UBS Outlook | Traditional sectors poised to outperform hot trends

What's new: Overlooked infrastructure sectors like utilities and transportation show stronger fundamentals than popular renewable and digital plays, while offering better valuations.

Why it matters: As investors chase trendy sectors, they're missing major opportunities in traditional infrastructure that quietly benefits from the same megatrends but at much lower entry prices.

The big picture:

• "Hot" sectors like data centers and renewables are becoming dangerously crowded

• Traditional infrastructure delivers surprisingly strong earnings growth despite being ignored

• Infrastructure debt faces historic EUR 50B refinancing opportunity in 2025

By the numbers:

• Infrastructure dry powder hits lowest level since 2020, suggesting less competition

• Conventional electricity seeing strongest growth (20%+ EBITDA CAGR) due to AI demand

• Private infrastructure valuations down while public markets surge

Key trends to watch:

• AI driving massive electricity demand, benefiting conventional power more than expected

• Trump administration likely to partially roll back clean energy incentives

• Local monopolies in "boring" sectors offering strongest competitive moats

The bottom line for investors: The best infrastructure plays for 2025 aren't the obvious ones. Look for overlooked assets with strong fundamentals, especially in power generation, transportation, and infrastructure debt where competition is weakest.