The AI Data Center Build-Out: Portfolio Diversification and Electric Growth

Is it possible we are living and investing in the early stages of a modern industrial revolution? Some known facts and observable trends in the infrastructure build-out around artificial intelligence (AI) — namely the explosive growth of AI data center construction — suggest the answer may be “yes.” As public familiarity with AI continues to grow, financial advisors are likely to see more client interest in AI-related investments. Being able to provide thoughtful guidance on potential AI investment strategies could help satisfy client curiosity, and one viable discussion could revolve around the AI data center build out.

 AI data centers serve as the backbone for training and hosting advanced AI models. These high-tech facilities feature thousands of specialized graphics processing units (GPUs), stacked into racks that can contain thousands of such units, with each rack capable of performing trillions of calculations per second. The racks are connected by a web of ultra-fast fiber optic cables, resulting in a single, extremely powerful computational network. This requires not only eye-popping amounts of electricity, but advanced cooling solutions, data traffic systems, and precision power management systems to ensure stability and uptime.

 There are many signs of an ongoing and accelerating global data center build-out. Amazon, for instance, has committed $100-150 billion to data center projects over the next 15 years, with one recent announcement including a nuclear-powered facility and a massive $11 billion campus in Indiana. Meanwhile, Google is also building a new $2B data center in Indiana and a $1B data center in Kansas City. Indeed, some experts see data center capex expanding beyond US$500 billion by 2027. Europe is also seeing a significant surge in AI data center construction. Between 2023 and 2033, the power demand from European data centers is expected to grow by up to 50%, equivalent to the current electricity consumption of entire countries like Portugal or the Netherlands​.

Some Key Sectors Involved in the AI Data Center Build-Out

In the United States, Morningstar analysts project a 46% increase in electricity demand from US data centers by 2032, and outlines a possible bull case scenario where demand more than doubles​. Either way, this appears to be a major consideration for the growth potential of utility companies, possibly presenting an opportunity for financial advisors to identify undervalued utility stocks poised for long-term growth in an AI-focused economy.

Meanwhile, the build-out of AI infrastructure has sparked a corresponding demand for specialized real estate capable of hosting data centers. Real Estate Investment Trusts (REITs) that focus on data centers are already seeing new opportunities to expand their businesses, as secondary markets such as Indiana and Iowa suddenly become more prominent. For advisors, understanding how data center REITs are positioned within the AI ecosystem could improve their ability to advise AI interested clients on gaining exposure to the AI sector — or simply diversifying their real estate holdings.

The physical expansion of AI data centers is also driving demand for specific construction materials, ranging from high-grade steel for building frames, to concrete with enhanced thermal properties to dissipate heat more effectively, to advanced liquid cooling technologies for maintaining optimal server temperatures​. This has created significant opportunities for manufacturers of specialized HVAC systems, high-performance insulation materials, and custom power distribution equipment. Identifying companies that supply the materials and services essential for data center construction can be a key part of capturing the AI build-out's economic upside.

For clients who seek more streamlined access to the AI sector, thematic exchange-traded funds (ETFs) can be an effective tool. These funds are designed to track indices focused on AI, robotics, and data center growth, offering a simple way to gain diversified exposure to companies that are key players in the AI ecosystem. This approach could be particularly beneficial for advisors looking to efficiently allocate assets without the need to manage individual stock positions.

Balancing the AI Buzz with Long Term Discipline

While the AI sector appears to offer significant growth potential, some clients may have more moderate or conservative risk appetite when it comes to AI technology. Understanding how to blend growth-oriented equity investments with more stable income-generating assets, such as dividend paying utility stocks or high-quality bonds, could provide clients with a smoother, less volatile investment option. Interestingly, data center related REITs themselves represent a unique combination of growth and stability. With long-term leases and steady cash flows, these real estate assets provide a degree of predictability while benefiting from the demand for AI.

Other investors might also have ethical reservations about the enormous energy needs of AI infrastructure and the attendant environmental impacts. The whole sector now accounts for up to 4% of greenhouse gas emissions globally, and this figure seems likely to rise as the scale of AI infrastructure expands to meet demand. Surging computational needs and the power to fuel them are also driving a rapid resurgence in nuclear power, which still has long-term environmental costs — as the byproducts of nuclear product can remain dangerous for thousands of years.

Importantly, while AI's growth potential is certainly immense, it is also useful to remember that industrial transformations tend to unfold in fits and starts, over many years, or even decades. As always, eager clients should be encouraged to view investments in new technologies as part of a broader strategy towards long-term wealth generation. Meanwhile, advisors should definitely stay informed about developments in the AI ecosystem, regulatory changes, and shifts in the competitive landscape. Those who are prepared to help clients understand AI investments and suggest options for a disciplined, diversified investment plan may be distinguishable from those who are not.

Conclusion

The unfolding AI-driven industrial build-out appears to be signaling a historic shift in the global economic landscape, bringing both amazing new opportunities and ongoing challenges for advisors. The Investments & Wealth Institute remains committed to supporting advisors in their professional endeavors through rigorous education, world-class certification programs, and up-to-date insights on market trends. Our focus on continuous professional development ensures that our certified professionals have the tools they need to provide the highest standards of service to their clients, especially as they navigate the complexities of AI’s impact on the market.

The Certified Investment Management Analyst® (CIMA®) certification, for example, can empower financial advisors with the advanced technical expertise and strategic insight necessary to navigate this new investing frontier. With its rigorous focus on portfolio construction, risk management, and data analysis, the CIMA curriculum teaches the skills necessary to evaluate AI-driven investment opportunities — and integrate them into well-rounded, client-centric portfolios. As AI reshapes industries from utilities to real estate, CIMA certified professionals can deliver the holistic and adaptable investment management services that clients need. For those aiming to provide exceptional advice in an increasingly AI-driven market, the CIMA certification stands out as a strong option for a new professional credential, offering the tools and confidence to turn knowledge into client value.