Mega forces are big, structural changes that affect investing now – and far in the future.
BlackRock’s has identified five “Mega Forces”. These forces encompass demographic shifts, technological advancements, geopolitical dynamics, financial innovations, and sustainability initiatives.
According to BlackRock, these key drivers are changing long-term growth and represent major shifts in profitability [of firms] across sectors and geographies. The “mega-forces” identified by the BlackRock:
• Demographic divergence – splits occurring between well-established, aging economies – and those of younger, emerging economies.
• Digital disruption and AI – key technologies are transforming how we live and work.
• Geopolitical fragmentation and economic competition – globalization is being “re-wired”, and splitting into competing blocs
• The Future of finance – characterized by evolving, fast-changing financial architecture (for households and companies), and impacting transactions and investing.
• The transition to a low-carbon economy – setting the stage for the massive capital re-allocations.
In the report, BlackRock said:
Infrastructure sits at the intersection of mega forces.
Take artificial intelligence (AI): AI is driving capital spending partly due to technological competition among countries, and the buildout of power-hungry data centers is now affecting the energy transition, too. The rewiring of supply chains benefits countries like India and Mexico.
Digital disruption and AI are already creating a massive and immediate need for power and data center infrastructure. AI-related data center investment could grow 60-100% annually in coming years, according to a mix of forecasters including the International Energy Agency. We don’t think broad valuations fully reflect this boom.
The investment implications of this buildout extend beyond first-line tech companies – reaching beneficiaries further up the supply chain like utilities, energy, materials, industrial equipment and real estate, as well as those adopting the tech. We are overweight the AI theme broadly.
AI’s energy needs could magnify the already massive investment expected in the low-carbon transition. Many mega-cap tech firms doing the largest AI buildouts have net-zero targets – that could drive up demand for renewable energy. Our BlackRock Investment Institute Transition Scenario estimates energy system investment will hit $3.5 trillion per year this decade – and $4.5 trillion by the 2040s. Low-carbon investment would then account for up to 80% of energy spending, up from 60% now.
Demographic divergence is a mega force often overlooked from a capital spending perspective that shapes infrastructure needs across economies. Typically, faster population growth drives faster capital investment.
Emerging markets, like Saudi Arabia, will require more capital spending to support their growing working-age populations. In developed markets, how countries adapt to aging will dictate investment, with measures such as AI-driven automation in South Korea to offset shrinking workforces.
Infrastructure demand may shift away from industries tied to population growth, presenting opportunities where investment has lagged. Markets often fail to price in predictable structural shifts until they occur, potentially leading to mispricings.
Source: Report by BlackRock Jean Boivin Wei Li David Giordano Christian Olinger
