Investing in the real assets powering the digital world
In barely three years, artificial intelligence (AI) has woven itself deep into everyday life. Businesses, consumers and governments are scrambling to adopt it, leaving machines to handle everything from routine office tasks and customer service to travel and retirement planning.
Yet it is easy to forget that these cloud-based algorithms cannot function without vast amounts of physical infrastructure. Grids and networks that supply power and water, data centres that process bits and bytes of information, including streamed video and financial transactions, mines and quarries that extract copper, iron and uranium, and pipelines that deliver a steady flow of gas – all form the backbone of the modern digital economy.
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AI is adding 2 to 3% to annual electricity demand growth. This growth is equivalent to the annual output of 20 new large Combined Cycle Gas Turbine (CCGT) generation facilities.
Source: IEA (International Energy Agency), May 2026
Listed companies owning or operating these essential physical assets plays three core roles in a portfolio: providing stable income, diversification and inflation protection alongside long-term capital growth. According to Pictet Asset Management’s research, these companies generate stable, long-term cash flows, underpinning reliable and growing dividends across market cycles, offering a degree of hedge against economic volatility.
Airports with growing passenger volumes and regulated cash flows. Utilities with inflation‑linked tariffs. Warehouses, toll roads and pipelines secured by long-term contracts. They all share a common feature: these assets are durable and difficult to replicate.
Owners of irreplaceable assets often benefit from structural barriers to entry, including local monopolies or regulated market positions. Just as it is impossible to build another international airport next to Heathrow, Changi or Zurich, existing mines and quarries face little threat of competition, thanks to geology, permitting constraints and high transport costs.
Crucially, these heavy assets endure. Some of the world’s biggest mines have been operating since the 19th century with production secured well into the 2050s. Power grids, railways and nuclear power stations are built to last for decades, easily outliving market cycles, and their values tend to appreciate over time.
These characteristics allow asset-heavy companies to raise prices faster than costs, helping revenues keep pace with, or outstrip, inflation. Strong cash generation allows management teams to pay stable dividends in both economic upswings and downturns, preserving real income over time – a key consideration for income‑focused investors.
This is reinforced by what’s known as the HALO (Heavy Assets, Low Obsolescence) assets, where companies with substantial physical capital enjoy earnings resilience throughout business cycles. In contrast, many asset-light business models may be in vogue, commanding high valuation premium in today’s equity markets, only to be upended by AI disruption tomorrow.
The case for real asset businesses is supported by powerful secular trends. Electrification, the expansion of AI and data centres, and the push for reindustrialisation and reshoring all require sustained investment in physical infrastructure. For every breakthrough in large language models or AI automation, the economy’s dependence on electricity, transport, water and critical inputs only intensifies.
For investors, this creates an opportunity, within a diversified portfolio, to access a steady stream of income underpinned by assets essential to everyday life and economic growth — assets that cannot be automated away, digitised or easily replaced.
AI: an energy race
Investors may think of AI as a race for chips and computing power. From Microsoft and Meta to Amazon and Google, hyperscalers are deploying ever more powerful processors. But there is little point in doing so if the electricity, water and energy networks needed to run them are not in place.
The expansion of AI and data centres, as well as electrification of building, transport and industrial processes, are boosting demand for electricity. In the US alone, annual electricity demand is expected to rise nearly 75 per cent in the next 25 years (see Fig. 1).
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In the US, annual electricity demand is expected to rise 75% in the next 25 years.
Source: Thundersaid Energy, May 2026
Soure: Thundersaid Energy, May 2026
Owners and operators of essential, capital-intensive assets that support the underlying systems for the digitalised economy are likely to benefit from rising demand, reliable cash flows and stronger earnings growth. What’s more, real assets offer real dividends – dividends that rise with inflation.
Take Southern Co, the second largest US utility serving 9 million customers from more than 100 power generation and transmission assets across Georgia and the Southeast.
Southern enjoys some of the highest levels of sales growth in the US utility industry today, thanks to a growing population, rising demand from industrial customers, and an influx of power-hungry data centres from the likes of Google, Meta and Microsoft. The company raised its outlook for annual sales growth to 2030 to 10%, compared with its planning estimate of 1% in 2021.
As a regulated utility, it benefits from building new generation and transmission to fulfil this AI demand, and then setting tariffs to deliver a return on that capital expenditure. Georgia’s favourable regulation also means that historically those returns have been above average for US utilities.
Southern has paid a consistent dividend since 1948, and has increased it for 25 consecutive years, most recently in April 2026.
In contrast to a regulated utility, Constellation Energy, the largest nuclear generator in the US, sells its electricity into the grid at market prices. Data centres have changed that business model as they seek direct supply and pay a premium for it. Constellation Energy has recently signed 20-year deals with Meta and Microsoft, improving both earnings growth and the visibility of that growth.
Re-industrialisation & reshoring
For much of the past three decades, major economies have shifted manufacturing overseas, taking advantage of globalisation and cheap labour in markets such as China.
But that model is being reassessed, following a series of supply chain shocks in recent years, including the pandemic, trade tensions and multiple wars.
As major economies reindustrialise and bring industrial production back within their borders, they are embarking on capital‑intensive projects that require investment in the physical infrastructure that supports modern production and supply chains. For example, Taiwan’s TSMC is investing USD65 billion to build the first three of its planned six new semiconductor fabrication plants in Arizona as part of the US reshoring drive.
Quarries and specialised facilities to produce raw materials, airports, toll roads and other transport links to move goods and logistics warehouses to store them also underpin the process of reindustrialisation.
Quarry operators such as Heidelberg and Vulcan are local monopolies which produce aggregates – crushed stone, sand and gravel used in construction – and building materials. Their strong market positions allow them to increase prices by mid-single digit every year, whatever the cyclical outlook. It also allows regular dividend increases ahead of inflation. Vulcan raised dividend growth by 6% and Heidelberg by 9%.
Salik, the exclusive operator of toll gates on Dubai’s road network, benefits from a 49-year concession which underpins its pricing power. Supported by population growth and Dubai’s growing role as a global logistics hub, the company has delivered strong growth, and in March raised dividend by more than 33%. Other transport infrastructure providers such as Spain’s Ferrovial are also backed by extensive road, rail and airport networks and long-term concessions.
Since 2000, real-asset companies in this universe have raised their total dividend per share by almost 7% on a compound basis (see Fig. 2).
Source: Bloomberg, Pictet Asset Management. Data as of 31.12.2025
Real assets, real income
For Asian investors, particularly in Hong Kong, the appeal of tangible assets comes down to inflation protection and resilience.
Companies that operate essential, durable infrastructure typically demonstrate strong pricing power. Their revenues are often regulated or contractually linked to inflation, allowing earnings to rise as prices increase. Demand for these services is also highly defensive: paying an electricity bill is not a discretionary purchase even when your budget is tight.
Gold miners offer a different angle. The gold market has historically acted as the go-to inflation hedge for investors due the metal’s scarcity, finite supply and intrinsic value. Equity investors can gain exposure through the miners. Zijin Gold offers one of this highest production growth rates in the sector, backed by long-life, low production cost mines in South America, Africa and Central Asia, as well as domestic production in China.
All of this translates into returns and dividend income with a degree of inflation protection that is difficult to replicate in bonds or in other areas of the equity markets.
The more digital the economy becomes, the more it depends on physical foundations. This offers investors a durable source of real income and the potential for capital appreciation.
Key takeaways
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Tangible assets can provide stable income and diversification in contrast to tech-heavy portfolios
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AI and digitalisation are increasing demand for essential services such as electricity, data centres and infrastructure
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Many infrastructure revenues are linked to inflation, helping protect purchasing power