FRESH TAKES ON BIG IDEAS

Infrastructure is a crucial component of economic growth. Reliable transport, logistics, energy, communications, and other critical building blocks are vital to keep industries running.

But much of the world’s infrastructure is getting old and outmoded and is no longer suited for the challenges ahead. Many systems that were built decades ago are nearing the end of their lifespans. Even newer infrastructure can come under pressure from shifting population dynamics, climate volatility, or digital disruption. Growing urbanization, geopolitical shifts, and the arrival of new technologies are revealing the limits of existing infrastructure systems.

Meanwhile, what we call “infrastructure” is changing. For decades, this term referred mostly to traditional assets such as roads, bridges, ports, and power grids. Today, the definition of infrastructure is expanding to include tech-driven prerequisites for modern growth, such as hyperscale data centers, fiber networks, and electric-vehicle-charging stations. These newer infrastructure systems share many traits with traditional infrastructure: long lifespans, heavy up-front capital expenditure, steady cash flow possibilities for investors, and indispensability for continuing economic development. But these newer systems tend to be more market driven, decentralized, and modular, and they frequently offer infrastructure as a service—with customers paying for uptime or output instead of purchasing or leasing an asset.

McKinsey estimates that the world will need roughly $106 trillion in cumulative investment by 2040 to meet the demand for new and revamped infrastructure. The largest share of this investment, about $36 trillion, could be directed toward transport and logistics infrastructure. Global transport systems are increasingly showing their age. Demand is rising, and user expectations are evolving. Many governments are prioritizing electrification and sustainable fuels while retrofitting existing assets to reduce carbon emissions. Geopolitical shifts and a broad desire for supply chain diversification are remapping historical trade routes, and automation and AI are transforming operations at ports, railways, distribution hubs, and other infrastructure nodes.

Digital infrastructure is another major area of potential investment. McKinsey projects that roughly $19 trillion will be required to update digital systems between now and 2040. These systems have become the backbone of all other sectors—from energy to agriculture and beyond. Demand for AI, cloud services, and other tech solutions is driving the need for more data centers, fiber, satellites, and undersea cables. Supply is struggling to keep pace. Access to power is also becoming a major constraint for data centers, prompting partnerships designed to address specific needs at the junction of energy and digital infrastructure.

“McKinsey estimates that the world will need roughly $106 trillion in cumulative investment by 2040 to meet the demand for new and revamped infrastructure.”

To find value, investors may have to move beyond traditional buy-and-hold approaches. Unlocking the capital and momentum necessary to meet this moment will take creativity, collaboration, and shrewd strategic thinking. Operators can focus on boosting efficiency and resilience by integrating innovative technology. Investors can take a broad view—pursuing cross-sector opportunities and financing models that align with long-term asset performance. Policymakers can consider how to set clear priorities, streamline regulatory processes, make use of underutilized assets, and attract private investment.

There are indications that private capital is already increasing its presence in the infrastructure space. Assets under management in the sector tripled between 2016 and 2024, rising from roughly $500 billion to $1.5 trillion. Future private investments could center on seven key verticals, some of which are discussed above: energy and resources (including power plants and carbon management), transport and logistics (including ports, airports, warehouses, and electric-vehicle-charging grids), agriculture (including irrigation, aquaculture, and large-scale food processing), digital and communications (including data centers, cellular networks, and satellites), waste and water (including automated sorting stations and water treatment plants), social infrastructure (including emergency services, public buildings, and healthcare facilities), and defense (including military bases and checkpoints).

It’s worth noting that infrastructure is increasingly becoming a geopolitical tool. Sovereign data center projects can be initiated with a goal to keep sensitive data within borders, boost national compute resources, and maintain digital autonomy. There is ongoing competition over access to critical minerals and energy resources. Geopolitical uncertainty is spurring investment in new trade routes and transport hubs. Many investors are exploring potential opportunities to revitalize the aerospace and defense ecosystem, repurpose underutilized government or industrial facilities into more valuable uses, or develop dual-use infrastructure.

AI and other emerging technologies could provide avenues for improving margins and capital productivity. For instance, AI-based generative scheduling and even generative design for infrastructure projects can frequently reduce total project costs by 10 percent and durations by as much as 20 percent, often leading to very different return profiles in assets ranging from solar to data centers to transport infrastructure. Investors are already using AI tools to quickly review tens of thousands of contracts with suppliers and subcontractors, in some cases reducing overall third-party costs by 2 to 4 percent.

Looking ahead, the coming decade will be pivotal. Decisions made now could shape the way people connect, economies grow, and societies thrive for generations to come. Those who move boldly today can help define infrastructure’s future.

—Edited by Seth Stevenson, senior editor, New York

ABOUT THIS AUTHOR

Alastair Green is a senior partner in McKinsey’s Washington, DC, office.