Brookfield’s Connor Teskey on the Real Bottleneck in the AI Buildout

Summary

• Connor Teskey serves as CEO of Brookfield Asset Management, having joined the firm in 2012 at age 24 to manage approximately $1.3 trillion across infrastructure, renewable power, real estate, private equity, and credit.
• Teskey leads the energy group at Brookfield, which has grown rapidly over the last 10 years and focuses on energy and infrastructure as dominant themes.
• Demand for energy has become the critical input to growth for major companies and countries, creating a scarcity that drives a supply-demand imbalance.
• The current capital need for infrastructure is described as the greatest in the history of mankind, with returns expected to remain attractive through the end of the decade and beyond.
• Electricity is identified as the single biggest bottleneck to growth for the world's greatest companies and largest countries.
• Demand for AI infrastructure and supporting energy is exceptionally high, while supply remains a small fraction of that demand.
• Even if demand growth slows, plateaus, or declines, a huge supply-demand imbalance will persist for providers of these assets.
• The primary bottleneck in the AI buildout is not capital or demand, but the operational capability to complete land development, secure grid connections, build power supply, and operate large-scale gigafactories.
• The market is increasingly favoring providers that offer both significant capital and strong operating capabilities.
• AI infrastructure buildouts in the US are driven largely by domestic large technology companies and hyperscalers.
• European AI buildouts are driven by global technology companies expanding into the region and by sovereigns backing infrastructure to ensure national access to productivity tools.
• Sovereign AI involves nation-states acting as initial off-takers for AI infrastructure, with agreements signed in France, Sweden, and Qatar.
• Brookfield's energy thesis has shifted from a climate case to a commercial one focused on speed to market, availability, and energy security.
• The firm does not accept return discounts for decarbonization impacts, aiming for attractive risk-adjusted returns that also benefit society.
• A supply-demand imbalance began in the late 2010s due to reindustrialization and electrification, which AI later exaggerated.
• Energy storage is the fastest-growing segment of Brookfield's energy business to offset the intermittency of low-cost renewables.
• Large electricity users are increasingly focusing on a smaller number of scale providers who can deliver on time and on budget rather than multiple small suppliers.
• Brookfield has shifted from selling power primarily to utilities and governments to selling the majority of power directly to corporations.
• The firm prefers to build new strategies internally when capabilities exist, but acquires firms like Oaktree to accelerate entry into core pillars like credit.
• Brookfield acquired a majority stake in Oaktree in 2019 and later achieved full ownership to capture a large market opportunity.
• The firm operates in 50 countries with headquarters in New York, having originated in Canada in 1899.
• Teskey's transition to CEO was a methodical, incremental process spanning three years, supported by a culture of senior mentorship.
• Brookfield mixes experienced leadership with young energy to maintain fresh perspectives and relatability to a younger workforce.
• The firm deploys capital in a decentralized manner for sourcing and execution while allocating capital centrally to ensure global perspective and risk-adjusted returns.
• The alternatives industry is expected to grow significantly due to increasing institutional allocations and low penetration in the individual market.
• Private market investments offer return premiums, stability relative to public markets, and diversification as companies stay private longer.
• Private capital is better suited for large infrastructure projects that require years of non-income production before generating cash for decades.
• Teskey cites his ability to simplify things as his greatest strength as an investor.
• Teskey's best advice from outside the business is to remember that investing is a people business where trust and enjoyment drive deals.
• Teskey spends his time out of the office with his wife and young children.
• Teskey admires Sam Pollock for building Brookfield's infrastructure business.
• Teskey is most excited about industries where the question is how much growth is possible rather than if growth is possible.