By Muskan Arora
Investors and
consultants will ramp up their allocations to data centers through real assets and
infrastructure portfolios, to support the growth of AI.
Steven Meier, who handles the $278 billion New York City retirement systems which includes five separate funds, seeks to make investments in software,
chip development, data centers and sustainable energy infrastructure.
Keeping in mind
AI’s impact on energy and environment, Meier says there are significant
opportunities in debt strategies that support the development of that critical
infrastructure.
The global
infrastructure market size is expected to grow around 27.5% from 2024 to 2033,
as per a recent precedence research.
In many ways,
investments happening in private equity incorporate AI, which allows Meier to invest particularly
through buyout and growth strategies. He anticipates venture capital to be an
area of opportunity in the coming years.
“Software is
something that can typically have a significant amount of positive leverage,
because the technology once it's developed, is easier to deploy with margins that are pretty significant,” said Meier.
The system isn’t
particularly targeting managers in AI but has active investments in both public
and private equity holdings in chip and software companies both in U.S. and
emerging markets.
However, while
choosing external managers, Meier is focused on understanding how AI is
impacting investment opportunities around its development and deployment.
Larry Fink, CEO and Chairman of BlackRock also highlighted huge growth opportunities in AI infrastructure and collaborating with technologists to build data centers in the US.
Fink, sharing the same sentiment as Greg Jense, co-CIO of Bridgewater, spoke about AI boosting productivity, The increase in productivity leads to lower costs of production for businesses, which aids in price reduction and cheaper goods and services, which, in turn, helps to reduce inflation.
Talking about Nvidia and the production of microchips,
Tim McCusker, CIO of NEPC spoke about AI being one of the
most scalable platforms as compared to the previous technological shifts seen.
“With the new activities and efficiency benefits that
would be created by AI, in the current times, more than 80% of the growth is
focused in China, Europe and North America,” said McCusker.
“China is doing a
tremendous amount of research and pouring a tremendous amount of money into
artificial intelligence,” added the CIO.
By some estimates, Asia Pacific region will witness
the fastest growth in AI in the next decade, with North America’s
infrastructure market sizing up exponentially by 2033.
Not just McCusker,
Christopher Ailman, CIO of CalSTRS also talks about the high demands of
electricity and water by AI operations, with implications on sustainability.
“If you look at the amount of chips made by Nvidia
last year, they draw the power of the entire city of San Francisco,” said
Ailman, in a board meeting.
“In some parts of this country, you're tripling the
electricity demand at a time where we need to change how we generate
electricity. Water is further used as a cooling agent for these AI centers,” he
added.
To reduce the adverse impact of developing data centers, Meier said he is focused on adopting investments in clean energy while investing in data centers.
Using AI for decision making
While speaking to
external managers, Meier is also studying how it can be used in his own investment system.
“We are also developing use-case in terms of how we can deploy artificial intelligence within our offices to be more efficient. We currently use it to support writing analyses and research and data analysis to improve our performance in terms of our quantitative system development. It's a wonderful tool in terms of its pilot capabilities helping with programming,” said Meier.
Jeremy Wolfson, the
CIO of LA Water and Power is also in early stages of beta testing AI technology
to develop cases to not only streamline its internal investment process but
also identify the best investment ideas with limited resources.
“We believe AI will result in better idea generation,
portfolio construction, risk management, and ultimately increased alpha
generation,” said Wolfson.
With the support of AI, Wolfson aims to enhance risk
management, identifying market trends and developing new insights, speedy due
diligence to increase the deal flow and automating manual processes to focus on
higher-value work.
Mark Steed,
CIO of $21 billion Arizona Public Safety
Personnel Retirement System, has been studying AI for over a decade and
highlighted “using supervised and unsupervised models” to make improved
investment decisions.
“The hard thing about data is if
you're investing in funds or even direct positions, and you're extracting all
of the unstructured data and trying to make it structured so you can use it but
you're also creating your own variables along the process,” said Steed, who
currently has two data scientists on his investment team.
“That as
you're building algorithms to help you help support decisions, that they're as
pure as they can be. I think for us, we'll continue to systematize a lot of our
investment logic,” he added.
