Tyler Rosen: You break the world into traditional and alternative. Good thing about traditional, so things like natural gas and coal, is it's reliable 24/7 365 energy. Unfortunately, it has the emissions profile we don't like. Alternatives, let's just call it wind and solar, has the emissions profile we want, but it's intermittent and variable. You know, if you're a data center CEO, you're feeling pretty good about your business today. You kind of wake up with night sweats about the power going out, right? You cannot lose power. You have a very expensive metal shell that's cooling servers and providing electricity and energy which means hey, I can't take the intermittency. I've got to use the base load. Nuclear is sort of the one resource that can kind of serve both masters. It is 24/7 365 low variable cost very high capacity factor and it's also pretty clean.

Joe Weisenthal: Hello and welcome to another episode of the Odd Lots podcast. I'm Joe Weisenthal.

Tracy Alloway: And I'm Tracy Alloway.

Joe Weisenthal: Tracy, I saw an interesting headline this morning. There was this comment from Jensen Huang. He was at a conference, the CES conference, and he was talking about how in the future, I guess, their chips are getting more efficient as chips tend to do that they may not as need as much intense cooling infrastructure or cooling equipment for future data centers. And a bunch of those cooling names like Trane Technologies, they're like really getting clobbered because we know those have been like some of the big winners from the AI boom.

Tracy Alloway: I can hear all the private equity shops that bought HVAC outfit screaming from over here. No, it is a really interesting headline, right? Because you think about this as a technology space. AI is technology, but it has this huge infrastructure aspect attached to it. Infrastructure investors from what I understand, you know, historically have tended to like relatively stable returns, right? You invest in it because you expect this to be a pretty reliable business, but because you have infrastructure that is now tied to tech, it seems like there's a pretty big risk that like every year or every two years or maybe even months now, there's going to be some huge tech upgrade that just changes the equation entirely.

Joe Weisenthal: That's a good point. Like I think like the first time years and years ago I started hearing about infrastructure investing, it was like, oh, we bought a toll road, right? Or we bought an airport. Airports by and large they don't get disrupted very much. But yeah to your point especially now that there's such a link with tech just like the sort of volatility of what's going to win out or what's needed seems highly uncertain.

Tracy Alloway: Yeah, and of course the other obvious thing going on at the moment is everyone's talking about AI valuations. Is the buildout getting ahead of itself and are all these companies actually going to be able to generate enough cash flow that backs up all this investment spend? One of the themes that's recurring over and over again these days is just like to make money it feels like you really have to get your hands dirty. Physical things of all sorts and physical things have been in our face constantly since COVID. Like this is just sort of the physical world is sort of like the story of our time.

Joe Weisenthal: Let's bring in our guest. Well, we really do have the perfect guest who long lots of experience in this realm. We are going to be speaking with Tyler Rosen. He's a portfolio manager, global listed infrastructure and natural resource equities at Cohen & Steers.

Tyler Rosen: Thanks for having me. Cohen & Steers, we're a long-only asset manager. We primarily invest in real assets. Where I help is our global listed infrastructure and our natural resource equity strategies. Infrastructure is communications things like cell towers, data centers and satellites; utilities, this is electric, gas, water, renewables; transportation, the toll roads, airports, marine ports and freight rails; and then energy is midstream pipelines.

Joe Weisenthal: So how busy have you been over the past year or two?

Tyler Rosen: It's been very busy. I mean my joke used to be that I invest in all the old economy stuff. Uh now it's like the new economy stuff and it's the stuff that people are really excited about. They've really only surfaced kind of to the front page of Bloomberg every morning in the last 18 months. We see investment cases in traditional utilities, tons of new alternatives, nuclear, renewables, pipelines.

Tracy Alloway: And what's the balance of power actually like between investors and the companies that need investment at the moment?

Tyler Rosen: We're now at a place in the cycle where the investment needs are so big that it's creating pretty big challenges for companies. Take the utility sector as an example. We've gone to such a level now that it's really causing affordability problems and some utilities we think are really going to struggle because elections are being won about utility bills. Other utilities on the other hand actually you invite data centers into your service territory and it lowers bills.

Joe Weisenthal: Hey, just real quickly, data centers lowering bills. What's that all about?

Tyler Rosen: It's very nuanced. The utility invests in its rate base. Let's say their rate base is $10 billion. They're allowed a return on equity. Maybe it's 10%. They earn a billion dollars. Then they charge their cost to customers. You double your rate base. If you don't increase your customers, you could actually double your costs. There are some utilities that are long power. Every ratepayer is paying for power that's not actually being used. Bring a data center into that service territory, the data center itself might consume that power and you as the ratepayer are not actually going to be burdened by that cost in your monthly bill.

Tracy Alloway: But how feasible is it that you could get a data center that could actually in some way improve the electricity market in a particular state or location?

Tyler Rosen: We're not saying it's good everywhere. I'd say it's really actually bad in a lot of places and then it's really good in some places. You could have big stranded asset risk. Utility is going to spend a couple billion dollars. Maybe the data center leaves five years from now and then everybody's going to be stuck with a stranded asset.

Joe Weisenthal: At what point did it sort of dawn on you that a lot of companies that we had long associated with being sort of classically cyclical companies are secular winners now? I'm thinking of like a Caterpillar.

Tyler Rosen: One of the things that we believe about natural resources is that we've exited what we talked about as the era of abundance and we've entered the era of scarcity. You know, we just don't have enough of all the stuff that we need for the economy to grow. And the companies that actually facilitate ending that scarcity, there's just not as many of them because again there's been massive consolidation in these sectors.

Tracy Alloway: How do you guard against the possibility that we always end up with overcapacity at some point in the cycle?

Tyler Rosen: Can't avoid it. That will happen. Although infrastructure again it's generally assets that are monopolistic either by regulation or by competitive dynamic. You think about the US freight rails, you can't really build a new one.

Joe Weisenthal: Tell us about right now, January 2026. What is the math that you see out there?

Tyler Rosen: Global energy demand is kind of three factors: global population growth, the global economy, and the energy intensity of economic growth. What we saw was global energy demand rising from about 178,000 terawatt hours to 220,000 in 2040. That's basically recreating the entire global crude oil industry that's been around for 100 years in the next 16.

Tracy Alloway: Can you talk about the decarbonization initiatives from some of the hyperscalers?

Tyler Rosen: Five years ago it was clean, stable, more in that order. Today, it's kind of flipped, right? We need more. It has to be stable. And then we do want it to be clean. Hyperscalers who have a lot of cash, let's try to re-industrialize the nuclear economy. Let's continue to make investments in SMRs.

Joe Weisenthal: I think I'm very skeptical that we're going to have a nuclear renaissance in the US. I don't think there's going to be another Vogtle in the next 20 years.

Tyler Rosen: Phase one is let's just not shut it down. Phase two is can we turn on any of the stuff that we recently turned off? Turning on Three Mile Island. Phase three would be the sort of brownfield inside the fence nuclear facility buildout. That's like a 2032 to 2035 in service. And then we talk about SMRs, that's like 2035 to 2040.

Joe Weisenthal: Will we get another Vogtle?

Tyler Rosen: No utility will do it themselves. There is zero chance that a utility will say, "Hey, we're willing to do a green field new nuclear facility with no cost overrun risk." But I think the cost overrun risk will get covered by the government.

Tracy Alloway: Why doesn't the market signal work for something like uranium or copper?

Tyler Rosen: Companies are still being penalized for increasing capex and increasing supply. They want the discipline. Shale destroyed a lot of value 2010 to 2020. It's not going to happen naturally. That's why I think that the government is going to try to get it moving.

Joe Weisenthal: What parts of this energy story to you still feel underappreciated?

Tyler Rosen: Certain utilities. Today, the fastest growing utilities only trade 6% more expensive, but they're going to grow 2% more. Outside that, the picks and shovels types companies to the data center and re-industrialization buildout. Who made all the money in the gold rush? It was the Levis and the picks and shovels companies.

Tyler Rosen: A decade ago, we had a NIMBY world. That world transitioned to a BANANAS world. BANANAS is Build Absolutely Nothing Anywhere Near Anything. There's been a lot of data center backlash. It doesn't create any jobs in the local market and you're not really doing a lot for the local economy.

Joe Weisenthal: That was a great conversation. Tyler Rosen, thank you so much for coming on Odd Lots.

Tracy Alloway: It feels to me the government is the key risk here, the regulatory risk. Even though maybe the numbers pencil out at current commodity levels, in another 10 years the pendulum will swing back.