By Mike Burke on May 14, 2026May 14, 2026 Why Digital CAPEX Is Colliding with Physical Infrastructure Reality What happens when the tortoise and the hare must finish the race at the same time? The market narrative today is dominated by the scale of capital being deployed into AI, data centers, and next-generation compute. Hundreds of billions of dollars are being committed, sometimes circularly, with the expectation that infrastructure will scale accordingly. It won’t and can’t without a fundamental reallocation of capital and a change in how infrastructure itself is financed and built. While capital is abundant for data centers (the hare), current infrastructure can’t accommodate (the tortoise). We are now seeing clear signs of strain. A significant share of planned U.S. data center capacity, as much as 30% of projects, targeting 2026 delivery are being delayed or canceled due to constraints that have little to do with financing. The issue is physical with constraints in power availability, grid interconnection timelines, equipment shortages, permitting bottlenecks, and neighborhood pushbacks. The U.S. faces a $3.7 trillion infrastructure funding gap through 2033, spanning energy, transport, and utilities. This is the core contradiction of the current cycle. Technology companies are deploying capital at software-type speed while Infrastructure is being delivered, at best, at regulatory and industrial speed. The limiting factor for digital growth is no longer computing; it is power and physical infrastructure. Historically, infrastructure development in the U.S. has relied on a combination of public funding, state-level execution, permitting, and procurement processes. Institutional capital, pension capital and now infrastructure funds, are well suited for development investments. These assets are long duration, inflation aligned/protected, increasing global demand and high yielding. However, there needs to be a change in delivery mechanism of capital that has been impeded by government interaction. An example could be reforming current laws around tax-exempt debt of public/private partnerships that hinders capital formation and transaction flexibility. In addition, expand private/public partnerships, like the rest of the developed world, to allow institutional investors to co-own and operate infrastructure. Or, have government entities recycling brownfield/contaminated industrial properties to investors to repurpose pipelines. There are many ideas and none of them are easy, but something must be done to facilitate. At this point, you’re probably thinking I am heavily invested in semi-conductors, data centers, robots and large language models. I am not. The basis of my thoughts is directly around my monthly electricity bills! In southeastern PA, we rely on the PJM Interconnection. It is the largest operator of the US power grid spanning 13 states. Capacity Pricing in 2023/2024/2025 had a low baseline of about $29 per Megawatt a day. That price for the 2027/2028 was estimated to be over $500 MW a day before the governor stepped into to cap the price at $333 MW per day! The trend is clear and something needs to change. At the current trajectory, massive technology CAPEX without corresponding infrastructure investment, is unsustainable. Infrastructure investment in the U.S. needs to reform; accelerate public from private investors, become more structured, and integrate with digital deployment….OR else there will be more town halls of citizens revolting over electricity prices. As an investment, for portfolios that are under allocated to utilities and real assets, infrastructure may be a good place to research. It is an attractive investment because it provides essential services that generate stable, long-term cash flows, often with inflation protection and lower sensitivity to economic downturns. It also benefits from powerful secular trends such as AI-driven data center demand, energy transition investments, and the modernization of aging global infrastructure. Lastly, you will be doing your part in helping seniors keep more of their social security checks from going to the electric companies. Remember, the tortoise always won the race. Keep that same mindset in portfolio construction… slow and steady! Disclosure: I/we have no stock, option, or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. Investment advice offered through Great Valley Advisor Group (GVA), a Registered Investment Advisor. I am solely an investment advisor representative of Great Valley Advisor Group, and not affiliated with LPL Financial. Any opinions or views expressed by me are not those of LPL Financial. This is not intended to be used as tax or legal advice. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Please consult a tax or legal professional for specific information and advice. LPL Compliance Tracking #1110007 Mike Burke See Full Bio