Apollo And AI

 

Apollo Global Management or Apollo, the global leading private equity, private credit and real estate asset management firm is investing large part of its newly raised assets in artificial intelligence, AI trades, namely AI data centers, leveraged buyouts of AI technology companies and private credit lending to AI technology companies, according to Wolfteam Ltd.'s estimates.

Artificial intelligence, AI is the trade of the moment, with many Wall Street investors and analysts and Silicon Valley technologists and investors forecasting that Artificial intelligence, AI is the fourth industrial revolution that will change everything. The Magnificent 7 AI technology companies Microsoft, Amazon, Alphabet, Meta, Apple, NVIDIA and Tesla are beating the S&P 500 for the last 5-7 years.

Apollo invests in Artificial intelligence, AI for several reasons, according to Wolfteam Ltd.'s estimates:

1) Artificial intelligence, AI is touted as the fourth industrial revolution, which is to deeply change how humanity works, rests, etc, with possible corresponding investment gains 

2) Artificial intelligence, AI is the trade that beats the S&P 500 for the last 5-7 years. Apollo is basically forced to invest in Artificial intelligence, AI technology companies by pension funds, endowments, insurers and individual investors in Apollo's funds who are asking why is Apollo not going to beat the indices and achieve outsized investment gains

3) Artificial intelligence, AI technology companies are highly valued, excessively valued by some estimates with huge market capitalization. Thus Artificial intelligence, AI is liquid enough to absorb the close to 500 billion USDs Apollo manages

Artificial intelligence, AI technology companies could turn out to be the latest fad and lead to a AI technology boom and bust akin to the 2000's internet dot com boom and bust, according to many investors and analysts.

The dot com boom and bust bore companies like Amazon and Google, however. So there is a high likelihood that the Artificial intelligence, AI current boom could create the leading technology companies for the nest decades. 

KKR And AI

KKR, the second largest private equity firm invests a significant portion of its newly raised assets in artificial intelligence, AI data centers and AI technology companies, according to Wolfteam Ltd.'s analysis.

KKR does this in order to achieve high returns, beat the S&P 500 and help drive the current AI boom, deemed by many as the fourth industrial revolution.

KKR invests in leveraged buyouts of AI technology firms, gives private credit loans to AI technology firms and data centers and invests part of its real estate portfolio in AI data centers.

Since AI is operationally leveraged and private equity buyouts are financially leveraged this double leverage creates higher opportunities on the upside, but also higher possible losses for KKR.

If the AI boom continues and AI changes our world profoundly, KKR is undervalued grossly, according to Wolfteam Ltd. In an AI positve case KKR's intrinsic value could rise to 430 billion USD from the current 116.42 billion USD.

Is Cryptocurrency Mining A Large Driver Of The Current AI Boom?

 

Cryptocurrency, Bitcoin mining is one of the main drivers of the current artificial technology, AI boom, according to Wolfteam Ltd.'s projections and estimates.

Cryptocurrencies mining is a highly computing intensive mining process and it needs flexible GPU chips like NVIDIA's to work, produce Bitcoins. NVIDIA is the leading company of the current AI boom. Cryptocurrency, Bitcoin mining drives a large part of the AI boom, partially behind the scenes. You need tens, if not hundreds of workstations to mine Bitcoin. All this in data centers equipped with the latest AI chips.

In short, cryptocurrency mining drives a large part of the demand for AI chips.

 

Blackstone And AI

 

Blackstone, the world's largest alternative asset manager with 1.2417 trillion USDs in private equity, real estate, private credit, hedge funds assets under management invests large portion of its newly raised funds in artificial intelligence, AI projects like AI data centers and private equity buyouts of AI technology companies, according to Wolfteam Ltd.'s estimates.

The fact that AI is a focus point of Blackstone's new investments is even stated on its website.  

Blackstone is basically forced along with the other leading private equity firms like KKR, Apollo, Carlyle, Ares, CVC to invest in artificial intelligence, since AI related investments in companies like Microsoft, Alphabet, Meta and Amazon have been beating the general US stock market  for several years now and in addition artificial intelligence is being forecast by Wall Street analysts and investors and Silicon Valley technologists and investors as the fourth industrial revolution. And private equity giants investments like Blackstone's private equity investments are being bench marked against the S&P 500. And according to various sources the average private equity portfolio has been beating the S&P 500 for the last 15 years.

What is more, artificial intelligence, AI provides for operational average and when this is taken atop on the financially leveraged nature of private equity which in general uses 30 % equity and leverages that with 70 % raised debt on average these two leverage factors provide for opportunity to magnify returns several times and bring about a boon for Blackstone's private equity investments.

In addition, investors' high expected return requirements force Blackstone to seek out high yielding private equity investments like artificial intelligence, AI. Here it must be said, that Blackstone is a prestigious, huge firm with extensive resources, which help it in providing management expertise to the AI technology firms it invests its private equity finds into.

In short, the mid-term future of Blackstone's investment portfolio is tied to artificial intelligence, AI, according to Wolfteam Ltd.'s projections and estimates. As the US economy, for that matter.

CVC and AI

CVC Capital Partners PLC, or CVC one of the largest European and global private equity, real estate and private credit asset management firms can reach 144 billion USDs of market capitalization if artificial intelligence, AI lives up to the current forecasts of Wall Street research analysts, investors and Silicon Valley technologists and investors, according to Wolfteam Ltd.'s projections and estimates.

CVC, along with the other leading private equity companies Blackstone, KKR, Apollo, Carlyle, Ares, etc. invests a large part of its raised funds in artificial intelligence, AI related AI data centers and related AI technology companies.

In addition, CVC is very profitable, posting net profit margin of 30 % + in the last four reported quarters.

Private equity in its essence is a leveraged equity investment with borrowed debt. AI and technology is an operationally leveraged investment. All this makers for a magnified effect of profits if private equity investments turn out to be profitable. And profitability begets profitability.

So, in short if AI changes our world as profoundly as Wall Street research analysts, investors and Silicon Valley technologists and investors currently forecast, this would make up for very profitable business for CVC. 

AI technology deals for CVC will increase in count, as in 2021 was evident in the last technology boom, AI deals will beget deals not only for CVC, but for Blackstone, KKR, Apollo, Carlyle, Ares, etc. And CVC's profitability will drive tens of billions of USD in market capitalization value for CVC, according to Wolfteam Ltd.'s projections and estimates.

However, if the current overly optimistic forecasts for AI don't turn out to be correct, US and global stock markets could fall more that 52 %, and CVC, being a leveraged investment in nature could fall even more. 

 

How To Value Private Equity Firms' Investments In AI?

 

Blackstone, KKR, Apollo, Carlyle, Ares, CVC, etc., the leading private equity, real estate and private credit asset management firms are investing more than 32 % of their new funds' assets in artificial intelligence, AI data centers companies, AI technology companies shares and loans to AI technology companies, according to Wolfteam Ltd.'s estimates.

Private equity firms tend to value firms on Earning Before Interest Taxes and Depreciation, EBITDA multiples. Wolfteam Ltd.'s corporate opinion is in agreement with the late great investor Charlie Munger that EBITDA is not a very good approximation for profitability. Especially, given the fact that data centers are depreciated on a 20 year time schedule by the hyperscalers Amazon, Microsoft, Alphabet, Meta and other technology firms. 

A much better measure would be the common Price/Earnings ratio. If artificial intelligence, AI's companies Price/Earnings ratio exceeds 55, this could be deemed a bubble, according to Wolfteam Ltd.'s projections and estimates.

A Price/Earnings ratio of 55 for an AI technology company would incorporate 20 %  yearly revenue growth, with net profit margins exceeding 17 % per year and US GDP growth of 5.7 % per year for the next 15 years. Which is simply a low probability assumption, according to Wolfteam Ltd.'s estimates.

At What Level Would The AI Boom Be Deemed A Bubble?

 

If the trailing Price/Earnings ratio on average for all the companies in the Nasdaq Composite surpasses 55, the artificial intelligence, AI technology boom can start showing signs of a bubble, according to Wolfteam Ltd.'s projections and estimates.

Currently the Nasdaq Composite Price/Earnings ratio is 27.72.

If the Nasdaq Composite Price/Earnings ratio exceeds 55 then the embedded growth expectations would require something like 5-6 % US annual GDP growth for the next 20 years, the largest public technology companies earnings growing by 15 % for 20 years and their net profit margin being above 22 % for the next 20 years to substantiate a Nasdaq Composite Price/Earnings ratio of 55, according to Wolfteam Ltd.'s projections and estimates.