The capex supercycle has arrived... here’s what it means for earnings (and you)

Infrastructure has entered a capex supercycle, according to Sarah Lau of Resolution Capital. Years of underinvestment are now forcing large, sustained spending across essential networks, at a scale and pace the sector has not seen before.

So if you think you know infrastructure, think again. What was once viewed as purely defensive is now being shaped by earnings growth as capital expenditure ramps up.

That shift became clear in my conversation with Lau, as structural demand from electrification, digitisation, population growth and artificial intelligence collides with years of underinvestment. 

It is a theme that has surfaced repeatedly in recent weeks, including in my discussion with Sarah Shaw of 4D Infrastructure.

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Lau sees this as an unusually strong moment for the sector.

“The earnings outlook looks a lot stronger than we’ve seen it for quite some time. We call it a supercycle of capital expenditure, and from where we sit today, it is as strong as it has been in close to twenty years.”

A supercycle built on unavoidable demand

At the core of Lau’s outlook is a simple observation: global infrastructure has been underbuilt for decades, and demand is now forcing a response.

“Governments worldwide have been underinvesting in infrastructure, and that’s been ongoing in certain assets for decades now.”

What has changed is that a wave of demand has arrived all at once, driven by digitisation, electrification, population growth and the return of manufacturing activity, particularly in the US.

Electricity demand has stepped up sharply, especially in North America.

“We are seeing a step change in electricity demand, particularly in North America, and that’s driven by AI,” Lau says.

For infrastructure owners, the implications are significant because earnings are closely tied to investment.

“These are monopoly-like assets. When they invest money in them, whether it’s existing assets or new assets, they’re usually allowed a certain rate of return.” 

In toll roads, rising congestion allows operators to lift tolls, directly boosting earnings. This, Lau argues, is why the current growth is not speculative. 

“Their earnings growth is highly correlated with investment,” she says, describing the environment as a “supercycle of capital expenditure” that is driving a much stronger earnings outlook.

What has changed for Australian investors

While the investment case for infrastructure remains intact, Lau notes that the opportunity set for Australian investors has narrowed materially.

“It wasn’t that long ago, just after COVID, that we had airports listed on the ASX,” she says. At the time, investors could “go onto CommSec and access these monopoly-like assets.” “But you can’t do that anymore.”

As a result, Australia and New Zealand now make up only a small part of the global opportunity set. “When we look at our universe globally, Australia and New Zealand is less than 5% of our total universe at this point in time,” Lau says.

What has not changed is why investors allocate to infrastructure. 

“They’re necessary for the economy to keep on going. They’re critical,” Lau says, noting that many assets also offer inflation pass-through as “an excellent cash flow hedge and a diversifier.”

The difference today is that accessing those characteristics increasingly requires a global approach.

The stocks Lau likes right now

Resolution Capital is overweight transportation infrastructure and US gas midstream, focusing on assets with long-dated networks, pricing power and earnings growth that the market is still underestimating.

Ferrovial (BME: FER)

Lau favours toll road owner-operators with dynamic pricing that allows earnings to grow faster than inflation as congestion rises. 

Ferrovial, listed in Spain, owns major toll roads in North America, including Canada. In Toronto, toll increases this year were “22%… way in advance of inflation,” driven by rising congestion. 

What the market often misses, Lau says, is the compounding effect of long-dated assets. 

“Infrastructure has relatively predictable cash flows, but there’s also a real compounding effect that people forget because these are such long-dated assets.”

Kinder Morgan (NYSE: KMI)

US gas midstream is another area of conviction. 

Lau highlights Kinder Morgan as a network connecting key natural gas supply and demand centres. “If you have a network, it’s incredibly valuable,” she says, particularly as permitting constraints and NIMBYism make new pipelines harder to build. 

Expanding existing assets is often the most efficient way to meet demand. With US gas volumes rising through LNG exports and industrial activity, Lau sees “a clear path to grow earnings above what people are expecting at this point in time.”

Outlook heading into 2026

Lau’s outlook for infrastructure in 2026 is constructive, but firmly grounded in discipline rather than optimism. She believes the foundations for solid returns remain in place. “The ingredients are there for another solid year in infrastructure,” she says, pointing to attractive sector yields and visible earnings growth across essential assets.

That confidence comes with realism. Reflecting on the 18.7 per cent return delivered by Resolution Capital’s Global Listed Infrastructure strategy last year, Lau stresses that standout outcomes cannot be relied upon. “Eighteen point seven per cent was a fantastic year, but it’s not something that can be replicated every single year,” she says.

What can be controlled is process. Resolution Capital focuses on “high quality assets, true to label infrastructure,” backed by strong balance sheets, disciplined capital allocation and management teams with skin in the game. 

“Every single portfolio manager in the strategy is actively invested in the strategy,” Lau says, adding that she is also personally invested.

For long-term investors, this alignment supports consistent compounding rather than short-term excitement, combining predictable cash flows with genuine earnings growth.