By Jeremy Anagnos, portfolio manager of Nordea’s Global Sustainable Listed Infrastructure strategy

The surge in investor focus on generative artificial intelligence (AI) has led to one of the most powerful rallies in technology stocks in recent memory.

In our view, generative AI has the potential to be a game changer not only in our everyday lives but also in the growth profiles of the infrastructure supporting it. We are currently seeing strong pricing power for data centre owners, accelerating load growth for public utilities, and increased demand for renewable developers and low-carbon portfolios to provide clean energy to support data centre assets.

This generative AI-related growth comes in addition to infrastructure’s broader secular underpinnings, which include the demands for global decarbonisation, energy security and modernised assets.

Infrastructure’s irreplaceable role in AI 

Current data centre capacity, ramping power/cooling needs and access to power for new-build data centre assets are bottlenecks to generative AI-related growth. Today, high occupancies of data centres are already spurring pricing power and margin improvements for existing essential assets in those listed companies. For example, vacancy rates are at a decade-low across North American markets, while 2023 data centre leasing activity is likely to have doubled 2022 levels and finish 8x above what was recorded in 20191.

Power use at existing facilities is also on the rise, as it is estimated that generative AI requires 20-100 times more power compared to data centre usage prior. For example, a generative AI purpose-built data centre requires a minimum of 250MW of capacity, compared with historical data centre capacity size on average of 10MW2.

While power use is increasing, transmission grids are unprepared and new investment is required to support generation connections. Generative AI-related demand in the power grid is expected to grow at a ~30% CAGR over the next five years, with some estimates coming in as high as 70%3.

In response to this phenomenon, major listed utilities are multiplying their forecasts for electricity demand growth. Industry-wide, current levels of anticipated power growth for the next five years double expectations as of 2022 and are more than 9x the long-run average4.

Increased load growth represents a paradigm shift for US utilities, with the potential to enhance earnings, increase required investment and further improve long-term earnings visibility. In addition, the draw for low carbon generation from generative AI and its data centres is immense; it is spurred by data centre developers prioritising green power to minimise carbon footprints in the face of unprecedented growth.

In fact, renewable PPAs (power purchase agreements) from Amazon, Google, Meta and Microsoft have ramped up by 6x compared to 2018 levels, and the development backlog for leading listed renewable energy developers is currently dominated by data centre-related projects. By 2025, generative AI-led PPAs could reach levels equal to half of the current market5.

Secular growth at a discount

Given the secular growth potential of infrastructure, valuations remain at a discount today. We expect high single-digit earnings growth in the future from the asset class, with the potential for upside should current trends accelerate.

Following a historic lag to large-cap tech and broader equities last year, as well as recent underperformance to private equity infrastructure indices, infrastructure’s price for its growth is compelling. On a 2025 PEG ratio – the price/earnings to growth ratio – we see listed infrastructure potentially trading at a ~1.5x multiple for 2025, compared to ~2x for the ‘Magnificent 7’6.

On a relative valuation basis, infrastructure is at a ~10% discount to global equities, compared to its history of a ~10% premium. When we further consider the private market and analyse notable large-scale privatisations over the last five years, we see listed infrastructure trading at a ~30% discount to private equity acquisitions7.

1CBRE Investment Management; Equinix public company reports; CBRE Group, Global Data Center Trends 2023 (July 2023); Digital Realty public company reports.

2Source: Scotiabank, “AI Is Supercharging Data Center and Power Demand” (January 2024)

3 CBRE Investment Management; “Grid Strategies: The Era of Flat Power Demand is Over,” December 2023

4 Wilson, Zimmerman. Grid Strategies: The Era of Flat Power Demand is Over (December 2023)

5 Scotiabank, S&P Global Market Intelligence; CBRE Investment Management; IEA, Electricity 2024: Analysis and forecast to 2026 (January 2024)

6 Based on 2025 P/E and EPS growth multiples as of February 2024. Listed infrastructure represented by holdings of the CBRE Global Listed Infrastructure Strategy.

7 CBRE Investment Management, iShares MSCI ACWI ETF, SPDR S&P Global Infrastructure ETF, ProShares Dow Jones Brookfield Global Infrastructure ETF, of 01/31/2024. Information is the opinion of CBRE Investment Management, which is subject to change and is not intended to be a forecast of future events, a guarantee of future results, or investment advice. Forecasts and any factors discussed are not a guarantee of future results.