AI allure seduces the sedate side of investing
XLI•Private infrastructure funds raised about $220 billion in 2025, while funds targeting digital infrastructure raised nearly $160 billion. The article says high valuations, development risks and widening differences in returns are making AI-linked infrastructure investments less predictable.
1. AI draws capital
Private pools of capital raised about $220 billion in 2025, bringing money earmarked for infrastructure beyond $1.5 trillion. Funds targeting digital infrastructure raised nearly $160 billion last year, nearly double their decade-long average. Broad infrastructure funds returned more than 13% last year, but data-center businesses have commanded higher valuations than private infrastructure overall.
2. Higher risks and uneven returns
Data-center enterprises changed hands at an average of 25 to 30 times EBITDA in the five years through early 2024, compared with 16 times for private infrastructure broadly. At 25 times EBITDA, a buyer starts with a 4% yield before costs, and a 12% return without debt would depend on strong renewals, rapid earnings growth or a higher sale price. Development risks include opposition, delays to electrical connections and supply-chain disruptions.
3. Traditional assets draw interest
Returns have varied widely: the top quarter of funds raised in 2022 returned more than 21% annually as of July, versus less than 12% at the median and 5% for the bottom quartile. The article points to potential opportunities in mature infrastructure assets sold or leased by governments, while noting that established assets can also command high valuations. About 730 infrastructure funds are seeking a combined $460 billion worldwide.
