How AI, tariffs, and the energy transition are reshaping infrastructure investing

AI, the energy transition, and geopolitical tensions are reshaping the global economy and markets. They're also transforming the landscape of infrastructure investing. I'm Alison Nathan, and this is Goldman Sachs Exchanges. For today's episode, I'm joined by Tavis Kanell, the global head of infrastructure within Goldman Sachs alternatives, which is part of our asset and wealth management business. We'll be exploring the megatrends driving opportunities and the outlook for the sector. Tavis, welcome to exchanges. Thanks,

Allison. Look forward to our discussion today.

So, Tavis, we're obviously in a very volatile market environment, and investors are starting to look closely at their asset allocations. So let me start by asking you, what role can infrastructure play in portfolios? Look.

It's a great question. And, you know, in all of our client conversations today, obviously, everyone's reading the newspaper and trying to digest, you know, some of the changes that are happening. I think what's interesting about infrastructure is that, in particular, when you look at institutional investors, they've really progressively increased their allocations to the asset class, over the last ten, plus years. And so today, to give context, you know, most large institutional investors have around 7% of their total assets invested into infrastructure. And, you know, there's they they've don

many follow ups to that. But before we get into some of the details on that, let's just first define what we're talking about in terms of infrastructure. I'm thinking roads and bridges, but, obviously, the space has evolved since then. So what do we mean by infrastructure today, and how has that evolved over the last decade or so? Yeah.

So it's not a it's not your mom or dad's infrastructure anymore. I think the asset class has really, has really expanded, over the last, you know, ten plus years. And that real really reflects a couple of things. You know, first and foremost, it reflects, how the needs of society have evolved and changed, over the last, you know, ten, fifteen years. So, you know, the two biggest segments in infrastructure today are energy, energy transition, and digital infrastructure. And if you were to go back, you know, fifteen years, those aren't really talked about much. Infrastructure fifteen years ago w

Let's dive into some of those. You know, when we think about, some of the categories you just mentioned, data centers, You know, it's a very buzzy word given how much demand for AI is skyrocketing, and that has increased demand for energy and data centers. Talk to us about, you know, how investors are putting money to work in that space. Sure.

So, you know, I think, data centers, and and, you know, the overall ecosystem, has gone through a number of different, you know, eras, I guess, to use a, you know, a Taylor Swift, analogy. And, you know, the the space we're in now is that there's still huge ongoing investment in build out of the cloud, and that's been ongoing for, you know, for, you know, five, six, seven years, but it's it's by no means done. And then what has gotten a lot of focus and attention is is is obviously AI and specifically, building out the AI training models. And the requirements are different between what is need

wanna dig into some of those points a bit more. But before I do, just for those of us who are not as familiar with infrastructure investing, talk to us a little bit about how the returns are actually made. Do you have to sell an asset as you just mentioned?