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Iceland: the land of fire, ice … and digital infrastructure?


Five years ago I wouldn’t have pictured myself sitting on a plane to Iceland in the name of equity research. What changed over that period was a dramatic evolution in how we use the internet. Businesses embraced cloud data storage, artificial intelligence “AI” rapidly caught up with humans and Netflix enabled us to impatiently binge-watch video on-demand.

As a thematic equity investor focused on global cities, I witnessed these trends creating massive demand for digital infrastructure: the data centres, mobile phone towers and fibre optic cables that form the plumbing of the internet.

Initially this infrastructure was built around leading global cities such as London, Washington DC and Singapore. Pioneering tech firms like Amazon and Google naturally gravitated to where their customers lived and worked.

Five years later, however, resources have become scarcer, land prices have soared and data connectivity has improved. The tech giants are shifting their attention to where their services are now growing most rapidly. These include the next tier of developed European cities - Madrid, Vienna and Berlin - as well as key cities in emerging markets that we consider ‘the digital frontier’. (Read more about the digital frontier here).

Critically, sustainability has leapt to the top of the corporate agenda, at the same time as Europe experiences an energy crisis.

At first glance, the sparsely developed volcanic island of Iceland, with a population 376,000, is an unlikely nexus for these trends. In fact, it's about as far from a global city as my market research has taken me.

As my taxi makes the 40-minute journey from the airport to its capital Reykjavik, where 60% of the population lives, we pass through expansive lava fields. I can see snow-capped mountains in the distance and motionless lakes accompanied by the odd brightly coloured house.



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