Artificial intelligence (AI) has not only revolutionized technology but also reshaped the investment landscape in 2024. While Nvidia’s meteoric rise to a $3 trillion market cap has dominated headlines, many mid-cap companies are riding the AI wave, offering investors untapped growth opportunities.
Houston-based Powell Industries is a prime example. Specializing in large-scale electrical infrastructure, Powell provides power control systems for industries like oil, gas, and petrochemicals.
However, its rapid expansion into the data center market—critical for AI applications—has captured investor attention. Revenue from its “commercial and other industrial markets” segment, which includes data centers, has nearly tripled from $57 million in 2022 to $150 million in 2024.
“Data centers are growing in size and computing power, driving up their electrical energy demands,” Powell’s chairman and CEO, Brett Cope, explained during a recent earnings call. This trend has fueled Powell’s 185% stock surge this year, marking a remarkable 600% increase since early 2023.
AI Drives Demand for Electrical Infrastructure
Powell isn’t the only mid-cap company benefiting from the AI boom. IES Holdings, ranked second on Forbes’ list of America’s Most Successful Mid-Cap Companies, is also capitalizing on the demand for data center power solutions.
Headquartered in Houston and Greenwich, Connecticut, IES generates nearly half of its $2.9 billion annual revenue from electrical installations, including those for data centers.
Led by hedge fund manager-turned-CEO Jeffrey Gendell, IES has seen its stock soar 209% in 2024 and tenfold since Tontine Associates acquired a majority stake in 2018. Gendell’s investment has paid off handsomely, with the firm’s stake now valued at $2.8 billion.
“Companies like Microsoft and Google have doubled their power consumption in three years,” noted Jason Swiatek, head of small and mid-cap equity at Jennison Associates. “This has spurred significant investment in power generation and grid infrastructure, creating opportunities for mid-cap players.”
Sezzle and GeneDx: Standout Performers
While AI-linked stocks dominate the mid-cap space, companies like Sezzle and GeneDx have shown explosive growth in other areas. Minneapolis-based Sezzle, a buy-now, pay-later platform, went public on Nasdaq in 2023 after years on the Australian Stock Exchange. Its 2,200% stock gain in 2024 reflects robust growth, driven by a 71% revenue increase in the third quarter.
GeneDx Holdings, specializing in genetic testing, boasts an even more staggering 3,600% rise this year. The company’s exome sequencing technology has revolutionized disease diagnosis, especially in pediatric care. While still recording a slight loss, GeneDx is nearing profitability, signaling a bright future.
Sustainable Growth with AI and Beyond
Sustainability-focused bitcoin miner Terawulf is another mid-cap success story. Ranked 30th on Forbes’ list, Terawulf extended its lease at a hydro-powered facility in New York, leveraging access to clean energy.
As bitcoin has gained 140% this year, Terawulf’s stock has quadrupled. Analysts suggest the company could attract AI customers seeking high-performance computing (HPC) capabilities.
Kevin Cassidy, a senior analyst at Rosenblatt Securities, emphasized the growing value of energy access in data centers: “AI customers are increasingly looking at bitcoin miners’ facilities for their computational needs.”
The Sweet Spot for Investors
Mid-cap companies often strike a balance between the growth potential of small caps and the stability of large caps. The S&P MidCap 400 has gained 18% this year, outperforming small-cap indices while slightly lagging large-cap stocks.
Chris Welch, portfolio manager at Diamond Hill Small-Mid Cap Fund, highlighted another advantage: “Mid-cap companies tend to have a more domestic focus, which can be a tailwind as businesses shift production closer to home.”
Among other notable mid-caps, Abercrombie & Fitch continues its resurgence, posting 20% sales growth and a 500% stock gain since 2023. West Coast coffee chain Dutch Bros and restaurant favorites like Shake Shack and Sweetgreen have also bucked industry trends, with Sweetgreen’s stock climbing 205% in 2024.
The Future of Mid-Caps
With their innovative offerings and strong growth trajectories, today’s top-performing mid-caps could evolve into the megacaps of the future, much like Nvidia did a decade ago. As AI and other technological advancements reshape industries, these companies are positioned to thrive.
Forbes’ full list of America’s Most Successful Mid-Cap Companies showcases these rising stars, offering a roadmap for investors seeking the next big opportunity.
