Many have called data the new oil. The digital economy runs on data. Information is crucial to digital technology, especially artificial intelligence (AI) applications. And that means the world needs more infrastructure to support the movement and processing of data.
“We’re in a once-in-a-generation investment cycle for data centers at the moment,” stated Felix Chan, a speaker at Brookfield Infrastructure‘s (NYSE: BIPC)(NYSE: BIP) annual investor day last year. Chan noted that companies need to invest over $1 trillion in the next 10 years in data centers to support the growth in data consumption, driven in part by generative AI. Brookfield Infrastructure has invested heavily in building a leading data infrastructure platform, positioning it to capitalize on this opportunity. That makes it a top stock to buy now to play the coming AI-driven data center boom.
AI runs on data
Udhay Mathialagan, who leads Brookfield’s global data center platform, stated at the same event:
AI is everywhere and machine learning and AI growth has just exploded. There’s lots of theories, lots of views on how AI will manifest itself, how it’ll be deployed. But the one thing, the one plain truth is the only way AI can be delivered is through physical data infrastructure on the ground. And what that means is data centers and lots of them.
AI needs data centers to thrive because the technology requires a tremendous amount of computing power and data storage. That computing power comes from specialized semiconductors developed by companies like Nvidia(NASDAQ: NVDA). AI apps, including the uber-popular AI ChatBot ChatGPT by OpenAI, widely use its H100 graphics cards. Companies are buying these chips hand-over-fist to power their AI ambitions. Nvidia’s data center business generated $18.4 billion in revenue during the fourth quarter, a staggering 409% increase from the prior year.
The AI boom is also driving companies to secure more space in data centers to house the technology used to train AI models and generate outputs. That’s fueling a building boom that could last more than a decade. According to Brookfield’s Chan, the world needs six gigawatts (GW) of additional data center capacity over the next three years to meet expected data demand. That’s staggering, considering there was only 7.4 GW of capacity online at the end of last year.
Building a leading data center platform
Brookfield Infrastructure has quietly positioned itself to capitalize on the data and AI boom over the past few years. It entered the data center market in 2019. The global infrastructure operator spent $1 billion to buy a portfolio of data centers from AT&T in the U.S., creating the Evoque Data Centers platform. The company also formed a joint venture (JV) with data center REIT Digital Realty that year to acquire the Ascenty data center platform in South America and has since formed another JV with Digital Realty to develop data centers in India.
The company invested in three more data center platforms last year:
Compass Datacenters: The company partnered with an existing investor to acquire Compass in a $5.5 billion deal. Compass develops mega data center campuses in North America.
Data4: It entered the European data center market by acquiring Data4 for $3.8 billion. The company operates 31 data centers across six European countries.
Cyxtera: Brookfield used its Evoque platform to acquire 40 data center sites out of bankruptcy from Cyxtera. It also purchased the associated real estate of several sites from third-party landlords, including Digital Realty.
Brookfield now owns interests in over 135 operating data centers across the Americas, Europe, and Asia Pacific. They have 750 megawatts (MW) of critical load capacity.
On top of that, the company has contracts to support constructing another 900 megawatts of data center capacity over the next three years. That pipeline gives Brookfield a clear line of site to grow its data center platform’s funds from operations (FFO) by 2.5 times over the next three years. Meanwhile, it has the potential to develop over 2.3 GW of data center capacity over the next five years and is buying more land to support future development. For example, following discussions with a customer about their growth ambitions, Brookfield Infrastructure acquired a strategic land site in Milan during the fourth quarter of last year to support over 60 MW of additional capacity.
A high-powered growth driver
Brookfield Infrastructure’s data center investments could pay big dividends for investors over the coming years. They help support the company’s view that it can grow its FFO per share by more than 10% annually. That should give it the power to increase its already attractive dividend (currently yielding 4.7%) by 5% to 9% per year. Add the dividend income to its earnings growth rate, and Brookfield could generate total annual returns in the mid-teens, with additional upside as the market starts pricing in Brookfield’s AI-powered growth potential. These factors make it a great AI stock to buy and hold for the long haul.
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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.
