Emerging Competition in AI

As of January 17, 2026, smaller companies are quickly rising to challenge Big Tech in the artificial intelligence (AI) market. This shift is being driven by the growing demand for AI technologies, which is reshaping various sectors, including energy and infrastructure.

Investors are now looking beyond traditional tech giants to find opportunities among small- and mid-cap companies that focus on concentrated markets.

Bloom Energy's Remarkable Growth

Bloom Energy has seen its stock price increase over 500% since last year, largely due to soaring demand for its onsite fuel cells used in data centers.

The company's market capitalization has now surpassed $30 billion. This dramatic rise indicates how smaller firms can capitalize on niche markets as AI technologies expand and evolve.

Investor Focus on Small and Mid-Cap Companies

Investors are increasingly drawn to small- and mid-cap companies that operate in segments with limited competition, allowing them to grow faster than larger, more established firms.

Jennifer Grancio, the global head of distribution at TCW Group, highlighted that many of these companies are “very quickly moving up the cap table,” meaning they are gaining more visibility and potential for investment. This trend reflects a broader market recognition of the value these companies can bring to the AI ecosystem.

The Shift Towards Nuclear Energy

Energy reliability has become a central issue in the AI power ecosystem, especially as data centers require constant and stable power to function effectively. Grancio noted that there has been a significant shift towards nuclear power to meet these energy demands.

As renewable energy sources like wind and solar cannot always guarantee a consistent supply, nuclear energy is being viewed as a viable solution. This shift is driving renewed investment in existing nuclear plants and the development of new technologies, such as small modular reactors.

Active Management of ETFs Gaining Popularity

With the rise of smaller companies in the AI sector, active management of exchange-traded funds (ETFs) is becoming increasingly popular. Unlike passive indices that track broad market returns, actively managed ETFs aim to identify and invest in promising companies early in their growth phases.

This strategy allows investors to hold onto these stocks as they move through different stages of growth, potentially leading to higher returns.

Risks and Volatility in the AI Ecosystem

While there is significant potential in this emerging market, risks remain. VanEck CEO Jan van Eck warned that some AI-related companies are financially weak and highly leveraged to electricity demand, which can lead to considerable volatility.

This means that investors need to be cautious and not overly concentrate their portfolios in any single AI theme. Van Eck advised against letting one sector dominate an investor's asset allocation, emphasizing the need for diversified investment strategies.

What to Expect Moving Forward

As the demand for AI technologies continues to grow, small companies are likely to play an increasingly important role in the market. Investors should remain vigilant, actively managing their portfolios and being prepared for the potential volatility that comes with investing in this sector.

By focusing on companies that demonstrate strong fundamentals and operate in less competitive environments, investors might find valuable opportunities in the evolving landscape of artificial intelligence.