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You turn on the tap, water flows. You flip the switch, the lights come on. You unlock your phone, you’re connected to the information superhighway. We take infrastructure for granted because we should. When it works, we’re not supposed to notice it. It is the key enabler that underpins modern societies. We build the rest of our lives with what it provides for us. Megaprojects may occasionally make the news (usually when delayed), but we only tend to think about infrastructure when it stops working.
There was a fire in an electric substation near London’s Heathrow airport in March this year. About 135,000 people were stranded, and by early morning, the UK had run out of suitable diversion points, forcing incoming planes to turn back mid-flight. This year, an electrical grid fault in Spain caused a cascading failure that left 55 million people without power. There is speculation that upgrades to the grid have not kept pace with the changing nature of electricity supply in the region. When the physical networks stop working, everyone notices. If they cannot provide for our needs reliably enough, those problems weigh on society and produce competitive headwinds for businesses.
Source: Brand, S., 1999, The Clock of the Long Now, p.37.
In his book The Clock of the Long Now, Stewart Brand's pace-layering model notes that societal changes stack like geological layers. The deeper below the surface, the slower and more foundational the change becomes. At the top, fashion ebbs and flows in months. Below it, business and commerce change in years, and underneath that, infrastructure changes over decades. Culture and nature sit deeper still. The lower the layer, the more power it commands. We see a meaningful shift underway in the US infrastructure layer that could drive investment opportunities for decades.
What’s changing
There are two main drivers for a long-acting shift in infrastructure spending. We can take advantage of both by noting the scale of the change and seeking out critical suppliers that will benefit.
Driver 1: deferred maintenance. Since at least the 1970s, the US has underinvested in its physical infrastructure. When infrastructure is new and nothing breaks, it’s easy to trim budgets. Infrastructure spending as a proportion of GDP has gradually but steadily declined over the past 50 years. The American Society of Civil Engineers estimates that trillions of dollars of additional spending will be required to bring the nation’s infrastructure up to scratch.
Driver 2: new demands. Climate events are placing new strains on physical infrastructure: energy generation is changing, and data traffic is scaling exponentially. These factors place new demands on infrastructure, where trillions of dollars in federal, state and corporate spending will be required to build the infrastructure of the 21st century.
The equity opportunity
Infrastructure projects are giant machines. They are complex and require inputs from myriad suppliers, designers and contractors. We look for businesses that dominate critical pinch points in the machine. Companies that offer goods and services that nobody else can replicate at the same level of quality, volume, cost or speed. Where rising demand meets constrained supply, earnings growth happens.
This powerful equation turns seemingly steady businesses into compounding machines for shareholders. These attractions only come into focus if you step back far enough to consider the next five to ten years of opportunities. Most of the market misses the bigger picture by watching the ups and downs of any given year.
Some illustrations from our portfolios
We already own several positions in traditional-looking advantaged suppliers, and we expect to continue uncovering more as we sift through supply chains.
Martin Marietta supplies aggregates such as crushed stone, sand and gravel. The low value per ton and the weight of these goods mean that local suppliers dominate. It isn’t worth the transport costs to truck an alternative from too far away. New quarries are hard, expensive and slow to open. Martin Marietta’s methodical assembly of an ever-increasing supply network gives it a tremendous opportunity to simultaneously capture the demand upswing and benefit from strong pricing.
Advanced Drainage Systems can reassemble its giant injection moulding machine wherever it's needed
© ENGEL
Advanced Drainage Systems (ADS) makes plastic pipes and stormwater tanks. It’s the largest US producer of these systems, which make up around 40 per cent of the stormwater control market. The rest is still in concrete pipes, which are heavier, more complex to install and more prone to damage. ADS is already the second-largest plastic recycler in the US. As drainage systems upgrade, we expect them to shift to plastic, and ADS is in a prime position to cater to this upswing in demand.
And let’s not forget that new infrastructure providers come in all forms. Amazon may be the most crucial infrastructure company of our generation. It is the invisible super-grid of modern commerce and computing. It runs the largest US fulfilment network and the world’s biggest public cloud utility in Amazon Web Services (AWS). To keep both networks humming, Amazon will spend about $100 bn in 2025 alone. This nation-scale logistics and data backbone is impossible to replicate in our investment time horizon, and the earnings power that comes from the goods and data that move through the business looks seriously underappreciated to us. The owners of infrastructure can be amongst the most durable growth businesses that we can own. Just look at Mastercard’s position as a payment infrastructure. Competitors have challenged it for 50 years, and it has steadily become more sewn into the system.
The takeaway
A multi-year rise in infrastructure spending is underway. Growth equity investors can benefit by finding suppliers that provide critical ingredients to the build-out that others cannot replicate. They can also benefit by seeking out the owners of the critical networks’ next generation. Stock markets can miss the quality and durability of these growth opportunities because of their focus on short-term horizons that mask the bigger picture. We see it very differently.
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The views expressed should not be considered as advice or a recommendation to buy, sell or hold a particular investment. They reflect opinion and should not be taken as statements of fact nor should any reliance be placed on them when making investment decisions.
This communication was produced and approved in June 2025 and has not been updated subsequently. It represents views held at the time of writing and may not reflect current thinking.
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