Apollo Global Management President Jim Zelter said investors are demanding more transparency regarding how data-center projects are being financed.
This push for clarity comes as the scale of artificial intelligence infrastructure grows. Because AI-driven spending is projected to reach trillions of dollars, investors must accurately assess the associated financing risks to avoid potential losses.
Speaking Monday on CNBC’s ‘Squawk on the Street,’ Zelter said the massive capital requirements facing the industry are significant. He said U.S. data centers alone could require $5 trillion to $6 trillion [1] in investment over the next five years.
Despite the scale of the spending, Zelter provided a timeline for the availability of capital. He said debt funding for AI capital expenditures will remain healthy at least until 2028 [2]. This suggests a window of stability for firms seeking to leverage debt to build out their infrastructure.
However, the long-term viability of these investments remains a point of contention. While debt markets may stay robust in the short term, some reports indicate the AI spending boom may not pay off for investors. Zelter said "investors want transparency regarding how data centers are being financed" to mitigate these uncertainties.
As the industry moves toward these trillion-dollar targets, the focus is shifting from the ability to raise capital to the ability to generate a return on that capital. The tension between healthy debt markets and uncertain returns creates a complex landscape for the next several years.
“"U.S. data centres alone could require $5 trillion to $6 trillion in investment over the next five years."”
The gap between the massive capital requirements for AI infrastructure and the uncertainty of its returns suggests a looming valuation risk. While the debt markets are currently supportive, a lack of transparency in financing could lead to market volatility if the projected productivity gains from AI fail to materialize by 2028.
