Why and How to Invest in US Infrastructure

The term infrastructure casts a wide net over a range of industries which are responsible for building the modern world. From engineering innovation to transformative transportation, infrastructure plays a vital role in social and economic well-being. Tellingly, infrastructure offers a compelling investment opportunity which is set to grow alongside humanity and its needs. But where is the best place to start looking in such a diverse industry?

Let’s X-Plain:

  • Why invest in US infrastructure?
  • Which infrastructure stocks to consider.
  • Why use ASX listed ETFs to invest in US infrastructure?

Why Invest in US Infrastructure?

The US is the world’s largest economy and is home to more than 335 million people.1 Yet, it is in dire need of infrastructure upgrades. The US requires at least US$3.8 trillion worth of additional investment to adequately repair existing infrastructure and keep pace with economic expansion.2 This figure marks the largest single country infrastructure investment gap in the world.3 Plus, there has been a notable uptick in natural disasters linked to climate change. In 2023, the US experienced a record-breaking 28 weather and climate disasters which cost roughly US$92 billion, which when added to the running sum of disaster costs in the US since 1980, exceeds US$2.6 trillion.4

Here lies the opportunity for investors. The US is spending big on infrastructure to – literally – bridge this gap. In recent years, the US Government has initiated multiple programs including the IIJA, IRA, and CHIPS Act which provide investment incentives for both disruptive and traditional sectors.5 Ultimately, this is creating demand for US infrastructure investment. For more information on the investment case behind US infrastructure development companies, read Introducing PAVE: The Resurgence of US Infrastructure.

Which Infrastructure Stocks to Consider

Infrastructure spending generally occurs in two ways, publicly (funded by the government) and privately (funded by private companies). The key to investing in the growth of US infrastructure is focusing on stocks which will facilitate development in both publicly and privately backed projects, rather than those responsible for existing assets such as legacy utility and energy companies. This could include stocks involved in the construction, engineering, material procurement, transportation, and equipment distribution processes of infrastructure projects.

Why use ASX Listed ETFs to Invest in US Infrastructure

Given infrastructure development encompasses a broad array of sub-categories, it may be difficult to select individual stocks which will definitively benefit from increased spending in the space. Hence, using ETFs to help remove single stock risk, simplify the investment processes, mitigate international investing complexities, and offer built-in diversification. The Global X US Infrastructure Development ETF (ASX: PAVE), aims to do just that. It is classified as a thematic ETF and therefore aims to capture this trend by investing in companies that are part of the infrastructure theme, regardless of sector or industry classification.

Related Funds

PAVE: The Global X US Infrastructure Development ETF (ASX: PAVE) invests in US-domiciled companies involved in the construction, engineering, material procurement, transportation, and equipment distribution processes of infrastructure projects.