As with any investment, your capital is at risk.
There was a fire in an electric sub-station near London’s Heathrow airport in March this year. 135,000 people were left stranded, and incoming planes had to turn back mid-flight. An electrical grid fault in Spain this year 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. Those problems weigh on society and produce competitive headwinds for businesses.
Stewart Brand’s pace-layering model in his book The Clock of the Long Now notes that change in societies stack like geological layers. The deeper below the surface you go, the slower and more foundational change becomes. At the top, fashion ebbs and flows in months, below it, business and commerce changes 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 Global 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 taking note of the scale of the shift, then seeking out critical suppliers that are set to benefit.
Driver 1: deferred maintenance
The developed world has underinvested in its physical infrastructure. When infrastructure is new and nothing breaks, it’s easy to trim budgets. This has led to it getting older and weaker, and, at current rates of spending, future investment gaps that need to be filled. According to Oxford Economics, the US is most guilty, with an investment gap of $4tn up to 2040, double that of the next largest, China, but they are by no means alone.
Driver 2: new demands
Energy generation is changing. Data centres are driving power demand that has previously stagnated. Climate events are placing new strains on the system. These all place new demands on infrastructure, and trillions of dollars in public and private 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 and CRH supply building materials, such as crushed stone, sand, gravel and concrete. The low value per ton and the weight of these goods mean that local suppliers dominate. It simply isn’t worth the transport costs to truck an alternative in from too far away. New quarries are hard, expensive and slow to open. Both companies’ methodical assembly of a bigger and bigger network of supply gives them a tremendous opportunity to capture the demand upswing and benefit from strong pricing at the same time.
Nexans designs, manufactures and installs high-voltage cabling for on-land energy grids or to connect offshore wind farms to the grid, primarily in Europe. These cables are complex to manufacture, and Nexans is one of just two players that can install cables at the required subsea depth. It can benefit from the need to upgrade existing grid infrastructure and increase offshore wind capacity. As it is still selling off the more commoditised parts of its business, we believe this growth is underappreciated by the market.
Brookfield is a Canadian investment firm that operates property, renewable energy, infrastructure and private equity assets. Unlike other alternative asset managers, its background is in running infrastructure assets directly. It is therefore well-positioned to bridge the investment gap through private capital. Last week, it announced plans to build a $10bn data centre and energy generation project in Sweden, after a similar $20bn announcement for AI infrastructure in France in February. Increased demand can extend its decades-long track record of delivering mid-teens earnings growth. We purchased it in December and have added to it twice this year.
And let’s not forget that the providers of new infrastructure come in all forms. Amazon may be the most important infrastructure company of our generation. It is the invisible super-grid of modern commerce and compute. It runs the largest US fulfilment network and the world’s biggest public cloud utility in AWS. To keep both networks humming, Amazon will spend around $100bn in 2025 alone. This nation-scale logistics and data backbone is impossible to replicate on 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 payment infrastructure. Competitors have challenged it for 50 years, and it has still 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 the suppliers that provide critical ingredients to the build-out that others cannot replicate. They can also benefit by seeking out the owners of the next generation of critical networks. 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.
Risk factors
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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