A sensible AI consideration? Every hyperscaler needs a data center.
One of the more interesting takeaways in LPL Research's Midyear Outlook isn't in stocks. It's in fixed income.
LPL is underweight investment-grade corporate bonds, noting that spreads remain tight and that a wave of debt issuance from hyperscalers could add pressure as companies finance the massive AI infrastructure buildout. Amazon, Alphabet, Meta, Microsoft, and Oracle are expected to continue issuing significant amounts of debt to fund data centers, chips, and power infrastructure.
At the same time, LPL highlights infrastructure as a preferred alternative investment, citing stable cash flows, inflation-linked revenues, strong pricing power, and direct exposure to long-term growth themes such as data centers, fiber networks, and the digital buildout.
That raises an interesting question for investors:
Would you rather lend money to a hyperscaler that is spending hundreds of billions to compete in the AI race?
Or own the infrastructure that every hyperscaler needs to lease regardless of who ultimately wins?
The AI boom is creating enormous demand for data centers, power generation, fiber connectivity, cooling systems, and other essential infrastructure. In many ways, the picks-and-shovels opportunity today may be less about predicting which technology company dominates AI and more about owning the assets that benefit from the growth of the entire ecosystem.
As portfolio construction evolves beyond a traditional stock-and-bond framework, infrastructure continues to stand out as a potential source of diversification, income, and long-term growth.
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