Artificial intelligence (AI) is widely regarded as the catalyst for the Fourth Industrial Revolution, or Industry 4.0—a revolutionary shift expected to unfold over the coming decades. The United States has emerged as the global leader in AI, driven by its technological innovation and access to abundant, low-cost energy. To maintain this leadership position, the U.S. is expected to accelerate efforts to support the rapid expansion of AI applications, as new use cases continue to emerge at an unprecedented pace.
AI Doesn’t Run on Code Alone: It Runs on Infrastructure
The rise of AI has intricately connected the technology and energy sectors. The future of artificial intelligence is a function of the technology inside the data center and the energy that ensures the data centers maintain low-cost operations 24 hours a day/7 days a week/365 days a year.
There’s No AI Without Infrastructure
This includes the energy infrastructure, technology infrastructure, and data center infrastructure that house the massive data necessary for AI computing. AI relies on technology infrastructure such as graphics processing units (GPUs)—specialized processors powering AI workloads—and the central processing units (CPUs) that support them. It also depends on vast energy inputs and data centers equipped with servers, memory, storage, and cooling systems.
“There’s no AI without INFRASTructure.”
AI is operated across thousands of data centers spread across the world. Most of these data centers are located in the U.S. Inside these data centers is massive computing power that performs the tasks required for ChatGPT, Claude, Copilot, and other AI applications to function. These data centers rely on consistent, dependable energy infrastructure to generate, transmit, and distribute the energy necessary to power them. The increased investment by hyperscalers, who are building larger data centers, combined with greater computing power, is leading to higher electricity demand after decades of stagnation.
Industry experts suggest that AI progress is increasingly measured not by square footage or petabytes, but by gigawatts, highlighting the centrality of electricity access for scaling AI. only expected to rise. As a result, U.S. electricity demand is on track to grow at a pace well above historical norms.
Electricity is the New Oil
Why? Because for all of AI, it’s about how much electricity you can get to your data center. Between hyperscalers and co-location options, data centers will draw more power than ever before. Advances in data movement technology continue to emerge, requiring careful assessment of the infrastructure needed to support the spending of major technology providers. Data centers also need cooling systems that operate on energy infrastructure.
Projections for data center construction spending are on the rise due to the anticipated surge in AI technologies and the infrastructure needed to support it, as shown in Figure 1.
The good news for energy investors is that the increase in electricity demand is just getting started. Data centers consume around 4% of current electricity generation today but are projected to grow to over 10% by 2030, according to industry estimates. While the energy industry used to be driven by global oil demand, experts are now turning to electricity as the emerging trend due to the high data center demand. The energy sector is now being actively redefined with electricity as the new oil.
“The energy sector is now being actively redefined with electricity as the new oil.”
Due to the explosion of AI computing and subsequent data center expansion, Tortoise Capital sees an opportunity to invest and capitalize on an emerging trend.
Tortoise AI Infrastructure ETF (TCAI)
The Tortoise AI Infrastructure ETF is designed to capture the secular growth opportunity presented by the advancement of AI. This strategy invests in the foundational infrastructure required for the United States to maintain and expand its global leadership in AI.
Our approach categorizes AI infrastructure into three essential pillars:
1. Energy
Data centers—AI’s operational core—require massive amounts of electricity to run 24/7, 365 days a year without interruption. Our strategy includes:
- Electricity generation and distribution assets that power data centers
- Pipeline infrastructure critical for fuel delivery
- Key energy inputs, including natural gas and uranium, that provide reliable and affordable energy at scale
2. Data Centers
This includes the physical facilities that house the vast amounts of data required for AI applications. We also invest in construction companies expanding the national data center footprint to meet the exponential growth in AI-related computing needs.
3. Technology
This includes the critical internal components that enable data center operations:
- Racks and associated electrical equipment that house AI servers and GPUs, which are the compute engines powering artificial intelligence workloads
- Cabling and switches that drive fast, efficient data transmission
- Data storage systems built to handle immense volumes of information
- Cooling infrastructure essential for maintaining performance and reliability of sensitive equipment
AI cannot run on code alone. The technology infrastructure inside the data centers is critical to the future development of AI. AI needs NVIDA CPUs/GPU and it also needs thousands of miles of fiber optic cable to connect the data inside to the outside world. There is a need for speed in the AI race, and thousands of network switches connect millions of servers—enabling them to talk to each other within microseconds.
At the core of the data center (fueling AI) is the massive amount of data. Zettabytes of data are securely stored in millions of disk drives inside the data centers. All of this equipment and high-performance computing generate significant heat, so the data center’s cooling infrastructure is vital to preventing hardware failures and maximizing performance within the data center.
The Tortoise AI Infrastructure ETF seeks to provide investors with a comprehensive way to participate in the long-term, secular growth of AI by investing in the enabling infrastructure that makes AI possible. From power generation to physical facilities and internal components, our strategy focuses on the critical infrastructure needed to sustain and scale AI’s transformative impact.
Disciplined Investment Process Guides Risk Identification and Management
The Tortoise Capital portfolio management team employs a disciplined investment process designed to identify and manage risk. The process begins with a thorough evaluation of each company’s assets and the quality of its cash flows. In addition, the team conducts a detailed review of financial statements—particularly the balance sheet—to assess financial stability.
Management quality is another critical input in the risk assessment process. The team analyzes company leadership by examining track records, ownership trends, and corporate governance practices. Based on these assessments, Tortoise Capital assigns a tier rating to each security, which serves as a risk classification tool.
Securities with higher risk are either excluded from the portfolio or included at smaller weights that reflect their elevated risk profile. Conversely, companies deemed to have lower risk may receive larger weightings in the portfolio. This risk-based weighting approach ensures that portfolio construction aligns with the firm’s disciplined risk management philosophy.
Tortoise Capital’s process has proven successful across multiple market cycles, particularly in navigating energy market volatility and the evolution of the sector while consistently aiming to deliver the best possible risk-adjusted returns for investors.
Where TCAI May Fit in a Portfolio
TCAI offers differentiated, low-overlap exposure by combining infrastructure growth with durable cash flows from essential services—making it a potential fit across multiple portfolio sleeves as either a core or satellite position.
Designed to be a high active share investment aiming to outperform the S&P 500, TCAI could be used as a thematic growth allocator, for exposure to real assets, as an infrastructure diversifier, or to provide inflation-hedged equity exposure. The Tortoise AI Infrastructure ETF curates a targeted, actively managed portfolio tied to AI-driven demand.
A Strategic Option for Investing in the Energy that Powers Technology Innovation
Some analysts estimate that natural gas may account for more than half of the energy supply to AI data centers over the next five years, citing its availability, infrastructure readiness, and role in meeting high reliability demands. In the coming years, a significant portion of the energy needs for AI data centers is expected to be satisfied by natural gas. Key factors influencing this trend include the availability of established transportation infrastructure, a plentiful domestic supply of natural gas, stringent reliability requirements for data center operations—ensuring that systems are online 99.999% of the time—and a comparatively low carbon footprint, particularly when integrated with current carbon capture technologies.
The AI trend continues to accelerate, especially as the U.S. continues to cement its leadership position in the space. The energy infrastructure sector will be critical to this trend, and natural gas providers and operators stand to benefit. We expect natural gas and nuclear to lead as electricity demand increases to support the development of AI.
TCAI provides access to the companies building and powering the infrastructure behind AI’s innovative expansion.
Important Information
Nothing contained in this communication constitutes tax, legal, or investment advice. Investors must consult their tax advisor or legal counsel for advice and information concerning their particular situation. This communication contains certain statements that may include “forward-looking statements.” All statements, other than statements of historical fact, included herein are “forward-looking statements.” Although Tortoise Capital believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Actual events could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors. You should not place undue reliance on these forward-looking statements. This communication reflects our views and opinions as of the date herein, which are subject to change at any time based on market and other conditions. We disclaim any responsibility to update these views. These views should not be relied on as investment advice or an indication of trading intention. Discussion or analysis of any specific company-related news or investment sectors are meant primarily as a result of recent newsworthy events surrounding those companies or by way of providing updates on certain sectors of the market. Tortoise Capital, through its family of registered investment advisers, does provide investment advice to Tortoise-related funds and others that include investment into those sectors or companies discussed in this communication. As a result, Tortoise Capital does stand to beneficially profit from any rise in value of the sectors broadly discussed, including individual companies contained within.
Tortoise Capital Advisors, LLC is the advisor to the Tortoise AI Infrastructure ETF.
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Investing involves risk. Principal loss is possible. The fund is registered as a non-diversified, open-end management investment company under the 1940 Act. Accordingly, there are no regulatory limits under the 1940 Act on the number or size of securities that we hold, and we may invest more assets in fewer issuers compared to a diversified fund. An investment in MLP securities involves some risks that differ from the risks involved in an investment in the common stock of a corporation, including risks relating to the ownership structure of MLPs, the risk that MLPs might lose their partnership status for tax purposes and the risk that MLPs will not make distributions to holders (including us) at anticipated levels or with the expected tax character.
The Fund’s strategy of concentrating its assets in the power and energy infrastructure industries means that the performance of the Fund will be closely tied to the performance of these particular market sectors. The Fund’s strategy of emphasizing investments in AI infrastructure companies means that the performance of the Fund will be closely tied to the performance of one or more industries that are expected to benefit from the growth of AI-capable data centers and related technology and energy infrastructure. Companies in the technology infrastructure sector are subject to many risks that can negatively impact the revenues and viability of companies in this sector including but not limited to risks associated with emerging technology that renders existing products or services obsolete, reliance on outdated technology, intellectual property theft, supply chain disruption, vulnerabilities to third-party vendors and suppliers, business interruption, difficulty in retaining skilled talent, and regulatory compliance.
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