Unlocking the AI-Driven Infrastructure Boom in Frontier Markets: A Strategic Play for Long-Term Growth

The global shift toward artificial intelligence (AI) is not just a tech revolution—it's an infrastructure revolution. As AI models grow more complex, the demand for energy, data centers, and digital connectivity is surging. Yet, while developed markets scramble to meet these needs, frontier and emerging small countries are quietly becoming the next frontier for innovation. For investors, this creates a unique opportunity: leveraging small-cap growth in under-followed markets to capitalize on AI's energy demands, U.S. onshoring, and the global energy transition. The Wasatch Frontier Emerging Small Countries Fund (ticker: WASEX) is uniquely positioned to exploit this convergence, offering a compelling path to long-term capital growth.

The AI Infrastructure Bottleneck and Frontier Market Potential

AI's insatiable appetite for computing power is straining global infrastructure. Data centers, which already consume 2% of the world's electricity, are projected to double their energy use by 2030. In frontier markets, where energy grids are often underdeveloped, this creates a paradox: these regions are both challenged by AI's demands and ripe for transformation.

The Wasatch fund's bottom-up, fundamental approach allows it to identify companies building the infrastructure to meet this demand. For example, small-cap firms in frontier markets are investing in renewable energy projects (e.g., solar farms, wind turbines) to power data centers, or constructing fiber-optic networks to support AI-driven connectivity. These companies often operate in sectors with limited institutional coverage, giving the fund's active management style a distinct edge. By focusing on companies with strong balance sheets, sustainable competitive advantages, and earnings growth outpacing their sectors, the fund can target undervalued opportunities before they hit the radar of larger investors.

U.S. Onshoring and the Global Energy Transition: A Dual Tailwind

The U.S. is aggressively reshoring manufacturing, driven by geopolitical tensions and policy incentives like the CHIPS Act and Inflation Reduction Act. This onshoring boom requires robust infrastructure—factories, logistics hubs, and clean energy grids. Frontier markets, with their lower labor costs and untapped resources, are becoming critical partners in this effort.

Consider a small-cap company in a frontier market building modular data centers for U.S. tech firms seeking to localize operations. Or a firm developing hydrogen production facilities to power green steel plants in emerging economies. These are the types of high-conviction, long-term growth stories the Wasatch fund targets. Its portfolio of 30–70 positions ensures concentrated exposure to such opportunities while managing risk through rigorous due diligence.

Why the Wasatch Fund Stands Out

Most investors overlook frontier markets due to their perceived volatility and complexity. However, the Wasatch fund's strategy is designed to thrive in this environment. By systematically covering the frontier and emerging small country universe, it avoids the “one-size-fits-all” approach of passive funds. Instead, it prioritizes companies with market caps under $7 billion—often too small for global giants but with explosive growth potential.

For instance, a company in a frontier market might be pioneering AI-driven grid optimization software to stabilize power supply for data centers. Another could be constructing EV charging networks in regions where U.S. automakers are establishing new manufacturing hubs. These niche opportunities align with the fund's focus on earnings growth, competitive moats, and management quality.

Risks and Rewards

Of course, frontier markets come with risks—political instability, currency fluctuations, and regulatory hurdles. But the fund's active management and risk-mitigation strategies (e.g., diversification across sectors and countries) help navigate these challenges. Moreover, the energy transition and onshoring trends are structural, not cyclical. As AI adoption accelerates, the infrastructure needs of frontier markets will only intensify, creating a durable growth tailwind.

The Verdict: A High-Conviction Bet for the Long Term

For investors seeking exposure to the AI-driven infrastructure boom without overpaying for crowded tech stocks, the Wasatch Frontier Emerging Small Countries Fund offers a compelling alternative. Its focus on small-cap, high-growth companies in frontier markets—combined with a disciplined, bottom-up approach—positions it to outperform in a world where AI, energy transition, and onshoring are reshaping global economics.

While the fund may not be for the faint of heart, its potential to capitalize on under-followed opportunities makes it a standout in the small-cap emerging markets space. As the infrastructure needs of AI and onshoring collide with the untapped potential of frontier economies, this fund could deliver outsized returns for those with the patience to ride the long-term wave.

In a market where most investors are chasing the next Silicon Valley darling, the real gold lies in the overlooked corners of the world. The Wasatch fund is your shovel.