AI Infrastructure Development Requirements
AI stands poised to become one of the most transformative technologies ever seen. However, realizing its full potential hinges on constructing the necessary physical infrastructure to enable its extensive use. Analysts project that investments in AI-related infrastructure could hit $7 trillion within the next decade.
A couple of pressing needs include increasing the number of data centers and enhancing power generation to accommodate AI’s growth. This is underscored by the strategies of Brookfield Renewable and Brookfield Infrastructure—my recent decisions to buy more shares in these two undervalued companies are largely influenced by this context.
Considerations on Returns
Brookfield Renewable stands out as a leader in clean energy. They manage assets in hydro, wind, solar, and battery storage, while also branching into nuclear services through partnerships. Their expertise positions them as a valuable energy partner for top AI companies. Brookfield Renewable is currently developing 10.5 gigawatts of renewable energy, which will support major players like Microsoft through 2030. Notably, this is the largest power purchase agreement ever made, dwarfing prior records. Additionally, Brookfield recently secured its most extensive hydropower contract with Google, amounting to up to 3 gigawatts.
In partnership with Cameco, Brookfield is also venturing into nuclear energy, aiming to construct over $80 billion in new reactors to bolster AI initiatives.
Brookfield expects its funds from operations (FFO) per share to rise by over 10% annually until 2031, with estimates suggesting nearly 20% growth in the next three years. This trajectory could be advantageous, as a dividend yield of 3.6% adds to its appeal for investors looking for solid returns.
AI-Driven Growth Mechanisms
Brookfield Infrastructure, the infrastructure-focused counterpart to Brookfield Renewable, channels investments into utilities, transportation, and technology infrastructure. Global operators are pouring resources across the entire AI infrastructure spectrum.
For instance, Brookfield is collaborating with Intel to support the construction of U.S. semiconductor plants while also managing a global data center platform aimed at meeting the demands of leading tech firms. They are investing in Bloom Energy’s fuel cell technology to power sizeable data centers. Furthermore, Brookfield’s acquisition of an industrial gas business in South Korea enhances its capabilities, especially with semiconductor manufacturers.
As Brookfield Infrastructure progresses, FFO per share growth could be around 14% in the coming years provided certain economic pressures ease. Their dividend yield currently stands at 3.7%, a sound choice for investors eyeing long-term gains.
Establishing Essential AI Infrastructure
Amid the focus on AI’s Large Language Model developers and semiconductor companies, many investors overlook the crucial infrastructure that underpins AI adoption. Brookfield Infrastructure and Brookfield Renewable are at the forefront of constructing this necessary framework. That’s why I’ve opted to keep investing in these undervalued stocks, as I am confident that the investments in AI infrastructure will yield substantial returns in the years ahead.
