The AI buildout continues to be a core secular theme in markets, which have shown significant resilience, particularly when considering energy consumption needs. Over the past month or so, we have seen natural gas names outperform the overall market, driven by this ongoing trend. For context, global power usage is expected to increase by nearly 300% over the next decade. This is a major infrastructure play that is still in its early innings.
Data centers are still primarily built out around what is known as “Data Center Alley,” located in Loudoun County, Northern Virginia. This concentration is largely due to the region’s proximity to Washington, D.C., where numerous major tech firms have established a foothold, alongside critical government agencies. Additionally, the area benefits from robust infrastructure, including extensive fiber optic networks, and favorable tax incentives that attract investment.
In the last three years alone, data center construction spending has nearly surpassed that of office buildings. My base case is that it will exceed office building construction in 2026, and if AI achieves even one-tenth of its potential, general office construction will remain quite low until the next “fundamental” shift in our global economy.
