Key Takeaways
- • Blue Owl, Ares Management, KKR, Blackstone and Apollo are positioning alternative-asset portfolios around AI infrastructure, targeting data centres and power assets under long-term leases with investment-grade tenants.
- • Blue Owl operates or is constructing more than 130 data centres totaling nearly 14 gigawatts of leased and owned capacity, with another 21 gigawatts in its development pipeline.
- • Ares Management estimates AI-related capital expenditure demand will exceed $5 trillion through 2030, including roughly $2 trillion for data centre buildings and associated power generation and transmission.
- • Blackstone reports that about 96% of its data centre counterparties are investment grade, and that the majority of its data centre portfolio carries initial lease terms of 15 to 20 years.
- • Moody's flags borrower concentration, construction risk, residual-value uncertainty and circular financing as risks as AI funding shifts toward leveraged finance and private credit.
Summary
Wall Street's leading alternative asset managers are positioning to benefit from the artificial intelligence boom by investing in data centres and other critical infrastructure, while seeking to contain risk through long-term leases with financially strong tenants, according to Reuters. Shares of alternative managers rose on Thursday, with Blue Owl gaining 6.5%, Apollo climbing 3.7%, Ares rising 2%, and KKR and Blackstone each adding 2.5%.
Blue Owl co-CEO Marc Lipschultz said the firm owns physical infrastructure critical to the growth of the digital economy. Blue Owl typically leases these assets for 15 to 20 years with annual rent increases, which the firm says provides investors a predictable and growing income stream. The company has more than 130 data centres operating or under construction, representing nearly 14 gigawatts of leased and owned capacity, plus 21 gigawatts in its development pipeline. CFO Alan Kirshenbaum said the investments are not simply a bet on AI growth, but credit exposure to major technology companies including Microsoft, Amazon and Meta.
Ares Management is focusing data centre development on major metropolitan markets including Tokyo, Osaka, London and Sao Paulo. The firm pre-leases projects to investment-grade hyperscalers under 12 to 15 year contracts with no termination rights and inflation-linked rent increases. Blackstone said its data centre portfolio largely has initial lease terms of 15 to 20 years, with around 96% of counterparties rated investment grade and an average market capitalisation of $2.5 trillion. President Jonathan Gray indicated these characteristics make the sector exposure relatively low-risk.
The investment wave spans data centres, power generation, transmission, equipment and software, and is described by industry participants as one of the largest capital expenditure cycles in history. Ares estimates AI-related capex demand will exceed $5 trillion through 2030. Financing is shifting from equity and investment-grade debt toward leveraged finance and private credit. Ares CEO Michael Arougheti said investors are becoming more selective about counterparty risk and its pricing following an AI-stock selloff earlier this month, and downplayed concerns that higher borrowing costs would significantly curb spending, noting companies could turn to equity.
Moody's said this week that the sector creates substantial, long-duration financing needs, while highlighting concerns around borrower concentration, construction challenges, residual-value uncertainty and circular financing arrangements, even though many borrowers carry investment-grade ratings. Concerns also persist that heavily indebted cloud providers known as neoclouds could default, and that AI spending may not generate sufficient returns. The sustainability of the strategy will depend on continued demand for computing power, tenant financial strength, and technology companies' ability to earn adequate returns on their infrastructure investments.
Blue Owl co-CEO Marc Lipschultz said the firm owns physical infrastructure critical to the growth of the digital economy. Blue Owl typically leases these assets for 15 to 20 years with annual rent increases, which the firm says provides investors a predictable and growing income stream. The company has more than 130 data centres operating or under construction, representing nearly 14 gigawatts of leased and owned capacity, plus 21 gigawatts in its development pipeline. CFO Alan Kirshenbaum said the investments are not simply a bet on AI growth, but credit exposure to major technology companies including Microsoft, Amazon and Meta.
Ares Management is focusing data centre development on major metropolitan markets including Tokyo, Osaka, London and Sao Paulo. The firm pre-leases projects to investment-grade hyperscalers under 12 to 15 year contracts with no termination rights and inflation-linked rent increases. Blackstone said its data centre portfolio largely has initial lease terms of 15 to 20 years, with around 96% of counterparties rated investment grade and an average market capitalisation of $2.5 trillion. President Jonathan Gray indicated these characteristics make the sector exposure relatively low-risk.
The investment wave spans data centres, power generation, transmission, equipment and software, and is described by industry participants as one of the largest capital expenditure cycles in history. Ares estimates AI-related capex demand will exceed $5 trillion through 2030. Financing is shifting from equity and investment-grade debt toward leveraged finance and private credit. Ares CEO Michael Arougheti said investors are becoming more selective about counterparty risk and its pricing following an AI-stock selloff earlier this month, and downplayed concerns that higher borrowing costs would significantly curb spending, noting companies could turn to equity.
Moody's said this week that the sector creates substantial, long-duration financing needs, while highlighting concerns around borrower concentration, construction challenges, residual-value uncertainty and circular financing arrangements, even though many borrowers carry investment-grade ratings. Concerns also persist that heavily indebted cloud providers known as neoclouds could default, and that AI spending may not generate sufficient returns. The sustainability of the strategy will depend on continued demand for computing power, tenant financial strength, and technology companies' ability to earn adequate returns on their infrastructure investments.
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