Infrastructure Stocks Gain AI Data Center Boost Amid Market Volatility
Infrastructure investments, long considered defensive and less volatile than other equity sectors, may offer investors both comfort and opportunities as geopolitical tensions roil global markets. While not entirely immune to sell-offs, this sector is receiving significant new tailwinds from the explosive growth of artificial intelligence data centers, which are generating unprecedented demand for energy. Globe Advisor consulted three portfolio managers for their top North American infrastructure stock selections.
Kevin McSweeney: CI Global Asset Management
Funds: CI Global Infrastructure Fund and CI Global Infrastructure Private Pool ETF (CINF-T)
Pick: Keyera Corp. (KEY-T)
This Calgary-based energy infrastructure company stands to benefit from natural gas demand driven by data centers and growth potential from its underutilized gas plants, according to McSweeney. Keyera processes and transports natural gas and natural gas liquids (NGLs). The company has a deal to acquire Plains All American Pipeline LP's Canadian NGL business, with acquisition synergies not yet fully priced in by the market. Given global disruptions, Keyera should also attract Asian companies seeking non-Middle Eastern NGL sources. McSweeney describes it as a defensive play with predictable fundamentals, trading at 10.5 times EV/EBITDA, in line with historical averages. Cyclical risks exist due to economic dependence.
Pick: CenterPoint Energy Inc. (CNP-N)
The Houston-based natural gas and electric utility benefits from Texas population growth, rising industrial demand, and massive AI data center expansion. CenterPoint also recovers costs for grid upgrades through supportive regulation. It expects high single-digit earnings growth this year, providing essential services with regulated rates. The stock trades at a reasonable valuation slightly above peers. Risks include unrealized data-center demand, economic slowdowns, and regulatory changes.
Laura Lau: Brompton Funds Ltd.
Fund: Brompton Global Infrastructure ETF (BGIE-T)
Pick: Ferrovial SE (FER-Q)
The Spanish infrastructure giant, which owns 48% of Ontario's Highway 407, benefits from toll rate increases, rising traffic, and long-term earnings growth potential. Ferrovial, now headquartered in Amsterdam, develops and operates highways and airports globally. It's a defensive stock providing essential services with steady cash flow. While valuation is rarely cheap, recent share declines present buying opportunities. A sharp economic downturn could impact toll-road traffic.
Pick: NextEra Energy Inc. (NEE-N)
This utility, also the largest U.S. renewable power producer, gains from Florida's population growth and accelerating electricity demand from data centers. NextEra partnered with Alphabet's Google unit to resurrect an Iowa nuclear plant by 2029 to meet AI demands. It operates Florida Power & Light Co., a regulated utility with an approved 11% return on equity. The company targets 8%+ compound annual EPS growth to 2032, trading in line with the market. Rising interest rates pose minimal impact based on earnings performance.
Jeff Sayer: Ninepoint Partners LP
Fund: Ninepoint Global Infrastructure Fund (INFR-T)
Pick: The Williams Companies Inc. (WMB-N)
This natural gas storage and pipeline company will benefit from growing power demand at AI data centers. Headquartered in Tulsa, Williams' pipelines deliver one-third of U.S. gas. Earnings growth is expected from increased demand, Transcontinental Gas Pipe Line expansion, and direct supply to hyperscalers. Defensive characteristics come from stable cash flow through long-term contracts. The stock trades at about 15 times EV/EBITDA, considered reasonable. The main risk is unmet AI data-center demand expectations.
Pick: NRG Energy Inc. (NRG-N)
This U.S. power company, with retail electricity and home services divisions, is well-positioned for AI-driven energy demand. Houston-based NRG recently acquired natural gas plants, with assets now concentrated in Texas and the northeastern U.S. It's a defensive play delivering electricity as a stable business, targeting 14% annual adjusted EPS growth through 2030. NRG expects a soon data-center deal for one gigawatt of power, supporting its six-gigawatt growth target. The risk remains unrealized data-center trade expectations.
