How the Definition of Infrastructure Has Evolved
For a long time, the word "infrastructure" conjured images of roads, bridges, and the physical assets that keep everything moving and functioning. That mental model is now outdated. At its core, infrastructure means the very high barrier-to-entry businesses that form the backbone of the global economy and society. This is a category that evolves over time. It began with traditional utilities — power plants, toll roads — but as society changes, so does the infrastructure required to support it and to connect people in their daily lives.
Today, that evolution has arrived at data centers. An enormous amount of capital is flowing into the build-out of data centers to support artificial intelligence, and this has become a central focus of infrastructure investing.
A Different Kind of AI Investment This Year
The character of AI-related investment has shifted meaningfully. In prior years, the story was dominated by a single name like Nvidia. More recently, attention has moved to different parts of the value chain — memory names such as Sandisk have climbed to the top of the leaderboard, and energy has captured attention because of what it takes to power the AI build-out.
The distinct advantage of investing in infrastructure, as opposed to trying to identify the ultimate winners of the AI revolution, is that you are putting capital into hard assets. These are assets with real cash flow and downside protection that support the build-out itself. Rather than betting on which company will win, you are invested in the physical assets that everyone building AI must rely on regardless of who comes out on top.
The opportunities span the entire value chain:
- Data centers themselves.
- Energy to power the data centers, drawn from traditional sources such as gas-fired power generation.
- Renewable assets, which are being built out in a big way. More renewable capacity is expected to be built in the United States over the next two or three years than was built in the last two or three years, driven directly by the demand emerging from the data center cycle.
The Question of Nuclear
Is nuclear part of this thematic view? In time, yes — but not comfortably today. Nuclear is currently a tougher sector for an infrastructure investor to enter. Over the next five to ten years, investment into nuclear to support AI demand is very likely to materialize, but for now it presents challenges.
Why is nuclear difficult right now? The primary reasons are the length of time it takes to build out a nuclear base and the construction risk involved, which tends to be quite high for these assets. The preferred approach is to target large assets that generate substantial cash flow and that sit on the lower-risk end of the spectrum — a profile that nuclear does not yet fit.
Interest Rates and Macro Resilience
Is there concern about the interest rate horizon? The reassuring answer is grounded in track record. Infrastructure has come to the forefront of investor attention over the last two or three years precisely because of how resilient it has proven across a wide variety of macroeconomic conditions. Investors began treating infrastructure as a private asset class more than 30 years ago.
During periods of high inflation and high interest rates, the infrastructure asset class came through battle-tested and demonstrated strong performance from an inflation-correlation perspective. It weathers difficult macro conditions very well, and that resilience is exactly why investors are increasing their allocations to it.
The AI Bubble Question
Is this an AI bubble, and is that a worry? The bubble question, which was actively discussed earlier this year and last year, has drifted to the back burner — but it has not disappeared. The honest assessment is that you have to pick your spots. Valuations look very robust, and when a large amount of capital chases a single space, valuations naturally rise. We are, therefore, in a heightened valuation environment.
Because of that, it is essential to work with a manager capable of identifying where valuations remain attractive and being selective about where to invest, rather than buying indiscriminately into an expensive sector.
Geopolitical Risk and the Supply Chain Opportunity
With traditional infrastructure like roads and bridges, geopolitical risk was rarely a concern — but AI infrastructure has clearly been affected by it. Is geopolitical risk still a worry? Yes, absolutely — and importantly, the issue extends well beyond AI.
Infrastructure is fundamentally a supply chain, and the current heightened geopolitical situation actually creates a very good investment opportunity. This works in two ways:
1. Resilience. Coming out of COVID, it became clear that supply chains were not as resilient as they should have been. That realization opened a major opportunity to invest in making them more robust.
2. Realignment. Supply chains are also being realigned in response to geopolitical challenges.
Together, these dynamics are generating a substantial investment opportunity in infrastructure that lies entirely outside of AI and data centers — an opportunity spread across the supply chain itself.
The Three Mega-Trends Driving Opportunity
Looking to the back half of the year and beyond, the opportunity set is anchored by three very large mega-trends:
1. Continued decarbonization.
2. Supply chain investment and realignment.
3. AI and data center build-out.
These three mega-trends are actively driving the investment opportunity set. Being an early mover into data centers — having watched the entire evolution of the space unfold — provides a vantage point on where value is being created.
An Opening for Individual Investors
Finally, there is a notable development for individual investors. New technology is making it possible for individuals to invest in an asset class to which institutions are continuing to increase their allocations. Historically the province of large institutional capital, infrastructure is becoming more accessible, and that broadening of access is a genuinely exciting shift for individual investors.
