The AI Boom Will Need a Cash infusion
Companies building artificial intelligence infrastructure will increasingly turn to private credit for funding, says Jean Boivin, head of the BlackRock Investment Institute.
Why This Matters
The world will require a lot of capital to build out the infrastructure needed to support the growing AI industry. Private credit is likely to play a major role in meeting that demand, according to Boivin. He made his comments during an interview with Bloomberg Television on Tuesday.
The Rise of Private Credit
Private credit is a type of debt financing that’s not publicly traded. It’s often used by companies that can’t or don’t want to access the public markets. The private credit market has grown significantly in recent years, and it’s now seen as a viable alternative to traditional bank lending.
The Hyperscalers Need Cash
Companies like Amazon Web Services, Microsoft Azure, and Google Cloud (collectively known as hyperscalers) are building massive AI infrastructure to support their cloud computing businesses. Building out this infrastructure requires huge amounts of capital, and it’s not always easy for them to access traditional funding sources.
Private Credit Will Fill the Gap
Boivin says that private credit will help bridge the funding gap for these companies. Private credit firms are willing to take on more risk than traditional banks, and they’re often more flexible in their lending terms. This makes private credit a more attractive option for companies that need to build out their AI infrastructure quickly.
The Practical Implications
What this means is that private credit firms will have an increasing role to play in the development of the AI industry. They’ll be providing the capital that companies need to build out their AI infrastructure. This could lead to more competition in the AI marketplace, as companies with access to private credit funding are able to invest more in their AI businesses.
