiconductor cycle. This isn't just about being a supplier; it's about being a necessary, scalable component in a system where efficiency and power management are paramount. The company's focus on industrial and automotive end markets adds a layer of diversification, but the AI tailwind is the primary growth lever.

On the flip side, Modine represents the productivity beneficiary. Its expertise in thermal management is being deployed to solve a fundamental, non-negotiable need: cooling AI data centers. As these facilities pack more compute into smaller spaces, the heat generated demands specialized, customized solutions. Modine's role is to provide the HVAC systems that keep this critical infrastructure running. This is a classic case of a foundational technology (AI) creating a new, high-margin market for a specialized product. The company is not building the AI models, but it is enabling the physical deployment that makes them viable. This positions Modine to benefit from the same secular growth trend as Lattice, albeit through a different business model and end market.

For the growth investor, the appeal of both lies in their market penetration potential. Lattice is scaling its addressable market by embedding its technology into more systems, while Modine is capturing a growing share of the specialized cooling equipment market. The key will be execution against these high-growth assumptions, navigating any end-market specific headwinds. The evidence suggests the market is rewarding this focus, with Lattice's stock narrative tightening around its AI-driven growth story.

Financial Scalability and Market Penetration

The path to capturing a meaningful slice of the AI-driven TAM hinges on a company's ability to scale its financial model profitably while navigating external pressures. For Lattice Semiconductor, the focus on industrial and automotive end markets provides a crucial layer of diversification. This strategy buffers the company against volatility in any single sector, a key advantage for a growth story that must outpace the broader semiconductor cycle. Yet, this very focus may also limit its pure-play exposure to the most explosive AI capex, compared to larger, more vertically integrated chipmakers. The company's narrative is now tightly linked to AI, with analysts pointing to AI related revenue potential as a key driver for recent price target revisions. The financial model assumes a long-run revenue growth rate of 17.53%, a figure that must be sustained through execution in these foundational markets.

External headwinds, however, are a material risk to that growth narrative. Analysts explicitly flag risks from Chinese electric vehicle production cuts and easing tariff pull ins as potential weight on the Q4 outlook. These are not abstract concerns but concrete pressures that could dampen demand from a major end market. The bullish case assumes these risks are manageable or offset by AI acceleration, but the tug-of-war between optimism and caution is already reflected in the market. This dynamic underscores a critical point for growth investors: scalability is not just about internal execution, but about the resilience of the underlying demand drivers.

Modine, by contrast, operates in a niche where its competitive advantage is built on customization. Its thermal management solutions for AI data centers are not off-the-shelf HVAC equipment. The company's strength lies in creating bespoke systems that address the intense, concentrated heat generated by dense compute clusters. Standard equipment is less effective here, giving Modine a defensible position in a specialized, high-margin segment. This is a classic case of a foundational technology (AI) creating a new, non-cyclical market for a specialized product. The financial model for Modine is less about broad market share and more about capturing a growing share of this specialized cooling equipment market, where its engineering expertise is a barrier to entry.

The bottom line for both companies is that their growth stories are now intertwined with the AI productivity flywheel. Lattice's scalability depends on its technology becoming embedded in more systems, while Modine's depends on the continued build-out of data centers. The financial models must demonstrate that this penetration can be achieved profitably, even as external pressures like tariff changes and regional production shifts introduce friction. For the growth investor, the question is whether their respective moats-whether in foundational logic or specialized engineering-can be leveraged to capture a durable portion of the expanding TAM.

Catalysts, Risks, and What to Watch

The growth thesis for companies like Lattice and Modine hinges on a few key events and risks. For Lattice, a near-term catalyst is its presentation at the Needham Growth Conference on January 14. This fireside chat with institutional investors will provide a direct update on strategy and financial results, offering a clear signal of how management is navigating the current environment. Given the market's rotation away from infrastructure spenders, the company's ability to articulate a path to profitability and revenue growth will be under the microscope.

The primary long-term risk is a deceleration in AI capital expenditure. Analysts note that while consensus estimates for 2026 capex are climbing, the market has already rotated away from infrastructure companies where earnings growth is pressured. If the projected spending surge fails to materialize as expected, it would force a broader rotation away from these spenders and pressure the growth premiums that investors are currently willing to pay. This is the core vulnerability for any company whose narrative is tied to the infrastructure build-out.

For the growth investor, the most important trend to watch is the emergence of tangible AI productivity gains. Goldman Sachs Research has identified companies with high labor cost exposure to AI automation as key beneficiaries, highlighting the next phase of the trade. The evidence suggests that investors are being more selective, rewarding those who can demonstrate a clear link between investment and revenue. Therefore, earnings calls from Lattice and its peers should be scrutinized for evidence that their foundational technology is enabling the efficiency gains that will ultimately drive platform and productivity stock performance. The bottom line is that the market's patience for pure infrastructure spenders is finite; validation will come when that spend demonstrably translates into scalable, profitable growth.