In this month’s Market Spotlight, we explore how digital infrastructure, once a rarely discussed segment of multiple sectors, is now a critical pillar of the AI era, offering both growth potential and resilience.
The AI revolution has fully embedded its place in the global economy and just as the steam engine revolutionized manufacturing and transportation, artificial intelligence is transforming how data is created, processed, and stored. And while headlines focus on the newest flashy AI tools and platforms, the digital infrastructure enabling this transformation marches on behind the scenes.
Digital infrastructure comprises all physical assets purpose-built to support the enormous computing demand from AI systems. As AI adoption continues to accelerate, the demand for these facilities, components, and energy has increased exponentially. Training and deploying AI models requires specialized facilities with plentiful and redundant power, cooling and networking systems, and security. Despite the immense operational needs, companies providing these necessary resources have been an attractive area for investment.
- Data centerreal estate companies are one such area, providing investors with direct exposure to this growing market. These companies develop, own, and lease state-of-the-art facilities to tenants such as cloud service providers, enterprise IT firms, and AI companies. They offer the required infrastructure that these clients require for uninterrupted computation and data storage. These REIT’s benefit from long-term leases, high demand given the level of supply, and strong tenant retention. This creates a business model that generates a recurring and stable flow of income. As AI adoption continues to grow, so does the demand for the digital infrastructure supporting it, making these businesses increasingly lucrative.
- Power consumption by data centers is expected to triple by 2030. Without sufficient access to power, the current pace of AI growth will be unsustainable. Innovative utility companies have jumped to action, expanding their power generation capabilities, building transmission pathways, and broadening distribution infrastructure to meet the demand from data centers.
- The ability to provide efficient and scalable cooling technologies to data centers is equally as important as power to AI. Data centers generate tons of heat and require innovative solutions to maintain high performance and prevent equipment failure. As data center density increases, so will the demand for specialized cooling systems making this another component of AI infrastructure poised for rapid growth.
While digital infrastructure may not get the same attention as high-growth tech names launching products and apps, its role in the AI revolution is no less important.