RACK targets the physical infrastructure powering AI and cloud computing — from the companies building data centers to those making the chips, cooling systems, and power equipment that keep them running. It's a picks-and-shovels play on the AI boom.
How It Works
The fund captures the entire data center ecosystem: semiconductor manufacturers, cooling and power management specialists, construction firms specializing in data centers, and REITs that own these facilities. Holdings are weighted by market cap with individual position caps, rebalanced quarterly to capture shifts in this rapidly evolving sector.
Key Features
- Pure-play exposure to AI infrastructure buildout without betting on specific AI winners
- Includes overlooked beneficiaries like industrial cooling and backup power systems
- More concentrated than tech ETFs but broader than semiconductor funds
Risks
- Hyperscaler capex cycles can cause 30-40% drawdowns when spending slows
- Many holdings trade at 30-50x earnings based on future data center demand
- Concentrated bets on niche suppliers could see 50%+ drops if they lose key contracts
Who Should Own This
Best for investors who believe AI compute demand will drive a multi-year infrastructure supercycle but want to avoid picking winners among AI software companies. Works as a 2-5% satellite position for tech-heavy portfolios or as an alternative to semiconductor ETFs for those seeking broader exposure to the AI buildout.