Barlow’s Research Roundup: Scotiabank analyst sees Brookfield Infrastructure Partners as undervalued

Scotiabank is bullish on Brookfield Infrastructure Partners, citing 10%+ FFO growth for 2026, a 5% dividend yield, and attractive valuation at 8x 2028E P/FFO and 12.8x EV/EBITDA, with a $44 target price. Morgan Stanley said Alphabet won the hyperscaler earnings round, highlighting 63% Google Cloud growth, a nearly doubling of backlog to $462B, and strong AI-related demand, while AWS also posted 28% growth and a $364B backlog. RBC said crude markets remain physically tight despite near-term moderation, with a potential summer crunch supported by refinery outages, export restrictions, and rising seasonal demand.

Analysis

The key setup is not “good quarter, good guide” but a temporary dislocation between asset-level fundamentals and wrapper-level sentiment. BIP is likely being priced as a proxy for BIPC simplification noise, yet the underlying cash-flow engine sits in the most durable demand pools in the market: digital power, data-center adjacency, and regulated/logistically constrained infrastructure. That makes the selloff more interesting than the headline suggests, because the market is discounting a structural capital-structure event while ignoring the higher-quality growth duration embedded in the assets.

For hyperscalers, the important second-order signal is that AI monetization is shifting from narrative to throughput and backlog conversion. The surprise is not simply cloud growth; it is the acceleration in committed demand that implies capacity, not demand, is the binding constraint. That tends to favor the platform with the best internal chip stack and enterprise distribution, but it also raises a subtle competitive issue: if third-party accelerator economics are real, the winners may extend beyond the obvious cloud duopoly into networking, power, and data-center supply chains over the next 6-18 months.

The crude commentary is a reminder that futures can stay complacent while the physical market tightens underneath. If summer outages and export limits persist, the first casualties are typically refiners and downstream industrials, not the upstream names that already discount some tension. The more actionable read is that physical tightness can persist long enough to force demand rationing, which often shows up with a lag of weeks to months rather than immediately in headlines.

Consensus may be underestimating how much of the BIP/BIPC spread is self-inflicted simplification overhang rather than operating deterioration, and overestimating how quickly cloud margins normalize as AI capex rises. The better contrarian frame is that AI infrastructure beneficiaries with scarce right-of-way, power access, or land near demand centers can re-rate even if the pure software names wobble. In other words, the market may be paying too much for visible software beta and too little for bottleneck assets.

Key Decisions for Investors

• Add BIP on weakness over the next 1-3 weeks; target a 12-month re-rating as simplification risk clears. Use a stop below the recent post-quarter low; risk/reward favors 2:1 or better if the market stops treating BIP as a BIPC tracking error.
• Fade BIPC relative to BIP via long BIP / short BIPC pair for 1-3 months. The thesis is that the cleaner cash-flow story should outperform once structure anxiety fades; cover if the spread stops widening after the review details emerge.
• Maintain/trim overweight GOOGL versus AMZN and MSFT into the next 1-2 quarters. The upside is that backlog conversion and AI monetization are proving out faster at Google Cloud; the risk is higher capex intensity, so use a staggered entry rather than a full-size jump.
• Express the AI infrastructure second-order trade with a long basket of infrastructure bottlenecks (power, fiber, data-center real estate, grid equipment) against a short basket of high-multiple AI software beneficiaries over 6-12 months. The trade works if capacity scarcity, not app-layer adoption, remains the binding constraint.
• For crude, stay long physical-tightness beneficiaries selectively over the next 4-8 weeks, but hedge with downside protection in case demand destruction starts to show up. The cleanest risk/reward is via call spreads or defined-risk energy longs rather than outright beta.