Enjoying this content?
Get three under-the-radar investment themes delivered to your inbox every Monday.
Aircraft lessors are hitting decade-high lease yields on supply shortages
Theme 1: Aircraft Leasing Golden Age on Supply Shortages and Yield Expansion
The aircraft leasing sector is experiencing a fundamental shift in supply-demand dynamics. On the supply side, aircraft and engine shortages are constraining availability while production ramp-ups at Boeing and Airbus remain gradual. This scarcity is giving lessors unprecedented pricing power, with weighted average lease yields climbing to levels not seen since the early 2010s.
On the demand side, global airline profitability is projected to remain solid across all regions in 2026, supported by sustained passenger volume growth, lower fuel costs, and a weaker U.S. dollar. Airlines are maintaining high aircraft utilization rates while facing limited alternatives for fleet expansion, forcing them to accept higher lease rates.
The secondary market is showing exceptional strength with increasing sales activity and strong gains on aircraft disposals. Capital markets access remains robust with over $10 billion in aircraft ABS issuance in 2025, potentially surging to $15 billion in 2026.
Stocks that would benefit:
AER: AerCap Holdings - As the world's largest aircraft lessor with approximately 3,000 aircraft, AerCap is uniquely positioned to capitalize on the supply shortage dynamics with its modern, fuel-efficient fleet (75% new technology, targeting 85% by 2030). The company delivered record financial performance in Q2 2025 with GAAP net income of $1.3 billion, driven by strong execution, asset demand, and expanding lease yields. Management has consistently raised its 2025 adjusted EPS guidance, reflecting confidence in sustained lease revenue growth and expanding net spreads in the current favorable leasing environment. Read More →
AL: Air Lease Corporation - Air Lease stands to benefit from a $5 billion lease re-rating opportunity as approximately $5 billion in net book value of lower-yielding COVID-era leases will mature by end-2026. This creates the opportunity to re-lease at rates 30-50% higher, potentially driving 150-200 basis points of portfolio yield improvement through 2029. The company's order book, acquired at deep discounts during 2020-2022 industry stress, creates durable pricing power and asset value appreciation in the current supply-constrained market, where persistent aircraft supply constraints are expected to last 3-4+ years. Read More →
FTAI: Fortress Transportation and Infrastructure Investors - FTAI Aviation is rapidly solidifying its position as a leader in the CFM56 and V2500 engine aftermarket through its proprietary Maintenance, Repair, and Exchange (MRE) model. This vertical integration approach allows FTAI to capitalize on the aircraft supply shortage by offering cost-effective, flexible solutions to airlines struggling with fleet expansion. The company's Aerospace Products segment is experiencing accelerating growth with Q3 2025 Adjusted EBITDA up 77% year-over-year, directly benefiting from the tight aircraft supply environment that forces airlines to maximize existing asset utilization through maintenance and engine services. Read More →
Theme 2: Power Infrastructure Boom on AI Data Center Electricity Demand
The power infrastructure sector is experiencing a fundamental demand shift driven by artificial intelligence and data center proliferation. AI workloads require massive, reliable electricity supply that is straining existing grid capacity and forcing accelerated infrastructure investment. This represents a structural change rather than cyclical demand, as AI adoption continues expanding across industries.
On the supply side, grid modernization has been chronically underfunded for decades, creating bottlenecks that are now becoming politically visible as electricity prices rise. Distributed storage capacity has grown fivefold since 2020 to 4.8 GW in 2024, with another 4 GW expected by 2026, indicating accelerating infrastructure investment.
The market is recognizing what analysts call the "AI-Power Nexus" where technologies once thought to reduce physical resource needs actually require massive infrastructure buildout. Rising electricity prices are pulling forward capital spending decisions that would normally take years, creating sustained demand for generation equipment, grid components, and installation services.
Stocks that would benefit:
GE: GE Vernova - Positioned at the epicenter of the AI data center buildout with a unique end-to-end portfolio spanning power distribution, liquid cooling, and control systems that commands $2.4-3 million in content per megawatt. The company's Electrical Americas segment, generating 30%+ operating margins and 9% organic growth, has become GE's crown jewel with a $12 billion backlog that grew 20% year-over-year. This demonstrates that capacity constraints and supply chain investments are translating into sustainable competitive advantages as AI data centers drive unprecedented electricity demand, creating a multi-year growth runway with embedded pricing power. Read More →
PWR: Quanta Services - As a leading electric power infrastructure contractor, Quanta has evolved beyond traditional construction into an integrated infrastructure solutions platform that expands its addressable market by 40-60%. The company is capturing disproportionate value from the $211 billion utility capex boom through 2027, driven specifically by data center power demand (45GW needed), electrification, and grid modernization. Quanta's nine-month 2025 results demonstrate this thesis with 21.6% revenue growth to $20.6 billion and expanding operating margins in both Electric Infrastructure Solutions (11.4%) and Underground Utility (8.4%) segments, directly benefiting from the AI-driven power infrastructure buildout. Read More →
ETN: Eaton Corporation - Eaton has positioned itself as the indispensable infrastructure provider for the AI data center buildout with its comprehensive electrical components and power management systems portfolio. The company's recent $9.5 billion Boyd Thermal acquisition transforms its competitive position in liquid cooling, providing direct engineering relationships with chip designers and establishing a technical moat in a critical area for AI data centers. This acquisition, combined with Eaton's existing electrical equipment expertise, creates an end-to-end solution for the power-hungry AI infrastructure market, allowing the company to benefit from both the initial buildout and ongoing power management needs of data centers. Read More →
Theme 3: Data Storage Hardware Recovery on Supply Shortages and AI Infrastructure Demand
The storage sector is experiencing a fundamental transformation from commodity hardware provider to critical AI infrastructure component. Severe supply shortages of high-capacity drives have persisted throughout 2025, with lead times for major cloud customers extending beyond 52 weeks in both Q2 and Q3. This supply-demand imbalance is allowing storage providers to dictate terms to major tech companies for the first time in over a decade.
On the demand side, AI workloads require massive storage capacity for training data, model storage, and inference operations. High-Bandwidth Memory demand has driven companies like Micron to nearly triple revenue from 2024 levels. The rollout of AI-integrated PCs and smartphones expected in Q2 2026 will create additional consumer storage refresh cycles.
Supply constraints are being compounded by the technical complexity of next-generation storage technologies. Seagate's Heat-Assisted Magnetic Recording (HAMR) technology began shipping 40TB+ drives to early testers in late 2025, but production ramp-up remains limited. This technological moat is supporting sustained pricing power and margin expansion across the sector.
Stocks that would benefit:
WDC: Western Digital - Western Digital has completed its transformation into a pure-play HDD company, delivering a 660 basis point gross margin expansion to 43.9% and generating $599 million in quarterly free cash flow. This transformation has eliminated the cyclical drag that previously masked the underlying profitability of its core business. The company is directly benefiting from AI-driven data creation, which is fundamentally altering the storage landscape with management seeing exabyte growth trending toward 23% CAGR versus a 15% base case. WDC's technology leadership through UltraSMR (32TB drives shipping today) provides immediate capacity advantages and customer lock-in, creating pricing power in a supply-constrained environment that extends through calendar 2026. Read More →
STX: Seagate Technology - Seagate's decade-in-the-making heat-assisted magnetic recording (HAMR) technology is now ramping at scale with over 1 million Mozaic drives shipped and five global cloud service providers qualified. This isn't an incremental upgrade—it fundamentally changes the unit economics of mass storage by increasing capacity per drive while reducing cost per terabyte. The company's build-to-order model has committed nearly all high-capacity nearline production through calendar 2026, with visibility extending into 2027 via long-term agreements. This structural shift from spot-market volatility to contracted demand insulates revenue from traditional storage downturns while the technical complexity of HAMR creates a multi-year margin expansion opportunity that competitors cannot easily replicate. Read More →
MU: Micron Technology - Micron has engineered a fundamental transformation from a cyclical commodity memory supplier into an AI infrastructure enabler, with data center revenue reaching a record 56% of total revenue in fiscal 2025 and HBM approaching an $8 billion annualized run rate. The company's technology leadership in 1-gamma DRAM, G9 NAND, and HBM3E/HBM4 creates a differentiated product portfolio that commands premium pricing and expands gross margins to 41%, up 17 percentage points year-over-year. The HBM trade ratio of 3:1 (and exceeding 3:1 for HBM4) creates a structural supply constraint on conventional DRAM, amplifying pricing power and forcing a strategic reallocation of wafer capacity toward high-margin AI products that directly support the massive storage requirements of AI workloads. Read More →
Join our Discord community to give feedback, request features, or ask questions about the newsletter or website.
https://discord.gg/yePwyWrwJBThe content is for informational purposes only and should not be construed as financial or investment advice. We are not financial advisors. Consult with a qualified professional before making any investment decisions. Any actions you take based on information from this site are solely at your own risk. Past performance is not indicative of future results. Investments may lose value and are not guaranteed.
Loading more newsletters...
