Digital infrastructure: The roads of the future

The digital transition and the increasingly networked world we live in have become generally accepted megatrends, as digitalisation is essentially penetrating into all aspects of life and constantly expanding into new fields of application. In a word, we are experiencing the age of digitalisation. Among other things, the main fields of digital infrastructure include:

• Online retail and e-commerce,

• Industry 4.0 (meaning the networking of machines and production equipment and the automation of such),

• Telemedicine and e-health,

• Smart cities (the networking of cities and the management of waste, energy, and transport systems),

• Smart homes (the networking of household appliances and the management of heating, lighting, and security systems via the Internet),

• E-Learning, and

• Autonomous driving.

Digitalising our lives requires a comprehensive digital infrastructure. This includes all of the technical components necessary for the transmission, storage, and processing of data, such as mobile telephony networks, fibre optic networks, Internet nodes, servers, routers, data centres, and much, much more. However, the construction of digital infrastructure is often lagging behind the fast growth in demand. In many areas, digital applications and solutions are already available, but cannot be deployed because the existing data networks and transmission capacities are inadequate. Without these bottlenecks, a lot more new developments could be made available to a broader audience.

Companies with core roles in digital infrastructure

Lifeblood of the tech sector

As a consequence of the above, digital infrastructure is developing very dynamically, both in terms of its scope and technological level. Certain companies play vital roles in this process. One of them is Intel, which many people mainly know as a manufacturer of micro-chips for personal computers and laptops. Above and beyond this part of its work, however, Intel also offers other processors and hardware that form the basis for high performance digital infrastructure. With its constantly evolving micro-chips, the company supports the steady increase in computing power, which in turn improves data processing speed, paving the way for the development and/or use of new applications and technologies. Another company at the heart of this field is Cisco Systems, which is predominantly known for its network routers and data network servers, i.e. for the components that form the backbone of the Internet.

Challenge: Building renovation

The construction industry plays a key role on the road to a “green future”, as buildings are responsible for almost 40% of annual global CO2 emissions. In light of this, it is hardly surprising that boosting the energy efficiency of existing buildings and transitioning away from fossil fuels to renewables for heating and air conditioning is one of the top priorities. The products and services of companies like the French firm Saint-Gobain make these changes possible. On the one hand, we are invested in this area in order to support a sustainable future, and on the other to generate profits.

Security of supply: An increasingly important topic in energy

The security of the energy supply is an issue that has become extremely important, especially in recent years and as a result of the war in Ukraine. There are significant risks associated with the mounting demand for energy, the higher energy prices, and the limitations on the production and availability of fossil fuels. More and more people are opting to use alternative sources, such as solar power. Sunnova Energy is a supplier of solar panels that allow for the roof-top generation of electricity, as well as solutions for storage systems. Consequently, we believe that this company will benefit from this trend and are thus invested.

Additional opportunities, but higher risks

Clearly, digital infrastructure is an area that can expect to see strong growth over the long term. This field is more dynamic than the field of traditional infrastructure, which results in additional opportunities, but of course along with additional risks. While a power plant operator or a road construction company may not have to worry about too much competition once it is established on the market, the situation is very, very different for companies active in areas such as micro-chips, renewable energy, mobile telephony, and the like. Consequently, a continuous, careful selection of companies and countries is even more important, along with close market monitoring by active fund management.

The funds Raiffeisen-MegaTrends-ESG-Aktien and Raiffeisen-NewInfrastructure-ESG-Aktien exhibit elevated volatility, meaning that unit prices can move significantly higher or lower in short periods of time, and it is not possible to rule out loss of capital.