KEY POINTS

• The rapid expansion of AI usage has attracted significant investment, which has raised concerns that we are in an AI-driven bubble.
• Disciplined risk management when investing in the AI buildout remains critically important.
• The fact remains: AI adoption and its needed buildout is already underway and requires substantial digital and energy infrastructure to support it—creating a significant investment opportunity.

Has Demand for AI Created a Bubble?

The explosive growth of AI requires enormous digital infrastructure and compute capacity, which has driven strong demand for power and supporting infrastructure. But now some investors are concerned that growth in AI is overblown, and has created a bubble.

We believe the answer is no—but keeping sound risk-mitigation procedures in place when investing is nonetheless key.

Equity markets have been fueled by AI developments. Beginning with the release of ChatGPT, investor
sentiment around AI soared, eventually driving a surge in valuations as markets rushed to price in its disruptive potential.

Despite having some concerns about excessive hype, we see little risk of overbuilding the related AI infrastructure. Below, we outline three key reasons for including AI infrastructure investments in a portfolio over the long term.

1. Demand for infrastructure remains strong—and is likely to accelerate. The advent of AI has already sparked growth in infrastructure assets, with demand for data centers, fiber networks and electric utility grids far exceeding initial expectations. As AI capabilities become more commercial, the need for high-performance infrastructure is likely to further accelerate.

Artificial general intelligence could unlock as much as $10 trillion in productivity gains over the next decade—but realizing that potential will require $7 trillion of infrastructure investment.⁵ This includes data centers, or “AI factories”; dedicated power generation; compute infrastructure such as GPUs; semiconductor manufacturing; and fiber networks. 

More efficient models are being used in greater numbers to tackle more complex tasks, consuming more compute overall. Ongoing research and development (R&D) will itself require more AI compute for training and experimentation. To meet the demand, both private companies and governments are investing billions in the race to develop the next generation of AI. Global hyperscaler capital expenditure (capex) is projected to rise 2.5x in the next five years (see below).

Building a hyperscale data center requires over $10 million per megawatt, while the compute infrastructure within it can exceed $30 million per megawatt, driven by chip requirements.

In short, future power needs still point to demand far outpacing current and planned infrastructure capacity, even if estimates of those needs are meaningfully reduced.

2. Infrastructure’s resilience and ability to weather volatility. Historically, infrastructure investments have tended to weather market cycles, despite geopolitical or economic uncertainty. The sector’s resilience stems from its core characteristics: perpetual, long-lived assets with high barriers to entry; contracted or regulated revenue streams that are typically indexed to inflation; and stable, predictable cash yields with low correlation to public markets. Many assets related to the AI buildout—from regulated utilities to contracted digital networks—benefit from inflation-indexed revenue streams that are designed with the goal of preserving real returns for investors.
Furthermore, the current environment—stabilizing interest rates, a resilient global economy with the potential for higher inflation—helps to reinforce the case for investing in high-quality, long-duration assets that can generate relatively steady cash flows, offer attractive risk-adjusted returns and may help provide inflation protection.

3. The need for private capital is likely to continue. The building of infrastructure—especially digital infrastructure—is capital intensive by nature, and obtaining the needed levels of capital expenditures requires experienced partners. We are in a capex supercycle where “hyperscalers”—large cloud computing providers at the forefront of the AI revolution—are pouring unprecedented amounts of money into graphics processing units (GPUs), data centers, power infrastructure and model development. At the same time, governments are highly motivated to develop AI technology, as it has become a strategic sovereign priority driven by commerce and national security concerns. 

But with many governments facing record debt levels and large tech firms seeking to team up with well-capitalized partners, we believe that there may be significant opportunities for innovative capital partnerships to meet capital needs and deliver essential infrastructure. The largest capital providers, with relevant experience and a long-standing local presence, may be well positioned to capture a meaningful share of the opportunity.

Positioning for Long-Term Investment and Reduced Risk

Investing in AI-related infrastructure presents significant opportunities, but it is not without risks or challenges. Experienced infrastructure investors begin by understanding where the potential bottlenecks lie, as well as where the next technological leaps will come from, which is essential to designing and investing in the physical backbone of AI for the long term. 

Brookfield has invested in infrastructure assets for more than 100 years and employs several core investment principles, aiming to protect and preserve capital while providing income and attractive returns for clients. Resilience has always been at the core of Brookfield’s approach. As it relates to infrastructure, we are especially mindful of technological obsolescence. For example, AI hubs need modular designs so that power and cooling systems can be upgraded quickly as new chips roll out, and facilities can be designed with space and piping for future immersion cooling. 

Brookfield invests in diversified projects across the AI value chain that are backed by contracts with high-quality counterparties, and avoids building on a speculative basis. Resilience has always been at the core of our approach. Patient, disciplined capital—deployed into the infrastructure assets that power progress—creates the opportunity to build enduring value for investors and partners. 

The Bottom Line

Despite concerns about an AI-related bubble, the AI buildout is already underway and needs digital and energy infrastructure to support it. The modernization of the grid, in turn, cannot proceed without private capital. This convergence is creating what we believe is a once-in-a-generation opportunity for disciplined, long-term investors to fund the physical backbone of the global economy’s next phase.

Read more in our Alts Quarterly Q1 2026.

ENDNOTES 

⁵ Brookfield internal research, as of August 2025.

A WORD ABOUT RISK

As an asset class, private credit comprises a large variety of different debt instruments. While each has its own risk and return profile, private credit assets generally have increased risk of default, due o their typical opportunistic focus on companies with limited funding options, in comparison with their public equivalents. Because private credit usually involves lending to below-investment-grade credit assets is increased in return for taking on increased risk.

Investments in real estate-related instruments may be affected by economic, legal or environmental factors that affect property values, rents or occupancies of real estate.

Infrastructure companies may be subject to a variety of factors that may adversely affect their business, including high interest costs, high leverage, regulation costs, economic slowdown, surplus capacity, increased competition, lack of fuel availability and energy conservation policies.

Alternative investments often are speculative and include a high degree of risk. Investors could lose all or a substantial amount of their investment. High-yield bonds are subject to interest-rate risk. When interest rates rise, bond prices fall; generally, the longer a bond’s maturity, the more sensitive it is to this risk. Yields are subject to change with economic conditions. Yield is only one factor that should be considered when making an investment decision.

The information in this publication is not and is not intended as investment advice, an indication of trading intent or holdings, or a prediction of investment performance.

Diversification does not guarantee a profit or protect against loss. The views and information expressed herein are subject to change at any time. Brookfield disclaims any responsibility to update such views and/or information. This information is deemed to be from reliable sources; however, Brookfield does not warrant its completeness or accuracy.

The opinions expressed herein are the current opinions of Brookfield, including its subsidiaries and affiliates, and are subject to change without notice. Brookfield, including its subsidiaries and affiliates, assumes no responsibility to update such information or to notify clients of any changes. Any outlooks, forecasts or portfolio weightings presented herein are as of the date appearing on this material only and are also subject to change without notice.

Past performance is not indicative of future performance, and the value of investments and the income derived from those investments can fluctuate.

FORWARD-LOOKING STATEMENTS

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INDEX PROVIDER DISCLAIMER

The quoted indexes within this publication are unmanaged and cannot be purchased directly by investors. Index performance is shown for illustrative purposes only and does not predict or depict the performance of any investment. There may be material factors relevant to any such comparison, such as differences in volatility and also regulatory and legal restrictions between the indexes shown and any investment in a Brookfield strategy, composite or fund. Brookfield obtained all index data from third-party index sponsors and believes the data to be accurate; however, Brookfield makes no representation regarding its accuracy.

Brookfield does not own or participate in the construction or day-to-day management of the indexes referenced in this document. The index information provided is for your information only and does not imply or predict that a Brookfield product will achieve similar results. This information is subject to change without notice. The indexes referenced in this document do not reflect any fees, expenses, sales charges or taxes. It is not possible to invest directly in an index. The index sponsors permit use of their indexes and related data on an “as is” basis, make no warranties regarding the same, do not guarantee the suitability, quality, accuracy, timeliness and/or completeness of their index or any data included in, related to or derived therefrom, and assume no liability in connection with the use of the foregoing.

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KEY TERMS AND INDEX DEFINITIONS

Bloomberg Global Aggregate Index is a market-capitalization-weighted index comprising globally traded investment-grade bonds. The index includes government securities, mortgage-backed securities, asset-backed securities and corporate securities to simulate the universe of bonds in the market. The maturities of the bonds in the index are more than one year.

Bloomberg U.S. Corporate High Yield Bond Index measures the USD-denominated, high-yield, fixed-rate corporate bond market. Securities are classified as high yield if the middle rating of Moody’s, Fitch and S&P is Ba1/BB+/BB+ or below.

Cliffwater Direct Lending Index (CDLI) seeks to measure the unlevered, gross-of-fee performance of U.S. middle-market corporate loans, as represented by the asset-weighted performance of the underlying assets of business development companies (BDCs), including both exchange-traded and unlisted BDCs, subject to certain eligibility requirements.

FTSE EPRA Nareit Developed Real Estate Index is an unmanaged market-capitalization- weighted total-return index that consists of publicly traded equity REITs and listed property companies from developed markets.

FTSE Global Core Infrastructure 50/50 Index gives participants an industry-defined interpretation of infrastructure and adjusts the exposure to certain infrastructure subsectors.The constituent weights are adjusted as part of the semi-annual review according to three broad industry sectors: 50% Utilities; 30% Transportation, including capping of 7.5% for railroads/railways; and a 20% mix of other sectors including pipelines, satellites and telecommunication towers. Company weights within each group are adjusted in proportion to their investable market capitalization.

Green Street Commercial Property Price Index (CPPI) is a time series index published by Green Street, which tracks the value of U.S. commercial real estate properties. The index is based on transaction prices and appraisals of institutional-quality properties across major sectors, including office, industrial, retail and multifamily. It is widely used as a benchmark for changes in commercial property values over time.

ICE BofA Single-B U.S. High Yield Index tracks the performance of USD-denominated below-investment-grade corporate debt publicly issued in the U.S. domestic market, including all securities with a given investment-grade rating of B.

ICE BofA U.S. Convertibles Index tracks the performance of convertible bonds in the U.S.

ICE BofA U.S. High Yield Constrained Index measures the performance of USD-denominated, non-investment-grade, fixed-rate, taxable corporate bonds.

J.P. Morgan CLO A Index is a subset of the J.P. Morgan CLO index that only tracks the A-rated CLOs.

J.P. Morgan CLO BB Index is a subset of the J.P. Morgan CLO index that only tracks the BB-rated CLOs.

J.P. Morgan CLO BBB Index is a subset of the J.P. Morgan CLO index that only tracks the BBB-rated CLOs.

MSCI ACWI ex USA captures large- and mid-cap representation across developed markets (DM) countries (excluding the U.S.) and emerging markets (EM) countries. The index covers approximately 85% of the global equity opportunity outside the U.S.

MSCI Emerging Markets Index is used to measure the financial performance of companies in fast-growing economies around the world. The index tracks mid-cap and large-cap stocks in 25 countries.

MSCI World Index is a free-float-adjusted market-capitalization-weighted index that is designed to measure the equity market performance of developed markets.

Preqin Infrastructure Index captures in an index the return earned by investors on average in their private infrastructure portfolios, based on the actual amount of money invested in private capital partnerships. Each data point is individually calculated from the pool of closed-end funds for which comprehensive performance data is held, as of both the start and end of the quarter.

Preqin Private Equity Index captures in an index the return earned by investors on average in their private equity portfolios, based on the actual amount of money invested in private capital partnerships. Each data point is individually calculated from the pool of closed-end funds for which comprehensive performance data is held, as of both the start and end of the quarter.

Preqin Real Estate Index captures in an index the return earned by investors on average in their private real estate portfolios, based on the actual amount of money invested in private capital partnerships. Each data point is individually calculated from the pool of closed-end funds for which comprehensive performance data is held, as of both the start and end of the quarter.

S&P 500 Index is a market-cap-weighted equity index of 500 widely held, large-capitalization U.S. companies.

S&P UBS Leveraged Loan Index measures the market-value-weighted performance of the investable universe of USD-denominated leveraged loans.

VERUS 2025-08 represents Verus Securitization Trust 2025-08’s issuance of an RMBS transaction backed by primarily newly originated first- and second-lien, fixed- and adjustable-rate residential mortgage loans, including mortgage loans with initial interest-only periods, to prime and nonprime borrowers.

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