AI Boom Reportedly Presents $1.8 Trillion Opportunity for Private Credit

A surge in new AI projects has reportedly been good news for the private credit sector.

Tech companies need funding to build data centers for their artificial intelligence (AI) models, an effort that could require more than $1.8 trillion in funding by the decade’s end, Bloomberg News reported Thursday (May 1), citing an estimate from the Carlyle Group.

Some of that demand can be met by private markets, Carlyle CEO Harvey Schwartz wrote in a recent shareholder letter, per Bloomberg.

“There’s a need for private credit to facilitate the infrastructure build for AI, whether it’s chips or data center developments,” Mark Van Zandt, managing director and co-head of real estate at King Street Capital Management, told Bloomberg.

Public-market products such asset-backed bonds or traditional real estate debt, have financed data center projects, but these “can’t do it all,” he added.

According to Bloomberg, several tech companies have already tapped private credit, including startup Nscale, which is seeking a $1.8 billion private credit loan, on the back of a pending partnership with ByteDance.

And Meta hopes to raise billions to build its U.S. domestic centers, with Apollo Global Management and KKR as possible backers.

Ares Management Corp. has estimated private credit outfits could finance about $5.5 trillion of capital across debt and equity in global infrastructure, including AI-related projects, through 2035, according to a report this year.

“The capital needs are enormous,” Van Zandt said. “There’s a demand-supply imbalance in the market that will take some time to get resolved.”

The trend is happening as financial watchdogs are warning of possible risks related to private credit. For example, a recent Federal Reserve report notes that private credit stress was cited by roughly 20% of the Fed’s market contacts, while risks for nonbank financial institutions were cited in the mid-teen percentage of respondents.

This, PYMNTS wrote earlier this week, suggests “that these two avenues of financial shock are increasingly on the radar.”

The Fed report echoes concerns spotlighted in a separate stability report last month from the International Monetary Fund.

“It is crucial to strengthen policies that mitigate nonbank leverage and other vulnerabilities,” the report’s executive summary said. “Enhanced nonbank reporting requirements could help supervisors develop a systemwide and cross-sectoral perspective of risks and distinguish poorly governed and excessive risk-taking institutions from those that contribute more positively to financial intermediation.”

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