Arrakis Global
Global Thematic Fund Manager
AI financing deals increase the market's perception that alternative asset managers are financing the AI capex buildout, putting their shares at risk in a bust or slowdown. Even if the deals make sense on paper, Blackstone, Apollo, Carlyle, KKR and Blue Owl shares look likely to be pain points in any AI capex bust or slowdown. x.comÂ
Fresh funding for AI expansion supports a continued bid for AI stocks as compute spending shows no sign of slowing. Meta committed to $95B in shareholder dilution for AI, Anthropic is set to have $200B in cash in a couple of weeks, and SpaceX got a $40B Apollo loan solely to buy more Nvidia GPUs. The Anthropic IPO might even be a positive catalyst rather than the negative one many fear. x.comÂ
SpaceX's $40 billion financing agreement with Apollo raises suspicion that the funding will be hidden in an off-balance-sheet special-purpose vehicle. Apollo's chief economist says AI has delivered no financial payoff to corporate America outside tech despite massive investment. The bust of the AI boom will be epic. x.comÂ
The highest-quality private equity and private credit managers, Apollo, Ares, Blackstone and KKR, are back on sale, mainly because of interest rates. They are not as cheap as during March's SaaS debt scare, and weaker names such as Blue Owl are still to be avoided. x.com x.comÂ
Debt-funded AI building is making tech stocks vulnerable to a 25-30% pullback as rates and energy prices rise. AI company borrowing reached $466B this year versus $101B a year earlier; weekly default-insurance trading on seven AI names rose from under $2B in July to over $9B in September. Keep cash for lower prices, though 30% earnings growth and a 19x market multiple argue this is not an AI bubble. x.comÂ
Alphabet's AI capex payback is being repriced, making its post-earnings decline more than a one-day mood swing. Guidance and cloud and AI margin commentary are the near-term tests. If growth continues but the multiple compresses, the risk is duration in mega-cap AI, not a collapse in technology growth. x.comÂ
Nvidia, Goldman Sachs, Brookfield, Apollo, BlackRock and KKR sit at the big-boy table of winners, led by Jensen Huang, David Solomon, Bruce Flatt, Jon Gray, Larry Fink and Waldemar Szlezak. They are stocks worth owning, probably in larger size. x.comÂ
The S&P 500's concentrated, correlated AI exposure makes a large allocation too risky as rates rise. Higher rates could force data-center bondholders to sell AI equities; early AI use appears to be stagnating and unclear ROI may cap demand even if usage grows linearly. Failed lab IPOs or a credit-driven recession could also undermine the market. AI moving on-device or on-premise is another significant risk to data-center capacity demand. x.com x.comÂ
AI cloud infrastructure stocks risk falling together because neocloud providers depend on the same debt funding. Musk says debt markets have almost shut off financing for companies dependent on AI data-center revenue, though he is a chip buyer and balance sheets differ; Nebius remains up over the year. x.comÂ
Blackstone's $5B TPU cloud venture with Google looks like the lowest-risk play in AI data centers. Per The Transcript, the venture will bring 500MW of capacity online by 2027 to meet growing TPU demand. Partnering with the world's leading compute user leaves Blackstone the least dependent on outside customers, with the strongest-balance-sheet customer, and the unemployed use Google even more. x.comÂ
Blackstone, KKR, Apollo, Ares and Carlyle face a re-pricing, not a correction, because AI capex is artificially inflating S&P 500 earnings. Hyperscaler capex becomes Nvidia revenue, whose profits make the index look healthy, but those are front-loaded accounting gains, not durable cash flows. When the capex cycle slows, the reversal hits everything downstream, including alternative managers and private credit. Per @Fiscal_ai, drawdowns already run from 33% at Carlyle to 46% at KKR and Ares. … Show more
