Five reasons why digital infrastructure is among the most exciting investment themes

Ben Forster, Equity Analyst and Global Real Estate at Schroders

Data centres, macro towers and fibre connectivity are among resilient growth areas as the digital economies of emerging markets bloom.

Just six years after its launch in 2016, short-form video app Tik-Tok has been downloaded more than 3 billion times.

The company’s explosive growth was accelerated by a lack of physical interactions during the Covid-19 pandemic, but its popularity continues to gather momentum, with more than 1 billion videos viewed on the platform every day by its 700 million active users.

A parallel trend is transforming business operations around the world.

1. Digital infrastructure enables new forms of communication to grow rapidly

With staff unable to visit offices and disaster recovery sites during lockdowns, businesses also went digital, embracing cloud computing and video conferencing.

Downloads of the Microsoft Teams video platform increased more than 10-fold. Collectively, the largest US cloud computing providers (Amazon, Google, Microsoft, IBM and Oracle), spent nearly $50 billion on cloud capital expenditure during 2021, to keep up with the step-change in demand.

Facebook, reinvented itself as Meta and committed to spend more than $10 billion per annum to build out the Metaverse, requiring vast amounts of data centre space.

Google's DeepMind division said earlier this year that they were on the verge of achieving human-level AI (Artificial General Intelligence) through their Gato AI tool. AI tools deal with billions of parameters: the more computing power available, the more accurate they become.

Scale and speed-to-market are critical for these tech giants, which has created a huge leasing opportunity for the data centre industry where the key ingredients of land, power supply and fibre connectivity are increasingly tightly held resources.

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