Data is the oil of the digital economy. Like crude over the last couple of centuries, information is what drives the new economy forward. The similarities don’t stop there because, like oil, data relies on infrastructure to transform it from its raw form into something more useful. However, instead of pipelines, processing plants, and storage terminals, data needs fiber optic cables, telecommunication towers, and data centers to keep the digital economy humming along.
That leaves a massive opportunity for companies to build out and operate data infrastructure. One of the many focused on this space is Brookfield Infrastructure(NYSE:BIP)(NYSE:BIPC), which has been pouring capital into acquiring and developing data infrastructure in recent years. It expects that trend to accelerate and last for many decades, given the opportunity it sees ahead for data infrastructure.
Image source: Getty Images.
A century-long investment opportunity
The oil industry spent more than a century building out the infrastructure needed to support the economy’s ever-growing thirst for crude. Brookfield sees a similar megatrend investment opportunity in data as the economy consumes an increasing amount of digital information.
Overall, two factors drive the need for more infrastructure investments in the near-term. First, the existing data infrastructure is aging. As a result, it’s struggling to keep up with growing global technology demand growth. Second, the telecom industry needs to replace existing networks with faster and leaner fiber infrastructure and prepare to support the roll-out of 5G technology. These upgrades will require an estimated $1 trillion of global capital investments over the next five years alone. Meanwhile, the longer-term investment opportunity is equally vast, likely to power steady growth for infrastructure companies.
Image source: Getty Images.
Accelerating its investment strategy
Given the enormousness of the data infrastructure market opportunity, Brookfield plans to invest an increasing amount of capital into the sector over the next several years. It has been methodically building out a data infrastructure platform in recent years. Brookfield launched into this sector in late 2014 when it participated in a consortium to acquire a 50% stake in a French communication tower infrastructure business, investing $500 million into that $2.2 billion deal. Meanwhile, over the past three years, the company has invested about 20% of its $1.5 billion average annual growth capital spending (or roughly $300 million per year) into building its data infrastructure platform.
However, it has accelerated its investments in the sector this year, already spending half of its $1.7 billion growth investment on data infrastructure. The main drivers were a $150 million equity investment in a U.K. telecom business and a $600 million equity investment in an Indian telecom towers portfolio.
The company expects to continue allocating an outsized portion of its capital to expanding its data infrastructure operations over the next three to five years. In its view, it will increase its overall growth investment spending target to more than $2 billion per year. Meanwhile, it anticipates allocating 35% of that higher budget on data-related investments during that period, up from 20% of its lower investment rate during the previous three years.
Some of that shift is because many of its recent acquisitions included an embedded growth component. For example, there’s growth potential at its Indian tower portfolio as it builds additional towers to support its current tenant and add new ones to existing towers. Meanwhile, in late 2018, the company partnered with REITDigital Realty(NYSE:DLR) to acquire Ascenty, a data center business in Latin America. When they bought the company, it had eight data centers in Brazil in operation and 14 total when including those under construction. It now has 22 in operation or under construction and has expanded its reach into Chile and Mexico.
Meanwhile, the other driver of the company’s accelerated investment in data will be additional acquisitions. Given the industry’s need for capital, Brookfield will likely focus on acquiring data infrastructure companies that need access to funding for organic expansion projects or to make bolt-on acquisitions. For example, Brookfield tried to buy Cincinnati Bell(NYSE:CBB) earlier this year to accelerate the expansion of its fiber network. While a rival infrastructure fund outbid it for that company, there’s no shortage of capital-starved data infrastructure companies out there, suggesting it should have plenty of opportunities to acquire other companies or business units.
An ultra-long-term investment opportunity
Because Brookfield Infrastructure believes we’re still in the early innings of a data infrastructure investment megacycle, the company anticipates that it will have an increasing amount of compelling investment opportunities in the sector over the next several years, which is driving it to boost its spending target and allocation to the space. That bright outlook suggests that the company should have no problem continuing to generate outsized total returns for its investors, making it the ultimate buy-and-hold stock to create long-term wealth.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
