Q: How is artificial intelligence (AI) affecting the infrastructure markets, and what about in the coming years?
— Midwest CAIA event attendee
A: The explosion of data, movement to the cloud and emergence of AI are all driving significant growth in data center electricity demand.
Data Center Share of U.S. Power Consumption1
Data center power usage has risen to 4.4% of total U.S. power generation. By 2027, that number is likely to rise to 8.5% of U.S. power generation.
As a result, many of the largest corporate lessors of data center real estate are using massive amounts of electricity and continue to demand more.
With the growth and volatility of energy prices, many of these companies look to lock in future energy prices through long-term (10–20 year) contracts with energy producers, called “Purchase Power Agreements” (PPAs). PPA volumes are approximately twice what they were just five years ago and add more predictability for both the consumer and producer of power.2
Many of these companies have also stated objectives to decrease their carbon footprints. Moving their electricity consumption to renewables is one of the easiest ways for them to achieve these goals, which means the demand for renewable-powered data centers is exploding.3
Global Largest Corporate PPA Off-Taker(GWs)4
Given these trends, two of our favored themes for 2024 and 2025 are renewable energy infrastructure projects and industrial data center real estate.
While we have already witnessed the shift to the cloud driving data usage, we only expect further growth via AI adoption. AI-powered searches take 8x or more energy consumption than a traditional Google search.5 Because the AI evolution is young, it is difficult to pick the likely future winners. Google was not the first, second or even third popular search engine to come along. In its early days as an online bookseller, Amazon did not suggest the “everything store” dominator that it was to become. Likewise, there is quite a good chance that the future winners in AI are currently unknown or have not yet even been created!
Consider industrial data center real estate and the renewable energy infrastructure projects connected to those data centers as the sort of Levi’s jeans of the new economy. Levi’s made its fortune by supplying the gold miners of the California gold rush, rather than entering the over-competitive fray of going directly after the gold. Similarly, no matter who the future winners in the gold rush of AI turn out to be, there is a potential fortune to be made supplying them.
