Urbanization, climate change, and the need to constantly repair and replace infrastructure suggest that the necessity for infrastructure in the U.S. and internationally will be on the rise for many years to come. Sadek Wahba, founder and chairman of I Squared Capital- a global infrastructure management company managing roughly $40 billion in investments in infrastructure projects in over 50 countries- gave CNBC insight on how investors can capitalize on this trend in the U.S. According to Wahba, electric transmission builders, infrastructure technology services and cybersecurity are prime investments.
Demand for infrastructure improvements is projected to increase as cities see an influx of people in the next few decades. Furthermore, the same period marks a crucial point in the collective effort to handle climate change, with energy efficiency becoming a bigger priority for builders and investors. Commenting on this, Sadek Wahba, founder and chairman of I Squared Capital, which oversees $40 billion in infrastructure investments in over 50 countries, said, "The sector as a whole is on an upward trajectory." He further spoke with CNBC on how investors can take advantage of this trend.
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According to Wahba, overhauling the whole electric grid is essential. Despite having limited transmission wires, power generators are generally still required to wait a long time to connect new sources of energy onto the electric grid. Before they can do so, costly upgrades to the transmission system are usually carried out. Utility companies can perform such build out, but that doesn't necessarily indicate a direct correlation to the infrastructure, since they comprise more than just that. Consequently, Wahba suggests investing in the specialized construction firms that build the grid, as this area has the potential to yield great results, given the time and effort it takes, along with the need for specialist expertise, licensing and environmental permitting. Wahba also believes that the electrification of urban transportation will become increasingly attractive as an investment if congestion pricing plans become more widespread, like the one New York City has instigated.
Wahba noted the exciting potential of technology which would support the growth of new infrastructure. He cited examples such as congestion pricing systems, which would require measurement and the ability to process payments. Wahba also proposed that technology such as the ability to adjust temperatures based on the number of people in a room could save a significant amount of money. He further suggested that a growth in digitalized infrastructure could also lead to an exponential increase in cybersecurity. To illustrate, he noted the dangers of hackers taking control of the hospital HVAC system or power generation. He went on to say that as the world becomes more dependent on technology, fiber optics, and data centers, the demand for these products will rise. Nevertheless, he noted that stock prices may remain comparatively high due to demand from AI and 5G networks.
Wahba explained that the US infrastructure market for investors is incredibly limited in comparison to what other countries have. Whereas investors in the UK can buy stock in a water company, individual investors in the US cannot buy stock in JFK Airport. There needs to be more infrastructure assets that are publicly investable to create more market competition and better pricing for consumers, however, a proper regulator needs to come into play to stop private companies from excessively raising prices. The US energy industry has the most advanced system in the world, but the transmission grid is still not functioning properly.
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