The caution flag over AI lending
AI infrastructure is expensive and growing fast, and private credit keeps getting the call to fund it. Carlyle's new white paper, out Thursday, estimates the industry may need about $1 trillion to underwrite AI compute buildouts. That sum would be larger than half of all assets now managed by private credit.
What is getting financed and why it is trickier than software
Money is showing up in multiple lanes: building data centers and power capacity, loans secured by chips, and lending to special-purpose vehicles. Carlyle argues the credit risk tied to data centers and other AI-linked assets is more speculative and more correlated with the broader economy than software, and a large share of today's financing approaches has yet to face a real stress test. Broader forecasts put AI infrastructure spending above $5 trillion through 2030. Carlyle is not avoiding the space. As Jenkins put it, "We want to take the risk, but we want to do it in a balanced manner."
The software playbook, and its cracks
From 2020 to 2022, software made up about half of private equity deals. Lenders piled in because subscription revenue looked steady and relatively insulated from downturns. Then generative AI challenged that comfort, introducing a shared risk of rapid technological obsolescence. The hangover has shown up as software loans struggling in the syndicated market, tougher refinancing for borrowers, and increased redemption requests at some private credit funds.
Concentration, counterparties, and where profits land
A key headache is not knowing where AI's profits will ultimately stick, whether with chipmakers, data centers, or application builders. On top of that, portfolios that seem spread out can still hinge on a short list of giants. According to Jenkins, just seven or eight top-tier counterparties make up most of the underlying financings he's observing.
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That makes the basics non negotiable: know who the real counterparty is, what the contract locks in, and what the assets are worth. "People need to be very, very thoughtful as an investor as to what your counterparty exposure is, what that contract says, and what that ultimate asset value is," Jenkins said.
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