While digital infrastructure assets like data centres have become a key component of super fund portfolios in the last few years, John Pearce, chief investment officer of the $166 billion UniSuper, is growing increasingly cautious on the boom.  

“It’s getting late in the party,” Pearce tells Investment Magazine. “I’m fine having invested in Goodman and Next DC {in equities]; they’ve done it before, they’ve got their sites, they’ve got the power lined up. They haven’t done the contracts but the contracts will come.

“Getting involved at building a data centre today at a project level – do you really want to own that data centre in seven years’ time if you can’t flip it? I can’t get myself comfortable with that.”

Pearce doesn’t think demand is the problem – it seems to be “insatiable” – but questions whether investors are effectively taking on technology debt in the rush to invest in data centres being built today, or misreading the regulatory tea leaves.

“Is the technology still going to be the right technology? Are there going to be power constraints? Is there going to be a problem because the demand on the grid is such that the politicians and regulators will come and say ‘you’ve got to turn that off because we can’t afford to lose votes over blackouts’ – all of that stuff is playing in my mind.” 

Pearce’s comments came after the fund released its FY25-26 return, where it made 10.4 per cent in its default balanced option. US equities drove a significant portion of that, but the fund has also been playing in Japan, and has closed off its underweight to China and reversed its overweight to India – returning to the benchmark weight in both – with Pearce saying that India stands to lose in the AI boom. 

“It doesn’t have any AI champions. There’s two dominant players, US and China; you’ve always got a question mark about the investability of China, and then you’ve got to go to Japan, Taiwan or Korea. Outside of those countries there’s no real AI story.

“India doesn’t really have a story, and it’s got the sorts of jobs that AI is going to disrupt. Whether or not you believe that is another thing, but in terms of momentum it’s hard to see India standing in the way of that momentum at the moment… If you wanted to diversify from the AI theme, we’d probably keep our money in Australia.”

China, on the other hand, has a “very compelling AI story” – but most funds have “95 cents in the US and five cents in China”.

“There’s good reason for that, but we think China’s worthy of a bit more investment,” Pearce says. “If you look at the discourse in China and how it’s changed – Xi Jinping, three or four years ago, talked all about common prosperity and knocked around the tech sector, the education sector, the property sector.

“I think there’s a realisation among policy makers, and you can hear it in the language, that China cannot win this AI race without the private sector being involved.”