Artificial intelligence (AI) and the growth of data will drive significant infrastructure investments across major utilities and other infrastructure subsectors over the next decade, said Shane Hurst, portfolio manager at ClearBridge Investments.
Explaining how the two sectors can serve each other, Hurst highlighted that global electricity demand is expected to increase at a compound annual growth rate of 14 percent over the next three years.
“In the next five years, consumers and businesses are expected to generate twice as much data as in the last ten years, with major technology companies expected to invest $1 trillion in data centers,” he said. -he declared.
Additionally, AI data center racks are predicted to require seven times more energy than traditional data center racks, leading to energy demand growth of nearly 20% per year by 2026.
Utilities are also stepping up to meet the challenge of growing AI energy demand and are beginning to be recognized for their efforts.
“AI can also be used to predict and prevent outages, improve grid security, and manage demand response programs, thereby increasing overall grid reliability and facilitating the growth of smart grids,” Hurst said.
According to the portfolio manager, other sub-sectors that could benefit include toll roads, freight rail and water services, all of which can use AI to optimize intelligent traffic management, load planning, leak detection and water quality.
“We think the role of AI in decarbonization is also underestimated,” he said, emphasizing that regulated utilities will benefit from such a structural tailwind from AI as it overlaps with that of the broader energy transition.
Indeed, ClearBridge data suggests that AI energy demand could propel investments in solar capacity to a compound annual growth rate of 8 to 16 percent through 2030, and investments in capacity wind power from 18 to 31 percent during the same period. same period of time.
“AI’s ability to drive most infrastructure subsectors provides another compelling reason for investors building diversified portfolios to consider globally listed infrastructure,” Hurst said.
Industry leaders agree that the AI boom is particularly fueling investment opportunities in data centers and energy networks to meet growing demand and prospects for renewable energy.
As of June, Maple-Brown Abbott had allocated 37 percent of its global listed infrastructure strategy to U.S. power and multiple utilities, reflecting the firm’s strong conviction in this sector.
During a speech at a conference in Melbourne in April, Blackstone CEO and co-founder Stephen Schwarzman also highlighted an “explosion” in data center construction.
“It’s like something I’ve never seen,” he said at the time.
Schwarzman also noted that this increased interest would require a global effort to strengthen power grids to meet the substantial energy demands of data centers.
“From an investor’s perspective, something really strange is going to happen, and this lack of capacity in the industrial world’s power grid, with AI and electric vehicles, creates huge investment opportunities. “
