What the AI Infrastructure Boom Means for Asset Values

Artificial intelligence is usually discussed in terms of models, software and computing power. Yet the real story may lie elsewhere.

Behind every large language model, hyperscale data centre and AI platform sits an enormous amount of physical infrastructure. Power transformers, substations, switchgear, cooling systems and backup generation are becoming critical enablers of the AI economy, and demand is accelerating at a pace few anticipated.

When reading a recent Financial Times article examining the growing shortage of power transformers, Hickman Shearer Managing Director Tim Howard MRICS ASA was keen to explore what the technology revealed about the behaviour of asset markets.

“The transformer shortage is the symptom. What interests me is what it tells us about how infrastructure markets respond when demand accelerates beyond manufacturing capacity. As valuers, the challenge is distinguishing between cyclical pricing pressure and structural value change, because those are two very different propositions.”

Tim Howard MRICS ASA, Managing Director

The article highlighted an increasingly familiar picture. Global investment in AI infrastructure is driving unprecedented demand for electrical equipment, with manufacturers struggling to expand capacity quickly enough. Lead times for large transformers have stretched significantly, utilities are securing production slots years in advance, and the availability of critical infrastructure is becoming a strategic issue rather than simply a procurement challenge.

For those involved in valuation, lending and asset backed finance, this raises a the interesting question: how should markets interpret scarcity?

When time becomes part of value

In most industrial markets, availability is assumed. Replacement cost reflects the cost of acquiring an equivalent asset within a reasonably functioning market. Delivery lead times are acknowledged but rarely become a defining component of value.

Markets under prolonged supply constraint challenge that assumption.

If replacement extends from months to several years, immediate availability begins to acquire economic value in its own right. The asset itself may not have changed, but the commercial consequences of obtaining one have. For operators expanding generation capacity, supporting hyperscale data centres or maintaining critical infrastructure, the cost of waiting can exceed the cost of the equipment.

Scarcity, therefore, becomes more than a procurement issue. It becomes a pricing input.

This is not a new principle. Similar dynamics emerged across certain construction equipment categories during the pandemic, while specialist semiconductor manufacturing equipment has experienced comparable pressures. What makes the current transformer market particularly interesting is the scale of investment underpinning demand and the likelihood that it represents a structural rather than purely cyclical shift.

Diverging value concepts

Periods like these also remind us that valuation is rarely about a single number. As markets move rapidly, the relationship between different bases of value can begin to diverge.

Replacement costs may increase as manufacturing capacity tightens and raw material prices rise. Market values may strengthen where secondary supply is limited and buyers compete for available assets. Yet those movements may not be mirrored equally across every valuation basis.

For lenders, investors and financial reporting professionals, understanding why those differences emerge is often more important than the headline figure itself. The challenge is not simply recognising that values have changed, it is understanding which values have changed, why they have changed, and whether those movements reflect temporary market friction or a longer term repricing of the asset class.

When comparable evidence becomes more difficult

Rapidly changing markets also place greater emphasis on valuation evidence.

Comparable transactions remain fundamental to market based valuation, but their reliability inevitably becomes more complex when conditions evolve quickly. Historic transactions may no longer reflect current market sentiment.

Manufacturer quotations can become outdated within relatively short periods. Private treaty transactions may include premiums for availability rather than purely technical specification. Secondary market evidence may become increasingly influential as buyers seek alternatives to extended factory lead times.

In these circumstances, valuers are required to exercise greater professional judgement, drawing together transactional evidence, replacement economics, market intelligence and an understanding of buyer behaviour to determine whether observed price movements represent genuine market value or isolated market anomalies.

It is precisely during periods of market dislocation that methodology becomes most important.

Infrastructure is becoming an asset class in focus

While transformers have captured attention, they are only one component of a much broader infrastructure story.

Grid modernisation, electrification, renewable energy, battery storage and AI driven data centre expansion are collectively reshaping demand for industrial assets that, until recently, attracted relatively little attention outside specialist markets.

Many of these assets have historically been viewed as stable, mature categories with predictable depreciation profiles and established supply chains. That assumption deserves closer examination.

Where structural investment alters long term demand, historical relationships between acquisition cost, replacement cost and market value may begin to evolve. Residual value assumptions may warrant review. Lending decisions may require a different perspective on liquidity. Asset management strategies may increasingly consider availability alongside condition, specification and age.

None of these conclusions should be reached prematurely. Markets experiencing rapid demand growth can overshoot just as readily as they can underestimate future need. The more important observation is that traditional assumptions should continue to be tested against current market evidence rather than accepted by default.

A valuation perspective on the AI economy

The AI revolution is often presented as a software story, from a valuation perspective it is equally a story about physical infrastructure.

As investment flows into electrical networks and critical equipment, markets are responding in ways that extend beyond engineering and procurement. They are challenging how scarcity is interpreted, how replacement is assessed and how market evidence is weighted.

For valuers, the opportunity is not simply to observe changing prices. It is to understand whether those movements represent temporary market distortion or a fundamental repricing of an asset class.

That distinction is likely to shape lending, investment and financial reporting decisions long after the headlines surrounding today’s transformer shortage have faded.

About Hickman Shearer

At Hickman Shearer, we specialise in delivering exceptional RICS-regulated capital asset valuation, management and sales services. Our expertise spans a wide range of global industries, ensuring tailored and insightful valuations to meet your unique needs. With a strong track record of independent advice, we are committed to supporting businesses in achieving their strategic objectives.

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