By Kaspar Huijsman, Hugo Investing

When I talk to investors about artificial intelligence, Nvidia’s name usually comes up quickly. That makes sense: powerful chips play a key role in AI. But I find the companies around them just as interesting. Who makes it possible to produce those chips? And who helps all that computing power work together efficiently?

There is a much bigger world behind AI than we often realise. Two companies that show this well are Marvell Technology and Lam Research. Each plays a different role in the chip industry, providing technology that most of us never see.

The Picks and Shovels of the Digital Age

I often compare new technology with a gold rush. The gold miners get the attention, but the companies supplying their tools also play an important role. Without picks and shovels, finding gold becomes much harder.

I see a similar pattern with AI. Behind a smart application are data centres, connections, chips and the machines used to make them. The success of any single application is uncertain, but many different applications can rely on the same technology behind the scenes.

Still, this comparison has its limits. Even suppliers of “picks and shovels” can face competition, lower spending by customers or changes in technology. An important role in the industry does not guarantee a good investment return.

Marvell: Computing Power Needs Connections

A powerful chip does not work alone. In a data centre, data must constantly move between processors, memory, storage and other systems. If those connections cannot keep up, the available computing power cannot be used fully.

Marvell develops technology for these connections and designs chips for specific customer needs. Its products also include technology that transfers data using light.

I sometimes compare this with a car. The engine gets most of the attention, but without a good gearbox, its power cannot reach the wheels properly. In the same way, a data centre needs fast, efficient data connections alongside its computing power.

For me, Marvell is a useful example of how the technology behind AI works. It is not just about how much a chip can calculate, but also about how all the parts work together.

Lam Research: Helping Manufacturers Make Chips

Lam Research plays a different role. It supplies equipment that allows chip manufacturers to add extremely thin layers of material, remove parts of those layers with great care and clean the thin discs on which chips are made, known as wafers. These steps are repeated many times during production.

That may sound technical, but the basic idea is simple: a chip contains complex structures that must be made with great accuracy.

Many Dutch investors know ASML, which supplies machines that use light to create patterns on wafers. Lam Research shows that making chips involves many other steps too. Several specialist technologies are needed to turn a design into a working chip.

What interests me is the knowledge behind these machines. As chip structures become more complex, producing them accurately and reliably becomes harder. Repeatedly adding and removing material creates the structures that allow a chip to work.

Business Growth Does Not Guarantee Investment Returns

With companies like these, I always separate the technology, the business and the share. They are three different things.

A technology can become more important while a supplier loses customers to competitors. A business can grow without its profits keeping up. And even strong business results can lead to a falling share price if investors expected more.

An exciting AI story alone therefore tells us little about future returns. The share price, the company’s ability to compete and the expectations already reflected in that price all matter too.

Demand and spending in the chip industry also rise and fall. Export restrictions, tensions between countries and reliance on large customers can affect business performance. The companies working behind the scenes face risks as well.

Looking Beyond the Best-Known Name

What I want to show with these two examples is how much lies behind AI. Marvell focuses on areas such as connections and chips designed for specific needs. Lam Research supplies technology used to make chips. They perform different tasks within the same industry.

That is what I find interesting about investing: understanding what a company actually does. How does it make money? Why do customers need it? And what could weaken its position?

A famous name tells only part of the story. Behind the applications we use every day are less visible companies that provide important technology.

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Disclaimer: This blog is for general information only and does not constitute investment advice.