The California Gold Rush of 1849 drew thousands of miners—known as the Forty-Niners—from around the world. They chased dreams of wealth, but few struck gold. Most faced harsh conditions, costly supplies, and little reward. Yet, a different group of entrepreneurs took a more reliable path to profit: supplying the miners themselves. As the saying goes, “The ones who profited most were those selling pickaxes and shovels.” Levi Strauss, for example, built a lasting business by selling durable denim workwear, eventually patenting the first blue jeans in 1873.
This concept of backing the boom, rather than competing in it, has modern parallels. Especially in fast-moving, innovation-driven sectors like Information Technology (IT). As digitization accelerates, a select few companies may win big, but many will fall short. Meanwhile, the businesses enabling this digital transformation – today’s digital “picks and shovels” – are often better positioned for steady, long-term growth.
From pickaxes to processors
Global data creation (the information generated from emails, videos, media posts, online business transactions etc. from all possible devices) has grown at an average of ~28% per year over the past decade, and that pace is expected to continue over the next few years(1) (see figure 1). The work-from-home wave of 2020-2021 catalyzed rapid IT investment and innovation, permanently altering the way people live and work. Some clear winners emerged, but many ambitious players failed to sustain momentum.
Figure 1: Past and expected growth of data creation
Now, artificial intelligence (AI) is driving the next wave of innovation and competition. While the potential rewards of building the best AI solutions are massive, history reminds us that predicting long-term winners in this race should be notoriously difficult. Fortunately, investors don’t need to pick the ultimate winners to benefit. Companies that enable or support digital innovation – like Levi Strauss did during the Gold Rush – can thrive regardless of which platform, service, or technology dominates.
Today’s digital picks and shovels
Global IT spending is projected to reach ~$5.6 trillion in 2025, with large-scale cloud service providers driving a significant share(2). Tech giants like Microsoft and Amazon will benefit from surging data center investments (expected to grow by more than 20% YoY) and companies like NVIDIA remain central in supplying the cutting-edge hardware those centers require. We like these businesses because their future doesn’t necessarily depend on who wins the AI race. Their fortunes are tied to the intensity of competition, which shows no signs of slowing soon.
But the opportunity goes beyond the obvious mega-caps. Data transmission and network infrastructure businesses are also well positioned as AI adoption expands and internet traffic more than doubles over the next four years. Meanwhile, the complexity of new technologies is also driving more businesses to outsource IT functions, fueling demand for IT consulting firms like CGI and Accenture.
Another indirect, and less obvious, beneficiary is the energy sector. After nearly two decades of flat electricity demand in the U.S., data centers and semiconductor manufacturing is driving power consumption higher(3). Utilities and power infrastructure companies with exposure to generation, transmission, and distribution should benefit from growing reinvestment opportunities to meet this new tranche of power demand.
Impact on Canadian businesses
Canada’s market is concentrated in a few sectors with the IT sector now representing ~10% of the S&P/TSX Composite, up from just 5% in 2005. While having less direct exposure to AI hype than others, there are still compelling ways to invest in the digital future here. Many Canadian companies fit the digital pick-and-shovel profile and are well positioned to benefit from broader digitalization trends. For instance:
- Shopify continues to benefit from rising ecommerce demand and its push toward AI-powered tools for merchants.
- Celestica is capitalizing on AI-driven data center growth with its specialized network products and services.
- Brookfield is investing in both data centers and the energy infrastructure needed to run them – particularly electricity generation, transmission, and distribution.
Beyond IT, natural gas demand may rise modestly in North America to support power-hungry data centers and semiconductor plants, which should benefit Canadian companies involved in natural gas infrastructure buildout.
History teaches us that betting on the enablers of new technology waves has often been more durable than chasing headline winners. Our view is that these enablers – rather than the platforms themselves – can often offer the most resilient long-term opportunities. By focusing on the infrastructure behind digitization, investors can participate in the digital future while avoiding the risks of “chasing the gold” itself.
Sources: Exploding Topics, Gartner, EIA,
Connor Barth, CFA
Senior Research Analyst
