Artificial intelligence (AI) and data growth will drive significant infrastructure investment in major utilities and other infrastructure subsectors over the next decade, Shane Hurst, portfolio manager at ClearBridge Investments, has said.
Unpacking how both sectors can serve one another, Hurst pointed out that global power demand is forecast to increase at a compound annual growth rate of 14 per cent over the next three years.
“Over the next five years, consumers and businesses are expected to generate twice as much data as they did over the past 10 years, with major tech companies expected to invest $1 trillion in data centres,” he said.
What’s more, it is anticipated that AI data centre racks will require seven times more power than traditional data centre racks, leading to power demand growth of almost 20 per cent annually by 2026.
Utilities are similarly stepping up to meet the challenge of AI’s growing power demand and starting to receive recognition for their efforts.
“AI can also be used to predict and prevent outages, improve grid security and manage demand response programs, increasing overall grid reliability and facilitating the growth of smart grids,” Hurst said.
According to the portfolio manager, other subsectors that are likely to benefit include toll roads, freight rails and water utilities, all of which can employ AI to optimise smart traffic management, load planning, leak detection and water quality.
“We believe the role of AI in powering decarbonisation is also underappreciated,” he said, noting that regulated utilities will benefit from such a structural AI tailwind as it intersects with that of the broader energy transition.
Namely, data from ClearBridge suggest that AI’s demand for power could propel investment in solar capacity at a compound annual growth rate of from 8 per cent to 16 per cent through 2030, and investment in wind capacity from 18 per cent to 31 per cent over the same time frame.
“The capacity for AI to boost most infrastructure subsectors offers another compelling reason for investors building diversified portfolios to consider global listed infrastructure,” Hurst said.
Industry leaders agree that the AI boom is particularly fuelling investment opportunities in data centres and energy grids to meet the rising demand and renewable energy prospects.
By June, Maple-Brown Abbott had allocated 37 per cent of its Global Listed Infrastructure strategy to US electric and multi-utilities, reflecting the firm’s strong conviction in the sector.
During a keynote speech at a conference in Melbourne in April, Blackstone chief executive and co-founder Stephen Schwarzman also highlighted an “explosion” in the construction of data centres.
“This is like something I’ve never seen,” he said at the time.
Schwarzman, too, noted that this heightened interest would necessitate a global effort to reinforce electricity grids to meet the substantial power demands of data centres.
“From an investor’s perspective, there’s something really weird that’s going to go on, and that lack of capacity in the electric grid in the industrial world, with AI and EVs, is creating enormous investment opportunities.”
