The assets enabling the AI revolution: a growing opportunity for income investors

5 minute read

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Think about the last hour of your working day. You may have joined a video call, asked Claude or ChatGPT to analyse some data or edit a LinkedIn post, saved a document to the cloud and, if it was a long day, ordered something online to arrive tomorrow.

None of that felt physical. All of it was.

The video call travelled through a mobile mast. The document and your chat sit on a server in a data centre. The parcel is being picked from a shelf in a logistics warehouse, probably one sited on the edge of a town so it can reach thousands of homes within hours.

These buildings, and the networks that connect them, are the physical infrastructure of the digital economy.

Most of the companies that own these assets make money the same way a traditional property company does: they own the building or site and rent it out. The difference is who the tenants are. A data centre owner leases space to cloud providers or big corporations. A tower company rents space on its masts to mobile network operators. A logistics landlord leases warehouse space to retailers and delivery firms. And a network owner leases capacity on its fibre-optic cables to telecoms operators and businesses.

Many of these companies are structured as REITs (real estate investment trusts). They are listed companies that own income-producing property, often with inflation-linked leases or fixed uplifts, and must distribute most of their profits to shareholders as dividends. That makes them a natural fit for income-focused portfolios.

The TM Gravis Digital Infrastructure Income Fund was launched in 2021 around a simple idea: as the world becomes more digital, the physical assets that make it possible should play a bigger role in investors' portfolios. Five years on, the manager argues that the case has only strengthened.

The Fund's opportunity set spans four sub-sectors. What makes them useful for portfolio construction is that each is driven by a different trend.

Data centres: where AI actually lives. AI is often described as if it exists in the ether. In reality it runs on rows of servers that need vast amounts of electricity and cooling. JLL projects that global data centre workload will increase by more than 100 GW by 2030. A gigawatt is a measure of power capacity, and 100 GW is more than the peak electricity demand of France or Germany, and roughly double that of Great Britain. AI is now joining cloud computing as a major driver of that demand.

Logistics: the unglamorous winner of online shopping. Every online order needs somewhere to wait before it is delivered, and online shopping needs far more warehouse space than shops do. Prologis, the world's largest logistics landlord, expects US e-commerce to rise from around 23% of core retail goods sales today to almost 30% by 2030. Each extra percentage point requires an estimated 50 to 70 million square feet of additional industrial space.

Towers: the quiet side of 5G. The towers themselves are seldom discussed, but mobile data doesn't travel without them. Ericsson forecasts that global 5G subscriptions will more than double by 2030 from 2.9 billion today. Tower owners are typically neutral landlords: several mobile operators can rent space on the same mast, and each additional tenant adds income without the cost of building another tower.

Networks: the cables that tie it all together. All of this infrastructure is only useful if it is connected. Fibre-optic cables carry data between them - underground, under the sea and along roadsides. Fibre is to the digital economy what roads are to logistics. The Fund doesn't currently hold any network owners, but it has in the past and can do so again when opportunities arise at the right price.

Because these trends are distinct, a portfolio spread across them is focused on the digital economy without being tied to one theme.

In May 2026, the Fund made its most significant change since launch: it began buying short-dated corporate bonds.

The logic is easy to follow. A company funds itself through a mix of shares and debt. Until May 2026, the Fund owned only the shares. Now it also gets exposure to the same companies by buying their bonds. The first six bonds in which it invested were all issued by businesses the Fund already held as equities. There are no unfamiliar names chosen just for their yield.

The attraction is income. In some cases, the bonds pay considerably more than the same companies' shares. For example, Goodman's 4.25% bond maturing in 2030 offered a yield pick-up of more than 4% at the time of purchase.

There is a second benefit. Compared to equities, short-dated bonds tend to move far less than shares when markets are volatile, so the allocation should help smooth the Fund's returns. The bonds, which are held to maturity, are also investment grade, which means they are assessed as having a low risk of default.

The allocation has clear limits. Bonds are capped at 20% of the portfolio, the maximum allowed in the Fund's IA Listed Property sector. The initial allocation was 15-16%, spread across six positions. Albane Poulin, Gravis's Head of Private Credit, joined the team to support bond selection. She brings 20 years of credit experience, most recently as Head of European Private Placements at Aberdeen.

This Fund sits in the IA Listed Property sector alongside funds holding shopping centres, offices and residential property. Its portfolio has little in common with those peers.

As a way to hold the physical infrastructure behind AI, 5G and online shopping in a single income-focused portfolio, it is worth a closer look. Five years in, the digital world keeps getting bigger, and it all runs on buildings, masts and cables.

Important Information

This article is issued by Gravis Advisory Limited ("GAL" or the "Firm"), which is authorised and regulated by the Financial Conduct Authority. GAL's registered office address is 24 Savile Row, London, United Kingdom, W1S 2ES. The company is registered in England and Wales under registration number 09910124.

TM Gravis Digital Infrastructure Income Fund (the "Fund") is a sub-fund of TM Gravis Funds ICVC, which is a UK UCITS scheme and an umbrella company for the purposes of the OEIC Regulations. The Authorise Fund Manager of TM Gravis Funds ICVC is Thesis Unit Trust Management Limited (TUTMAN), Exchange Building, St John's Street, Chichester, West Sussex, PO19 1UP. TUTMAN is authorised and regulated by the Financial Conduct Authority. GAL is the investment manager of the Fund.

Any decision to invest in the Fund must be based solely on the information contained in the Prospectus, the latest Key Investor Information Document and the latest annual or interim report and financial statements. GAL does not offer investment advice and this article should not be considered a recommendation, invitation or inducement to invest in the Fund. Prospective investors are recommended to seek professional advice before making a decision to invest.

Your capital is at risk and you may not get back the full amount invested. Past performance is not a reliable indicator of future results. Prospective investors should consider the risks connected to an investment in the Fund, which include (but are not limited to) market risk, counterparty risk, inflation and interest rate risks and the risks of investing in real estate and related industries. Please see the Risk Factors section in the Prospectus for further information.

This article has been prepared by GAL using all reasonable skill, care and diligence. It contains information and analysis that is believed to be accurate at the time of publication but that is subject to change without notice. It is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation. Any recipients outside the UK should inform themselves of and observe any applicable legal or regulatory requirements in their jurisdiction.