Key Takeaways
- • Ares Management is taking a cautious stance on financing GPUs and AI chips, with management stating on the firm's Q3 earnings call on October 29 that it does not know "how to underwrite the decline and depreciation curves" for that technology.
- • Ares estimates AI and digital infrastructure will require more than $5 trillion in capital expenditure through 2030, including roughly $3 trillion for GPU and chip financing and $2 trillion for physical data centres, power generation and transmission.
- • Ares views the $2 trillion physical infrastructure opportunity as the more attractive segment, citing simpler underwriting, existing sector capabilities and attractive risk-adjusted returns across debt and equity.
- • Ares is targeting data centre investments in Tokyo, Osaka and other global hubs through pre-leased projects with investment-grade hyperscaler tenants on 12- to 15-year leases.
Summary
Ares Management is adopting a cautious approach to financing graphics processing units (GPUs) and other chips used in artificial intelligence infrastructure, citing uncertainty over how quickly the technology depreciates and the complexity of underwriting these transactions. Management made the comments on the firm's third-quarter earnings call on Thursday, October 29.
The alternative asset manager estimates that AI and digital infrastructure will require more than $5 trillion in capital expenditure through 2030. Of that total, about $3 trillion is expected to go to GPU and chip financing, and about $2 trillion to physical data centres and adjacent power generation and transmission infrastructure. Ares considers the latter the more attractive opportunity, given the relative simplicity of underwriting physical assets and the firm's existing capabilities in the sector. "I, for one personally, do not know how to underwrite the decline and depreciation curves on that type of technology," management said regarding GPU and chip financing.
The firm also flagged concentration risk and the possibility that chips lose value as technology advances and newer processor generations arrive. Ares described the $2 trillion physical infrastructure segment as a large addressable market relative to available capital, offering attractive risk-adjusted returns across debt and equity investments.
Ares is targeting data centre investments in Tokyo, Osaka and other global hubs. These projects are pre-leased to investment-grade hyperscaler counterparties under 12- to 15-year leases. Management said this structure mitigates the key risk, stating, "With that risk boxed, we feel like we can generate really attractive returns regardless of the ultimate, you know, technology outcomes here."
The comments come as financing demand for AI infrastructure grows, while investors become more discerning about counterparty risk and pricing amid market volatility and higher funding costs.
The alternative asset manager estimates that AI and digital infrastructure will require more than $5 trillion in capital expenditure through 2030. Of that total, about $3 trillion is expected to go to GPU and chip financing, and about $2 trillion to physical data centres and adjacent power generation and transmission infrastructure. Ares considers the latter the more attractive opportunity, given the relative simplicity of underwriting physical assets and the firm's existing capabilities in the sector. "I, for one personally, do not know how to underwrite the decline and depreciation curves on that type of technology," management said regarding GPU and chip financing.
The firm also flagged concentration risk and the possibility that chips lose value as technology advances and newer processor generations arrive. Ares described the $2 trillion physical infrastructure segment as a large addressable market relative to available capital, offering attractive risk-adjusted returns across debt and equity investments.
Ares is targeting data centre investments in Tokyo, Osaka and other global hubs. These projects are pre-leased to investment-grade hyperscaler counterparties under 12- to 15-year leases. Management said this structure mitigates the key risk, stating, "With that risk boxed, we feel like we can generate really attractive returns regardless of the ultimate, you know, technology outcomes here."
The comments come as financing demand for AI infrastructure grows, while investors become more discerning about counterparty risk and pricing amid market volatility and higher funding costs.
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