AI to turbocharge infrastructure investment

The continuing expansion of artificial intelligence (AI) and data technologies will propel significant investment in major utilities as well as other infrastructure subsectors that support these technologies over the next decade, says a leading analyst.

Much of this infrastructure growth will be concentrated in energy-hungry data centres – the backbone of the AI and data boom.

“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,” says Shane Hurst, Portfolio Manager at ClearBridge Investments.

“Globally, power demand is forecast to increase at a compound annual growth rate of 14% over the next three years,” he added.

Citing figures from McKinsey and IEA as well as its own internal research, ClearBridge predicts that global investment in data centres will grow at 5% compounded annually, rising to $41 billion by 2026.

Meanwhile, AI data centre racks could require seven times more power than traditional data centre racks, leading to power demand growth of almost 20 per cent annually by 2026.

The explosion of AI technologies could also deliver considerable efficiency dividends for infrastructure, “streamlining processes, enhancing reliability and boosting efficiency within the sector”, according to ClearBridge.

“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.

AI also promises to reduce costs for utilities, driving efficiency improvements by optimising operations of the grid and reducing energy waste.

Other infrastructure subsectors that are likely to benefit include toll roads, which can use smart traffic management and eventually autonomous vehicles; freight rail, which can utilise AI load planning optimisation; and water utilities, which can employ AI to improve leak detection and water quality.

As well, AI and the growth of data assets have the potential to increase the role of infrastructure such as regulated utilities in the decarbonisation transition – a largely underappreciated benefit, ClearBridge notes.

AI’s demand for power could propel investment in solar capacity at a compound annual growth rate from 8% to 16% through 2030 and investment in wind capacity from 18% to 31% over the same timeframe, ClearBridge predicts.

“The capacity for AI to boost most infrastructure subsectors offers another compelling reason for investors building diversified portfolios to consider global listed infrastructure,” Hurst concluded.