A new report by BlackRock tackles a few themes central to the U.S. economy in the long term: including the rebuilding of the nation’s manufacturing infrastructure and the role of artificial intelligence.
The New York firm published its “2025 Thematic Outlook” this month and discussed such issues as rebuilding the physical economy. BlackRock said that infrastructure, manufacturing and home building may all be poised to benefit after the 2024 U.S. election, since these investment themes are at the intersection of policy and the economy.
The federal government has already made a significant financial commitment to infrastructure with the passage of the 2021 Infrastructure Investment and Jobs Act, which earmarked more than $1.2 trillion toward infrastructure repair.
The law has prompted more than 60,000 construction projects that have already started. More than $720 billion in funds from the law have yet to be allocated.
“We’ve seen kind of a convergence between policy and demographics that are coming together to really reinvigorate concepts like reshoring and manufacturing within the United States, making our infrastructure more up to date and competitive and addressing demographic challenges like the housing supply shortages we see disproportionally impacting the millennial generation,” said Jay Jacobs, U.S. head of thematic and active ETFs at BlackRock, in an interview.
A major portion of the infrastructure construction pertains to manufacturing space. Since the coronavirus pandemic, the United States and other nations have been looking to strengthen their economies by ensuring there are enough domestic manufacturing facilities. That way supply chains run less risk of getting interrupted.
The firm sees infrastructure as a bipartisan issue, as former and future president Donald Trump consistently spoke of the need to improve the nation’s infrastructure during his first administration, according to Jacobs. It is also an issue that resonates at the local level as well.
Many in government are eager to increase production within the United States. Despite the change in presidential administrations, the goals of increasing domestic manufacturing will likely not change, though the methods of reaching those goals may differ slightly, BlackRock said.
While previous bills took a “carrot” approach, the report said, the Donald Trump administration might use more punitive measures, such as tariffs or export bans, to get manufacturing to move back to the United States.
However, Jacob added, “Infrastructure is a very local theme [and] it’s not necessarily something that is entirely dependent upon the federal government. It’s dependent on the state government, it depends on city government, [and] so having bipartisan support stretches far beyond the general election.”
AI And Its Needs
Artificial intelligence is also tied in with infrastructure and is becoming a more important part of the economy, since it requires the construction of advanced data center graphics processing units—complex processors that can conduct comprehensive math quickly. It also needs application-specific integrated circuits, which are custom-built chips.
The market for these data center chips and processers is expected to reach a combined value of $156 billion by 2025 and $233 billion by 2029, according to the report.
“All of this is really coming together to create ... the next generation of generative AI that’s going to be more powerful and likely spur more adoption of artificial intelligence,” Jacobs said.
As AI grows in popularity, another investment opportunity will begin to emerge—cybersecurity—since there will be a growing need to protect the information that AI gathers, uses and stores, Jacobs explained.
“We believe we’ll see, as data becomes more valuable, a commensurate investment into cybersecurity stocks in parallel with the growth of artificial intelligence,” he said.
The third theme the report highlighted is the macroeconomic regime change as interest rates start to come down and inflation tapers off. Jacobs does not believe it will return to the low levels it was before the pandemic, for a few reasons—one of which is the high amount of debt that the government is carrying as well as an aging population, which is putting a strain on the healthcare system.
But it’s not all bad news, he said, since artificial intelligence could be a big contributor to productivity gains, “which would counteract some of the inflationary pressure.” But he doesn’t think we’ll feel the impact of that for a few years.
There are several investments that will benefit from the rate cut, according to the report, including biotech stocks, bitcoin, and gold, all of which will ride tailwinds.
Biotech holdings tend to thrive in lower interest rate environments, since they enjoy higher valuations, along with greater flexibility to increase their research and development budgets. There is also greater interest among companies for merger and acquisition opportunities, Jacobs said.
As for gold and bitcoin, when interest rates are higher, investors seek out attractive real returns by investing in low-risk investments. That changes as the interest rates start to go down, Jacobs explained.
“As interest rates come down, the lower risk investments have lower returns and you see people pushing out on the risk spectrum to look for other sources of risk and returns,” he said. “It is less punitive to invest in assets that don’t have cash flow like gold and bitcoin.”