ClearBridge Outlook | Infrastructure Set for Strong 2025 as AI Drives Power Demand

What's new: ClearBridge Investments forecasts robust infrastructure growth in 2025, driven by surging electricity demand from AI and data centers, even as interest rates peak.

Why it matters: Infrastructure investments offer crucial portfolio diversification and inflation protection at a time when markets are heavily concentrated in tech stocks and facing potential inflationary pressures from the upcoming presidential election.

The big picture:

• Infrastructure returns primarily come from growing asset bases, unlike stocks and real estate

• Utilities' earnings stability looks particularly attractive in an increasingly volatile market

• The sector typically outperforms global equities after Fed rate-hiking cycles end

By the numbers:

• Global GDP growth projected to rise from 3.1% in 2024 to 3.2% in 2025

• Infrastructure has consistently outperformed global equities after Fed rate hikes

• Current valuations remain attractive due to earnings growth outpacing total returns since 2022

Key trends to watch:

• Rising electricity demand from AI and data center growth

• Increased infrastructure spending for decarbonization and aging asset replacement

• Potential second wave of inflation following the presidential election

The bottom line for investors: Infrastructure offers defensive growth and inflation protection, with utilities particularly well-positioned to benefit from AI-driven power demand growth that the market is currently underestimating.

See full report here.