When Nvidia Corp (NASDAQ:NVDA) CEO Jensen Huang addressed world leaders at the G20, he didn’t spend much time talking about GPUs or the company’s latest chips.
Instead, he offered a simple framework for understanding the AI economy: a “five-layer cake” that starts with energy, ends with applications, and stretches far beyond Nvidia’s core business. For investors, it’s a useful reminder that the AI trade isn’t one theme—it’s an entire ecosystem.
AI Starts With Energy, Not Models
“The first thing is to recognize what is AI,” Huang said before breaking it down into five layers. “At the lowest layer is energy. You can’t produce something without energy. It transforms electricity into mathematics.”
That first layer is easy to overlook in a market captivated by chatbots and foundation models. Yet Huang argued that electricity sits at the base of the AI economy, followed by chips, “that’s the world that I’m in,” and then infrastructure—the land, power and data centers that house AI systems.
Only after those three layers come AI models, which Huang noted are “what most people think AI is,” and finally data and applications, where businesses generate real economic value.
The sequence matters. Huang’s argument is that AI isn’t simply software running in the cloud. It’s a vertically integrated technology stack where every layer depends on the one below it.
Nvidia Is One Slice. The Opportunity Is Much Bigger.
Huang’s framework also broadens the list of potential AI beneficiaries.
The first layer—energy—could benefit companies involved in electricity generation, grid modernization and power equipment, including Constellation Energy Corp (NASDAQ:CEG), GE Vernova Inc. (NYSE:GEV) and Eaton Corporation, PLC (NYSE:ETN) as AI data centers place growing demands on power infrastructure.
The second layer is chips, where Nvidia remains the dominant player alongside companies such as Advanced Micro Devices, Inc (NASDAQ:AMD) and manufacturing partner Taiwan Semiconductor Manufacturing Co. Ltd. (NYSE:TSM).
The third layer is infrastructure, covering the physical backbone of AI. That includes power and cooling specialist Vertiv Holdings, LLC (NYSE:VRT), networking companies like Arista Networks, Inc. (NYSE:ANET) and Broadcom Inc. (NASDAQ:AVGO), as well as data center operators Digital Realty Trust, Inc. (NYSE:DLR) and Equinix, Inc. (NASDAQ:EQIX).
Above that sit AI models, where companies including Alphabet Inc. (NASDAQ:GOOGL) (NASDAQ:GOOG) and Meta Platforms Inc. (NASDAQ:META) are investing heavily in frontier AI systems.
Finally comes applications—the software businesses that embed AI into everyday workflows. Companies such as Microsoft Corp. (NASDAQ:MSFT), Salesforce Inc. (NYSE:CRM), ServiceNow, Inc. (NYSE:NOW) and Palantir Technologies Inc.(NASDAQ:PLTR) are among those building products that monetize AI for enterprise customers.
The Investment Takeaway
Huang’s “five-layer cake” isn’t an investment recommendation—it’s a framework for thinking about where AI spending could flow. His central point was that countries and companies don’t have to dominate every layer, but they do need to decide where they want to compete.
For investors, the same logic applies. Nvidia may remain the flagship AI stock, but if Huang’s vision of AI as critical infrastructure plays out, the winners won’t be confined to chipmakers.
The next phase of the AI trade could increasingly be driven by the companies that generate the power, build the data centers, connect the networks and deliver AI into real-world applications.
Photo Courtesy: glen photo on Shutterstock.com
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