Brookfield Infrastructure Partners (TSX: BIP.UN) is a standout 5%-yielder that many Canadian investors may be overlooking. Undoubtedly, shares have been pretty much flat in the past five years, but as the artificial intelligence (AI) data centre buildout moves ahead at full steam, I do think that Brookfield Infrastructure might just have the right catalysts in place to sustain a leg higher. Indeed, in the second quarter, the firm already posted some impressive results, especially when it comes to data segment funds from operations (FFO) growth.
Of course, it’s tough to tell where that figure goes from here. Some investors betting on an inflection point might find it to be worth the while to give BIP.UN a closer look, especially as most other investors start pausing on the AI trade.
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AI is taking a breather: Should investors buy the dip?
Indeed, the great AI data centre buildout is not coming cheaply. And backlash facing some projects might just slow progress in an unexpected way. Either way, though, I do think that AI demand could continue to heat up into 2027 and beyond despite recent volatility within the AI scene.
As we get a better gauge of the ROIs to be had (perhaps a “killer app” or breakthrough could be enough to help AI infrastructure plays move ahead at full speed), perhaps a name like Brookfield Infrastructure could be in for a bit of multiples expansion, especially after a couple of volatile years. For now, AI demand is robust, and it’s probably going to stay that way as the hyperscalers look to keep increasing their CapEx into the new year.
With new strategic partnerships in place and early signs already starting to pay dividends, questions linger as to whether Brookfield Infrastructure will have such a hefty yield in a few years’ time as more investors come to appreciate the firm for its seat at the AI buildout.
Data centres might not stay out of favour for the long haul
Any way you look at it, AI infrastructure is not a cheap business to be in these days. And as rates south of the border go on the rise (rates might have room to climb in Canada as well), there’s every reason to be cautious when it comes to heavy investment in an infrastructure buildout that’s going to continue costing serious dough. In my view, Brookfield has done a fantastic job of making use of debt that isn’t going to render the firm vulnerable, even as rates head markedly higher in a hurry.
Sure, data centres aren’t exactly the hottest part of the market these days. As the semi stocks fold and neocloud plays in the U.S. lead the charge lower, I do think that Canadian investors might have a chance to snag shares of BIP.UN at a reasonable price with one of the better yields in the space.
At the time of this writing, shares are down close to 15% from their highs, a move that I think might already be overdone, especially if an AI bubble scenario doesn’t pan out and dip-buyers look to capture some of the better deals on the way down before the trade’s next big move. While it’s hard to pick winners in AI infrastructure, I do think that BIP.UN is a standout play for the fast-growing data segment and other businesses tied to the multi-year AI boom (think energy transmission and utilities), whether you’re in it for the income, the growth, or both.
