AI data centres are arguably the most significant driver of rising electricity demand, with transport, buildings and humanoid robots adding to the pressure on power systems over the longer term. Against this backdrop, Thiemo Lang explains why the Energy Efficiency investment cluster is the Fund's largest allocation and how it is positioned across the electrification value chain, from power semiconductors to optical networking.
What are currently the main drivers of rising energy demand and the trend towards electrification?
AI data centres are currently one of the most significant drivers of rising electricity demand, particularly in the US. The rapid expansion of AI infrastructure requires not only significantly more computing power, but also the electricity supply, cooling and electrical infrastructure to support it. This is creating attractive investment opportunities across the entire value chain – from power semiconductors and cooling systems to more energy-efficient solutions for data processing and transmission, including optical connectivity.
Another important driver remains the electrification of the transportation sector. Over the medium to long term, we expect electric vehicles to largely replace vehicles with combustion engines, with electricity replacing petrol as the main source of energy. China shows how quickly this transition can progress. Around 60% of all newly registered buses in the country are already electric, while the figure for city buses is close to 100%. Electrification is also progressing rapidly in commercial vehicles.
In the buildings sector, the planned transition from gas heating to electric heat pumps will also increase electricity demand. Energy-intensive industries that still rely heavily on fossil fuels today are also likely to become increasingly electrified over the medium term.
Finally, humanoid robots are likely to become a very significant driver of electricity demand over the longer term. As these autonomous systems become more widespread and sophisticated, their energy requirements will be critical to their economic viability.
What role do short-term geopolitical developments play for the theme of smart energy?
Geopolitical developments certainly create additional market volatility. The same applies to economic policy decisions involving subsidies, trade restrictions or supply chains for critical raw materials. However, our Fund focuses primarily on companies whose growth is driven by long-term structural trends and which are therefore less dependent on individual policy measures.
Recent developments in the Middle East and their impact on global energy markets have once again highlighted the risks of a high dependence on fossil fuel imports. In Europe, for example, the AccelerateEU initiative aims to reduce dependence on fossil fuels and accelerate investment in clean, domestically produced energy, electrification and energy infrastructure.
For us, it is important that the investment case does not depend on any particular political scenario. The need for a secure, affordable and efficient electricity supply is structural. Geopolitical developments may influence the pace of investment in certain areas, but they also underline the need to expand and diversify global energy supply efficiently.
Clean energy generation makes up only a very small part of the portfolio, while energy efficiency is the largest allocation. Why is that? What do you mean by energy efficiency, and which companies and technologies fall into this area?
Clean Power Generation does indeed account for only a small share of our portfolio today, as we currently see more attractive investment opportunities in other investment clusters. Our investment universe is divided into four clusters: Clean Power Generation, Energy Transmission & Distribution, Energy Conversion & Storage, and Energy Efficiency. This allows us to invest across the entire electrification value chain rather than being limited to individual technologies.
We currently have more than 50% of the portfolio invested in Energy Efficiency. This covers all end markets in which electricity is consumed, with a particular focus on areas where we see the greatest potential for energy savings and innovation. The energy efficiency of data centres is currently a key focus for us. For example, we invest in companies developing new and more efficient power supply architectures for server racks. Optical networking technologies are also becoming increasingly important within AI data centres. As AI clusters grow, ever larger volumes of data need to be transferred between processors, memory and other components efficiently and with minimal delay. Traditional copper connections are increasingly reaching their physical limits. This is supporting a shift towards optical connections, which provide greater bandwidth while also improving energy efficiency. We believe this represents a multi-year investment opportunity.
Energy conversion and storage accounts for around 25% of the portfolio. Which new or particularly promising innovations do you currently see in this area? How do you expect the market to develop?
Within Energy Conversion, we invest in companies that provide power semiconductors used, for example, to convert direct current into alternating current or to adjust voltage levels. These are broadly diversified semiconductor companies serving a wide range of end markets, including IT, automotive, industrial applications and consumer products.
At present, these companies are seeing their strongest growth potential in AI data centres. Even small improvements in efficiency can generate significant energy savings when applied at scale. New semiconductor materials such as silicon carbide and gallium nitride enable faster switching speeds, lower energy losses and more compact systems. We expect the power semiconductor companies in our portfolio to grow revenues by around 10–15% per year over the medium term.
Battery storage systems also remain an important part of ensuring a reliable electricity supply. We continue to expect robust growth in global storage capacity in 2026. Key drivers include growing requirements for grid stability, rising electricity demand from AI data centres, and additional revenue opportunities for storage operators through participation in electricity markets.
The Fund was launched on 30 September 2021 and has since grown to assets under management of almost €800m. How has the portfolio developed over the past five years, and what is your outlook for the next five?
The first five years have confirmed the strength of the underlying drivers of electrification. On the demand side, this has included the rapid growth of AI data centres. At the same time, the trend has continued to receive regulatory support against a backdrop of significant geopolitical change. In such a dynamic environment, our active management approach, based on fundamental analysis and diversification across the entire value chain, has proved very valuable.
Focusing on companies with strong balance sheets, technological leadership and exposure to new structural growth drivers has been critical in navigating volatility while maintaining the Fund’s long-term thematic focus.
Over the next five years, we expect the global trend towards electrification to accelerate further. AI data centres will continue to put significant pressure on power generation capacity and grid infrastructure. The necessary investment in electricity grids and high-performance data networks is likely to remain an important theme for many years. This is particularly the case as the expansion of AI data centres has so far been heavily concentrated in the US, and we expect investment to become increasingly global.
It will also be interesting to see whether nuclear power, which has recently experienced something of a renaissance, can maintain its momentum. Its ability to provide baseload power is well suited to the round-the-clock electricity requirements of data centres. Advanced reactor designs incorporate passive safety systems, while modular solutions could help reduce manufacturing and installation costs over the longer term.
Outside the US, the electrification of transport and buildings will remain important growth drivers, particularly in Europe and Asia. This includes electric vehicles as well as heat pumps and heating, ventilation and air-conditioning systems.
The major unknown is how quickly physical AI – in the form of humanoid robots, autonomous vehicles and other intelligent mobile devices – will develop, and how much additional electricity demand this will create. What is clear is that energy efficiency will be critical to making physical AI products economically competitive.
Given the wide range of growth drivers, our investment universe is likely to become even broader in the future. However, our focus will remain on technology and infrastructure providers that enable the generation, transmission and storage of electricity and, above all, its efficient use across a growing range of end markets.
