Last year, the market didn’t care how you made electricity.

If you produced electrons—or even talked about producing electrons—you got paid.

Solar ripped. Nuclear ripped. Gas ripped. Even coal ripped.

That’s not “fundamental stock-picking.” That’s a scarcity panic dressed up as an AI thesis:

And it worked… until it won’t.

Because “everyone’s a winner” trades die the same way every time:

the market stops paying for proximity and starts paying for proof.

“AI needs power → power stocks go up.”

That’s why this rally can continue in 2026… but it will stop being a blanket trade. It becomes a dispersion trade.

Three reasons the easy money phase ends:

A bunch of the “AI power” winners are now priced like software companies:

That doesn’t mean they must crash. It means the bar is higher:

The same scarcity that lifted the whole complex becomes the thing that punishes the weak links:

In 2026, “power demand is huge” stops being a catalyst if supply can’t physically show up on schedule.

The biggest losers in the next phase are predictable:

2026 is when missed timelines stop being “growing pains” and start being equity wipeout risk.

If data-center construction and grid upgrades keep accelerating, the cleanest “second-order” beneficiaries are not always the power producers.

They’re the companies that get paid whether the tenant is OpenAI, Meta, or whoever wins the model race.

Think of it like this:

A data center isn’t an office building. It’s a power plant + a chiller farm + a substation with servers inside.

So the money goes into MEP (mechanical, electrical, plumbing), grid gear, and thermal.

This is the “you can’t cheat physics” bucket.

If load is rising, the grid gets upgraded. Period.

What tends to win:

Example tickers to bucket-watch:
$PWR, $MYRG, $MTZ, $HUBB

Why it works in 2026:
Even if AI sentiment cools for a quarter, grid backlogs don’t vanish. These projects are multi-year bottlenecks.

Inside the data-center campus, reliability isn’t a feature — it’s survival.

Power distribution, switchgear, UPS, breakers, busways… this is where the spend explodes.

Example tickers:
$ETN, $POWL (and you can include $VRT here as the “critical infrastructure integrator” even though it straddles power + cooling)

Why it works in 2026:
Data centers don’t “value engineer” uptime. These systems are non-negotiable.

AI racks are denser. Denser racks = hotter racks. Hotter racks = more cooling spend.

This is the part the market consistently underestimates until it becomes the gating factor.

Example tickers:
$TT, $CARR, $JCI (and again $VRT lives here too)

Why it works in 2026:
Cooling is becoming a constraint on how much compute you can deploy, not just an operating cost.

Even if you get grid power, you still need redundancy. AI workloads don’t tolerate downtime.

Example tickers:
$GNRC, $CMI, $CAT

Why it works in 2026:
As AI becomes “production,” redundancy budgets rise. This isn’t discretionary.

When everybody wants to build at once, the winners aren’t just the OEMs — it’s the people who can install, commission, and deliver on time.

Example tickers:
$EME, $FIX, $STRL

Why it works in 2026:
Execution capacity becomes the choke point. Choke points get pricing power.

If you’re pouring massive pads and shells, aggregates and cement-heavy inputs can quietly compound on volume.

Example tickers:
$VMC, $MLM (and “electrification metal” exposure like $FCX is the classic second-order tie-in)

Why it works in 2026:
The build-out is physical. Physical booms consume materials.

That’s the key nuance:
The “everything energy” trade can fade while the “energy infrastructure” trade keeps working.

The tell will be simple:

In 2026 the market won’t ask “is AI big?”
It’ll ask “who’s actually getting paid, and when?”

2025 was a phase where exposure was enough.

2026 is the phase where execution is the catalyst.

If you want to stay in the theme without playing valuation roulette in the most crowded names, you tilt toward:

That’s where the “AI → electricity → construction → cash flow” chain is the cleanest.

I’ve always thought market cap weighted indices were kind of stupid. They are so top heavy they really don’t provide the real story about what’s going on. Right now you have the S&P 500 at all time highs, and the NASDAQ 100 fairly off. So sometimes it’s helpful to take a look at the equal weight S&P 500…..

It’s outperformed the QQQ and SPY so far this month. Now remember, a lot of stuff happens in December that may have no implications for next year. A big reason for the outperformance is small cap stocks. Long time readers know I think the Russell 2000 is a crap index. Money will go in there from time to time, but I think you treat IWM as a trading vehicle, not a long term buy and hold. Small caps may do well in 2026, but I really think you have to be a stock picker if you are going to venture there.

One thing I did do was add an AI adopters bucket to my portfolio. These are old economy stocks that are using AI to enhance the bottom line. These stocks won’t double to triple next year, but they could be steady growers and provide some stability to the portfolio. They also tend to be “value” stocks. Again, long time readers know I think that traditional value investing is dead. You are not going to consistently find undervalued stocks that Wall Street has missed. I am going to look to continue to expand this bucket next year. I will not be looking to find undervalued stocks, but valuation is going to matter. A stock like WMT is using AI to enhance the bottom line, but it’s also trading at a 40+ P/E.

Today’s stock is Huntington Ingalls (HII)…..

One aspect of the Trump trade I still love is to look for areas we are behind China, knowing Trump is going to want to catch up. Shipbuilding is a big one. This stock has run a lot, if you are looking to add it I would do it on dips.

HII is a rare “hard-asset + high-tech” defense compounder: it’s the nation’s largest military shipbuilder and it’s increasingly attaching software, autonomy, and AI to that installed base. The most important near-term signal is demand visibility—Ingalls was selected by the U.S. Navy to design/build the future Small Surface Combatant using the proven Legend-class cutter design, with management explicitly emphasizing speed, schedule predictability, and capacity to execute alongside existing destroyer/amphib lines.

On the nuclear side, Newport News continues to drive key Virginia-class milestones (e.g., SSN 802 “pressure hull complete”), which matters because submarine throughput and industrial-base scaling are the gating items for Navy readiness.

What makes HII more than a “steel-and-labor” story is the tech attach: HII is partnering with Shield AI to integrate autonomy software onto its ROMULUS AI-enabled uncrewed surface vessels, a credible wedge into unmanned maritime programs.

And on the productivity front, HII’s C3 AI partnership is aimed at using AI to improve shipbuilding planning/throughput and execution—exactly the kind of operational leverage investors will pay for if it shows up in cycle times and margins.

The H.E.A.T. (Hedge, Edge, Asymmetry and Theme) Formula is designed to empower investors to spot opportunities, think independently, make smarter (often contrarian) moves, and build real wealth.

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