Many have referred to as knowledge the brand new oil. The digital economic system runs on knowledge. Data is essential to digital know-how, particularly synthetic intelligence (AI) functions. And which means the world wants extra infrastructure to assist the motion and processing of knowledge.
“We’re in a once-in-a-generation funding cycle for knowledge facilities in the mean time,” said Felix Chan, a speaker at Brookfield Infrastructure‘s (NYSE: BIPC)(NYSE: BIP) annual investor day final 12 months. Chan famous that corporations want to speculate over $1 trillion within the subsequent 10 years in knowledge facilities to assist the expansion in knowledge consumption, pushed partly by generative AI. Brookfield Infrastructure has invested closely in constructing a number one knowledge infrastructure platform, positioning it to capitalize on this chance. That makes it a high inventory to purchase now to play the approaching AI-driven knowledge middle increase.
AI runs on knowledge
Udhay Mathialagan, who leads Brookfield’s international knowledge middle platform, said on the identical occasion:
AI is in all places and machine studying and AI development has simply exploded. There’s a lot of theories, a lot of views on how AI will present itself, the way it’ll be deployed. However the one factor, the one plain reality is the one approach AI might be delivered is thru bodily knowledge infrastructure on the bottom. And what which means is knowledge facilities and many them.
AI wants knowledge facilities to thrive as a result of the know-how requires an incredible quantity of computing energy and knowledge storage. That computing energy comes from specialised semiconductors developed by corporations like Nvidia (NASDAQ: NVDA). AI apps, together with the uber-popular AI ChatBot ChatGPT by OpenAI, broadly use its H100 graphics playing cards. Corporations are shopping for these chips hand-over-fist to energy their AI ambitions. Nvidia’s knowledge middle enterprise generated $18.4 billion in income through the fourth quarter, a staggering 409% enhance from the prior 12 months.
The AI increase can be driving corporations to safe extra space in knowledge facilities to accommodate the know-how used to coach AI fashions and generate outputs. That is fueling a constructing increase that would final greater than a decade. In keeping with Brookfield’s Chan, the world wants six gigawatts (GW) of extra knowledge middle capability over the following three years to fulfill anticipated knowledge demand. That is staggering, contemplating there was solely 7.4 GW of capability on-line on the finish of final 12 months.
Constructing a number one knowledge middle platform
Brookfield Infrastructure has quietly positioned itself to capitalize on the information and AI increase over the previous few years. It entered the information middle market in 2019. The worldwide infrastructure operator spent $1 billion to purchase a portfolio of knowledge facilities from AT&T within the U.S., creating the Evoque Knowledge Facilities platform. The corporate additionally fashioned a three way partnership (JV) with knowledge middle REIT Digital Realty that 12 months to accumulate the Ascenty knowledge middle platform in South America and has since fashioned one other JV with Digital Realty to develop knowledge facilities in India.
The corporate invested in three extra knowledge middle platforms final 12 months:
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Compass Datacenters: The corporate partnered with an current investor to accumulate Compass in a $5.5 billion deal. Compass develops mega knowledge middle campuses in North America.
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Data4: It entered the European knowledge middle market by buying Data4 for $3.8 billion. The corporate operates 31 knowledge facilities throughout six European nations.
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Cyxtera: Brookfield used its Evoque platform to accumulate 40 knowledge middle websites out of chapter from Cyxtera. It additionally bought the related actual property of a number of websites from third-party landlords, together with Digital Realty.
Brookfield now owns pursuits in over 135 working knowledge facilities throughout the Americas, Europe, and Asia Pacific. They’ve 750 megawatts (MW) of crucial load capability.
On high of that, the corporate has contracts to assist developing one other 900 megawatts of knowledge middle capability over the following three years. That pipeline offers Brookfield a transparent line of web site to develop its knowledge middle platform’s funds from operations (FFO) by 2.5 occasions over the following three years. In the meantime, it has the potential to develop over 2.3 GW of knowledge middle capability over the following 5 years and is shopping for extra land to assist future growth. For instance, following discussions with a buyer about their development ambitions, Brookfield Infrastructure acquired a strategic land web site in Milan through the fourth quarter of final 12 months to assist over 60 MW of extra capability.
A high-powered development driver
Brookfield Infrastructure’s knowledge middle investments might pay huge dividends for buyers over the approaching years. They assist assist the corporate’s view that it may possibly develop its FFO per share by greater than 10% yearly. That ought to give it the facility to extend its already enticing dividend (at present yielding 4.7%) by 5% to 9% per 12 months. Add the dividend earnings to its earnings development fee, and Brookfield might generate complete annual returns within the mid-teens, with extra upside because the market begins pricing in Brookfield’s AI-powered development potential. These components make it an ideal AI inventory to purchase and maintain for the lengthy haul.
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Matt DiLallo has positions in Brookfield Infrastructure, Brookfield Infrastructure Companions, and Digital Realty Belief. The Motley Idiot has positions in and recommends Digital Realty Belief and Nvidia. The Motley Idiot recommends Brookfield Infrastructure Companions. The Motley Idiot has a disclosure coverage.
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