There's a lot of near-term uncertainty facing the global economy. Surging inflation and rising interest rates are driving growing concerns we could be heading toward a recession. That could impact cyclical companies that rely on an expanding economy to drive growth.
However, amid the uncertainty, three prominent macroeconomic themes have emerged in recent years and will continue to drive growth in certain sectors: digitalization, decarbonization, and deglobalization. Here's why investors won't want to miss these megatrends.
Data-driven growth
Companies worldwide will invest an estimated $1 trillion in capital over the next five years to upgrade global data infrastructure. Those investments include upgrading copper wire networks to fiber optic cables, expanding global data center capacity, and building additional cell towers to support 5G networks, the Internet of Things, and artificial intelligence (AI).
Many companies focus on building the infrastructure needed to support the digitalization trend. For example, Brookfield Infrastructure (BIPC 1.39%) (BIP 2.21%) is investing in fiber networks, wireless infrastructure, and data centers.
Brookfield also recently agreed to acquire a European telecom tower company. It has 36,000 towers and a pipeline of 5,200 more that it expects to build for its primary tenant over the next five years to support its growth. That's one of several data infrastructure investments Brookfield has secured that will help power its growth in the coming years.
Meanwhile, real estate investment trusts (REITs) American Tower (AMT 0.58%), Crown Castle (CCI -0.13%), Equinix (EQIX 0.90%), and Digital Realty (DLR -0.71%) are focusing on various aspects of the digitalization megatrend to drive growth. American Tower recently expanded its global tower business to include data centers, putting it in an even better position to capitalize on the digitalization megatrend.
Crown Castle sees a decade-long investment cycle in 5G to build more towers, small cell nodes, and fiber optic networks. Data center REITs Equinix and Digital Realty have several expansion projects underway worldwide to help meet growing data center demand. Those investments position these REITs to continue growing their cash flow and dividends at healthy rates.
A powerful growth opportunity
Decarbonization is a multi-trillion-dollar trend that will last several decades. Energy companies must invest trillions of dollars in building renewable-energy-generating capacity to replace fossil fuels.
For example, leading utility NextEra Energy (NEE 1.57%) expects to deploy from $85 billion to $95 billion on new investments through 2025, primarily geared toward decarbonization. Those investments could give NextEra Energy the power to grow earnings and dividends at double-digit annual rates for the next several years.
Brookfield Renewable (BEPC 2.46%) (BEP 1.40%) is also investing heavily to capitalize on the decarbonization megatrend. The company has over 100 gigawatts of renewable power projects in its pipeline, more than four times its current operating capacity. It also has carbon capture and storage investments to help decarbonize other sectors of the economy. These investments could power upwards of 20% annual earnings-per-share growth for the company over the next several years.
Security is driving new investments
The pandemic exposed weaknesses in the global supply chain. That's leading governments to shift their focus to securing supplies of energy and other materials crucial to their economies.
The drive toward energy independence is fueling a boom in liquefied natural gas (LNG). European countries are locking up LNG supplies to reduce their dependence on Russian gas. That's enabled several LNG developers to move forward with new liquefaction and export facilities this year, including Cheniere Energy (LNG -0.93%). It started building its Corpus Christi Stage 3 project consisting of seven LNG liquefaction trains. The company is also evaluating an additional expansion to build two more trains at that facility.
Meanwhile, several companies are building new manufacturing facilities in the U.S. as the country restores supply. For example, semiconductor giant Intel (INTC 0.61%) is investing billions of dollars into building several new chip manufacturing facilities in Arizona and Ohio.
One catalyst driving Intel's investments is the CHIPS Act, which provides incentives to help boost domestic chip manufacturing capacity and reduce the country's reliance on overseas markets. Intel will be a major beneficiary of this recently passed legislation as it should help finance its manufacturing build-out in the country. That will better position it to capitalize on the rapidly growing semiconductor market that could double by the end of the decade, reaching $1 trillion in global sales.
Focus on the long-term picture
There's a lot of uncertainty in the global economy these days. However, it's clear that governments and companies will pour trillions of dollars into digitalization, decarbonization, and deglobalization in the coming years. Because of that, companies focused on those megatrends should thrive. That makes them potentially lucrative opportunities that investors won't want to miss.
