What's Hot and What's Not in B2B Distribution
What end-markets are fueling growth for wholesale distribution
Hi everyone,
In this week’s newsletter we’re going to have some fun!
What end-markets are hot and what’s not?
We’ve now seen earnings releases from just about all the major B2B distributors and can infer which end-markets have performed better than others – and which are projected to outperform through the rest of the year.
These verticals of B2B distribution have nice upside in some of the hottest growth categories:
Industrial and MRO
Electrical
Electronics
Hot: Industrial
Certain segments within industrial are seeing a material resurgence.
AI and data center infrastructure
The AI infrastructure push continues to gain steam. Starting back in September ‘24, Microsoft and Blackrock announced a $100B investment partnership in AI infrastructure in the United States. An interesting stat to keep in mind, there’s only $20B in equity investment needed to create $100B in overall investment. That’s the power of leverage!
Then, as we’ve previously covered, there’s the $500B investment in AI infrastructure pledged by a combination of Oracle, Open AI and SoftBank. This project is dubbed “Stargate.”
A report from Grandview research highlights that the AI infrastructure market in the US should have a 28.5% CAGR over the next 5 years. That’s a lot!
US AI Infrastructure projected to have a 28.5% CAGR
And of course, Mark doesn’t like to be left out. So, in less covered news, Meta (Facebook) also pledged a $60B investment in AI infrastructure in late January.
Hot: Manufacturing and Reshoring
Applico is bullish on American manufacturing and reshoring initiatives. The Trump administration has highlighted a few verticals where they see national security importance to ensure America regains its internal manufacturing capability:
Semiconductors
Earlier this month, we saw a big announcement by TMSC, the leading chip manufacturer in the world, to invest $100B in 5 new chip manufacturing facilities in the US.
In February, Apple also made a $500B investment announcement in American manufacturing. These numbers are spread out across a number of initiatives - with chip and server manufacturing seemingly being the biggest emphasis. What is also interesting is the mention of building Apple TV units in the United States - a first for Apple to actually create a consumer-grade product in America.
Pharmaceuticals
Eli Lilly announced a $27B investment to bring pharmaceutical manufacturing to the US. Merck has said it expects to invest $8B, and Pfizer is also talking about bringing manufacturing back to America.
Key commodities like Metal
This is not new to the Trump administration and echoes his sentiment from his first term. China’s over-investment in steel mills is well documented, and how they’ve flooded the global market – driving prices down and forcing many US and European steel mills out of business.
Automobiles
Bringing more automotive manufacturing back from Canada and Mexico has obviously been a focus of the Trump administration. Elon announced that Tesla will double its output of American-made Teslas over the next 2 years. And, other foreign automotive manufacturers have recently announced additional investments in the US.