Infrastructure (both physical and digital) is essential for connecting people with goods, information, places, markets, resources, and of course together. Access to roads, the internet, power lines, and waterpipes connect people to the things they need to live, not just what they want. Infrastructure investment must accelerate to meet these needs, made more urgent by climate change and the energy demands of new technologies. Government funding in the form of the Inflation Reduction Act and the Chips Act in the US, and the REPowerEU plan in Europe provide powerful incentives to spur this necessary infrastructure investment.
This theme represents the convergence of demand growth both from new technologies such as Artificial Intelligence, 5G mobile internet and renewable energies, and from the swelling middle classes in emerging markets such as India.
Our recommendations
A theme focused on stocks, commodities, real estate and private assets.
- Alternative/indirect investment in AI including data centre real estate, electricity demand growth in smart grids, energy efficiency.
- US and EU transport infrastructure.
- US energy infrastructure related to LNG.
- Clean water production and distribution.
- Network security infrastructure to tackle cybersecurity.
- Nuclear energy.
- Industrial metals, e.g. copper for electricity infrastructure upgrades.
- Construction materials sector e.g. cement and concrete.
Key risks
- New US government pushing back on infrastructure spending and/or energy transition.
- High fiscal deficits and government debts could limit infrastructure spending.
- Chinese low-cost competition in some segments (e.g. solar, batteries).
- Sensitive to a potential rebound of inflation and hikes in interest rates.
