The Next 4 AI Bottlenecks
Optics, memory, and transformers (not the one you are thinking)
Before we jump in, here are the results from the poll that we ran a few weeks back. Two-thirds of investors feel that it’s harder to invest in a stock that’s up 50% compared to one that’s down 50%.
This is a classic example of anchoring bias. Since you saw the stock trade at $100 and it’s now at $150, you mentally anchor yourself to the first price, which makes the stock feel expensive. Conversely, a stock down 50% feels like a bargain because it's cheap vs. the anchor. What’s interesting is that none of these decisions is made by evaluating fundamentals, but rather by going purely by vibes.
Most of the companies we invest in at Market Sentiment trade near their all-time highs — and that's by design. We focus on businesses with bottleneck-like characteristics, where the market has yet to fully price in the long-term scope of their dominance.
And all this is not just theory: Here is our full portfolio holdings as of today. Instead of betting on which model is going to come out on top, it’s much more profitable to bet on the underlying companies that the AI boom runs on. The other thing worth noting: 15 out of 16 positions are in the green (while QQQ is down YTD), and there's no single name carrying the portfolio.
With that, let’s get into a few names that are instrumental for the AI buildout. We already have one of these in our portfolio, and we will add a few more in the coming weeks.
4. Corning Inc ($GLW)
Corning is a 175-year-old materials science company best known for Gorilla Glass — the scratch-resistant glass on virtually every smartphone screen. But recently, the company has quietly become one of the most essential infrastructure companies in the AI buildout. The reason is fiber. AI data centers require up to 10 times more fiber connectivity than traditional cloud computing, and Corning makes the glass it runs through.
The big break for the company came in January, when it announced a $6B deal with Meta, under which Corning will supply optical fiber, cable, and connectivity solutions for Meta’s AI data centers. Meta's 5-gigawatt Hyperion data center under construction in Richland Parish, Louisiana, alone will require 8 million miles of fiber.
While the Meta deal is already priced in, and the stock is definitely not cheap (PE of 92!), we expect a few other players, like Google and Amazon, to make similar deals. Another tailwind for the company is that newer, more powerful chips require more fiber-optic connections. For example, Nvidia's 72-GPU Blackwell nodes require 16 times as much fiber as traditional cloud switch racks. Finally, the geopolitical angle is also there, with Corning manufacturing optical fiber domestically, including two of the world's largest fiber facilities in North Carolina that employ over 5,000 people.
3. SK Hynix ($HY9H)
We already did a deep dive into SK Hynix 2 months ago, and it’s our largest portfolio position (up 22.4%).
The company primarily makes DRAM (Dynamic Random Access Memory) and NAND memory chips (long-term storage). Traditionally, most clients for these products were smartphone and PC manufacturers, and the market was chugging along just fine.
Then AI changed everything — models required enormous amounts of memory to operate, and AI-generated images and videos required significant storage. With companies spending hundreds of billions on capex, demand for DRAM and NAND skyrocketed, far outstripping supply.
As a result, SK Hynix’s revenue tripled from $22.8B in 2023 to $66.3B in 2025.
The thesis of our investment was based on SK Hynix's domination in high-bandwidth memory. With over 50% market share, SK Hynix has significant pricing power, enabling it to set terms and expand profit margins while maintaining its market share.
The memory bottleneck is only expected to worsen as:
Agentic reasoning generates a long sequence of steps before giving the final answer. This means that the AI model should now retain all prior steps in memory so it has context for what it’s expected to do.
Images, audio, and video generation consume far more memory than mere text generation.
Finally, since model providers are pushing universal assistants that know everything about you, they now simultaneously have to keep the current conversation, general information, and old conversations.
FYI — SK Hynix is primarily listed on the KOSPI (Korea Composite Stock Price Index) under the ticker 000660. For international investors, the most accessible entry point is through Global Depository Receipts (GDRs). These are listed on the Frankfurt Stock Exchange under the ticker HY9H.F. They have filed for ADR listing in the U.S. market (Expected by mid 2026).
Micron MU 0.00%↑ is a decent alternative if you can’t access SK Hynix (for the Schwab investors). We have a small position there.
2. Hammond Power Solutions ($HMDPF)
Here’s a not-so-fun fact: Nearly half of planned US data centers are now being delayed or canceled due to shortages in critical electrical components like transformers, switchgear, and batteries.
