Stupid Money Moves Into AI
Private equity and private credit analysts are supposed to be the smartest investors in the world. They find undervalued assets, and often use other people’s money to buy them. They are moving into the super-hot business of AI, and particularly AI server operations. One experts believes they are rushing in far too soon.
UBS Research has done the work to look at the odds that AI server farms are a good investment, particularly at a large scale. According to Bloomberg, “Private debt had about $450 billion loaned to the technology sector as of early 2025, up $100 billion from 12 months earlier.” Presumably, most of this is directed at AI development. There is no other sector of tech that needs this level of capital.
Too Early To Put In Billions
Private debt is jumping into these investments because Google, Microsoft, Meta, and OpenAI will put hundreds of billions of dollars into them this year, and probably more in 2026. These companies may or may not need additional capital today. Eventually, the investments will be large enough that capital from outside their balance sheets will become essential to expansions.
Are these investments too early? Recently, OpenAI CEO Sam Altman said AI may not be profitable at scale soon enough to justify investments that could total over $1 trillion. If he is right, the rapid rush to invest could be stupid.
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