Private credit woes could become data center difficulties
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Illustration: Sarah Grillo/Axios
America's AI revolution may have a problem with its data centers. Not because of political pressure tied to electricity prices, but because of private credit freezing up.
Why it matters: The circular nature of AI dealmaking could become a vortex, without an obvious exit ramp.
Catch up quick: The unvirtuous cycle was kicked off at the end of January, when Anthropic released a series of Claude plugins that seemed able to automate legal-tech and other white-collar functions.
- Investors freaked out that this meant the end of software as we know it, sending SaaS stocks tumbling.
- Suddenly there was increased worry about private credit, which for years had helped to finance private equity's software spending spree. More smoke than fire, but it was prompt redemption requests.
State of play: Private credit often limits such redemptions — a stability feature rather than an instability bug — but once-record inflows appear to have slowed.
- And that may be where circularity comes to bite AI in the inference.
- Private credit has been a major financer of data centers. Blue Owl, for example, late last year signed a $30 billion deal with Meta for its planned Hyperion campus in Louisiana.
- Apollo, Blackstone, BlackRock, and TPG are among other private lenders that have participated in data center deals.
The bottom line: Private credit funds may need to stem their lending pace because of how AI cut the value of existing portfolio assets. Including to the sort of data centers that helped AI cut those values in the first place.
