Investors should get bullish on infrastructure in 2025 amid a coming ‘industrial renaissance,’ Apollo says

A solar panel manufacturing factory in Dalton, Georgia.

Investors will want to pay attention to infrastructure next year amid an upgrade spree and booming demand from AI that’s set to boost the sector, Apollo’s chief economist said.

Apollo’s Torsten Sløk said in a note to clients that a handful of specific factors are setting the stage for an infrastructure boom in 2025.

“Private infrastructure has shown resilience in times of market stress and provided downside protection with low correlation to other major asset classes. There are powerful macroeconomic tailwinds bolstering infrastructure today,” he said in a Saturday note.

Sløk pointed first to a global need to update aging infrastructure. The average age of government fixed assets like highways, streets, and power facilities has increased to nearly 30 years old, leaving an $88 trillion gap in funding by 2040, he says.

At the same time, growing regulatory support has boosted both US manufacturing capacity and spending on machinery, equipment, and business construction in recent years, even as manufacturing employment makes up a smaller share of total employment, he said.

Sløk emphasized the Infrastructure Investment and Jobs Act of 2021, or Bipartisan Infrastructure Law, which authorized $1.2 trillion for transportation and infrastructure spending, with $550 billion of that figure going toward new investments and programs.

That “unprecedented” policy support will continue to force spending on infrastructure, Sløk says, making for a coming “industrial renaissance.”

Analysts have recently sounded the alarm on the US’s aging infrastructure.

Investment manager Richard Bernstein has warned that inflation could keep rising if the US continues to have a steep trade imbalance skewed toward imports in the absence of any reindustrialization. Morgan Stanley has said the US economy could reap as much as $10 trillion over the next decade if it can scale domestic production.

Finally, Sløk points to surging demand for artificial intelligence, which has boosted power needs and will bolster demand for digital infrastructure like data centers.

Data centers require large amounts of space and power to operate, and their electricity demand is already primed to exceed supply in the coming years.

To meet demand, the US needs to more than double its power grid capacity by 2030 — adding triple the power needs currently required by New York City, Sløk said.