By: Edward J. Leach, CFP®, MBA, CEPA®
We often think about the Industrial Revolution as a defining moment of economic progress—a time when investment in factories, railways, and power transformed daily life and lifted entire economies.
Today, we’re living through a similar transition. But this time, the revolution is digital.
Artificial intelligence (AI) isn’t just hype. It’s already helping doctors catch diseases earlier, enabling companies to forecast demand more accurately, and powering everything from marketing to logistics. But all this technological magic depends on physical infrastructure that is every bit as real and capital-intensive as past factories.
According to research by Torsten Slok, Ph.D., Chief Economist of Apollo Global Management:
Global infrastructure faces an $88 trillion funding gap by 2040, and Governments are providing incentives and regulatory support for this build-out.
The US has over 5,400 data centers, but demand is accelerating rapidly.
US data center energy demand could double by 2030, requiring the power equivalent of three New York Cities being driven by AI and digital technologies, needing massive computing power.
(Source: Apollo Real Assets Outlook, Torsten Slok, Ph.D., Chief Economist, Apollo Global Management)
The New Factories: Data Centers
Data centers are the modern factories. Instead of producing textiles or steel, they process and store data 24/7.
But demand is exploding. As mentioned in the third point above from Apollo’s research: In the US alone, data center energy needs are projected to double in five years.
Meeting this challenge requires more than just new buildings. It calls for:
Expanding power generation, including renewables
Upgrading the transmission grid
Laying miles of fiber and wireless networks
Investing in energy storage and efficiency
It’s a massive, multi-decade effort—much like building the railroads or interstate highways of earlier eras.
A Potential Bright Spot for the Economy
At a time when economic headlines are often dominated by uncertainty, this need to build out digital infrastructure stands out as a potential, clear, and tangible driver of long-term economic activity.
It’s not just about tech companies. It’s about construction workers, electricians, engineers, renewable energy developers, and the entire supply chain that supports them.
Governments see this need, too, offering incentives and regulatory support to make these projects happen. Globally, the estimated $88 trillion infrastructure funding gap by 2040 must be closed—not out of luxury but necessity.
This kind of large-scale, future-focused investment has historically powered broad-based economic growth. It’s one of the reasons we see this story as a potential bright spot for our economy, country, and future.
How We Think About This in Portfolios
Of course, these projects take time, planning, and significant investment. They’re not simple, and they don’t offer quick fixes.
For investors looking to understand how long-term themes shape their portfolios, this digital infrastructure build-out is a good example of why investing in private markets matters.
Unlike public markets, private investments can participate directly in these large-scale, capital-intensive projects that are critical for future growth, while potentially offering differentiated return drivers and diversification benefits.
At Highland, we often talk about building a portfolio like baking a cake: stocks and bonds are the essential ingredients. Still, other asset classes—like private markets—are the extra flavors that help create something more complete and resilient.
Read more about that analogy here.
For us, private infrastructure opportunities are one of those additional ingredients. They don’t replace the core of a portfolio, but they can help support long-term goals by aligning with themes shaping our economy, like the urgent need to build the digital backbone of the future., like the urgent need to build the digital backbone of the future.
Ed Leach, CFP®, MBA, is a Partner and Wealth Advisor at HIGHLAND Financial Advisors, LLC in Wayne, NJ, and works directly with clients advising them on their financial planning and investments. Ed’s work focuses on the unique needs of business owners, helping them extract value from their businesses while creating efficiencies in their business and personal financial plans. He is also a member of NAPFA, which is dedicated to serving fee-only advisors.
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The above article was written with the assistance of artificial intelligence (AI).