The Four D's Driving the Next Infrastructure Investment Boom

**Sam** (0:00)
Joining me now to discuss the investments in infrastructure is Harlan Cherniak, who's the head of infrastructure debt and co-head of private credit at the Americas of Macquarie Asset Management. Harlan, thank you so much for your time.

**Harlan Cherniak** (0:11)
Thanks, Sam. Thanks for having me here today.

**Sam** (0:12)
Absolute pleasure. And I've got to start with the news of the day. I don't know you ever have a perspective on this, just as far as an asset class is concerned. I mean, Jensen Huang and this big announcement, NVIDIA tapping obviously the best in the business here on Wall Street as far as new check writers for this whole AI infrastructure build up. I mean, he's now talking about chips becoming an investible asset class. I mean, you've been doing this for a long time. I mean, have you got perspective on all of this right now?

**Harlan Cherniak** (0:40)
As you might imagine, it's quite bullish for the space.

**Sam** (0:43)
Sure.

**Harlan Cherniak** (0:43)
AI is still in its relative infancy stages and phases. It's not just since the launch of FAT GPT in November 2022
It's been this evolution in the development of data centers around cloud compute, AI, large learning language models, and just the sheer magnitude of the capex that's required to build these data centers and to have them from a durable long duration cash flow perspective. They're now being set up as project financings, which is a really great segue into how we approach everything from the Macquarie Asset Management perspective.

**Sam** (1:20)
Let's talk about that because you say infrastructure is an important asset class, but where are the biggest opportunities right now?

**Harlan Cherniak** (1:27)
So for us, we effectively invented infrastructure as an asset class about 31 years ago, having deployed over $250 billion across 200 plus or minus portfolio companies. And on the infrastructure credit side, we've deployed almost 25 billion over the last 20 years. We're really focused today on the four Ds, decarbonization, digitalization, deglobalization, and the aging demographics of our population. And if you think about it, everything from airlines to utilities, infrastructure is financing the essential assets and the essential services that are the foundation or the backbone of our economy. Everything from the time that you wake up at 5 a.m. to 8 a.m. when you walk in the door, the water that you drink, the electricity charging your phone, the networking, transmitting your news flow, the apps that you use to order your morning coffee on the way in the door, swipe through the security turnstile, and you plug in to the morning call to download all of your information. That is infrastructure at work. Where we're most focused today is around power.
We really like that bottleneck from a supply chain, long lead time in logistics perspective, and it goes way back before even this hype around the development of AI and data centers.
Obama and Clinton administration started the catalyst around the closure of coal-fired power plants, nuclear-fired power plants, and that's led to a shortage of power. Historically, electricity grew at like 40 basis points, a smidge or a percentage of GDP growth. Today, it's growing at over four and a half percent, and the capital needed to reinvent the entire grid, our transmission network, utilities, and all of the combined cycle gas turbine technology behind it, could be upwards of tens of trillions of dollars, from traditional generation to energy transition.

**Sam** (3:19)
Right.

**Harlan Cherniak** (3:20)
And that's where we're really focused. This is an industry, at least on the infrastructure credit side, that's effectively where direct lending or private credit was 17 years ago, coming out of the ashes of the great financial crisis.

**Sam** (3:31)
Sure. And how has AI reshaped all of that? Because when you talk about power, I mean, you think of a company, an industrial one like Caterpillar, for instance, which has been rallying off the back of the fact that it's now being seen as this sort of AI adjacent type of play to power all the needs for the data centers. I mean, how has AI reshaped the way we think about investing in infrastructure?

**Harlan Cherniak** (3:58)
I think the reality is it's still early days in terms of the development or the evolution of that, but it's changing everything from productivity and processes for industrial leaders like Caterpillar to investment and alternative investment management platforms like ourselves. The way we consume data, the way that we analyze data, and the way that we've reshaped our entire workflow, our investment process and framework, and our daily lives.
I know many of us at Macquarie were sent back to Northwestern University to take a course on agentic AI and generative AI to learn how we can empower our team, how we can refine and reshape our tools that we use on a day-to-day basis, to make us smarter, to make us more efficient, to make us more productive, and to make us more innovative. The key to a great alternative asset manager, and for us, we're asset generators and alpha leaders.