Are The AI Hyperscalers Turning Into Capital Intensive Businesses?

 

Technology companies are usually regarded as capital light, operationally leveraged.

Exception are companies like Intel, AMD, NVIDIA, Broadcom and other computer chip and equipment producers.

The hyperscalers AI companies Microsoft, Alphabet, Amazon and Meta are also regarded as not hugely capital intensive businesses. Which makes them trade at relatively high both individual and sector software Price/Earnings, Price/Book and Price/Sales ratio.

Recently, however, Microsoft, Alphabet, Amazon and Meta have all invested tens of billions if USDs in AI data center infrastructure. Microsoft, Alphabet, Amazon and Meta have each invested more than 20 billion USDs in AI data centers in 2025.

Does this turn the hyperscalers into slower, capital intensive businesses?

Not currently. Microsoft, Alphabet, Amazon and Meta still remain agile, fast moving and fast growing be they mega cap companies each worth more than 1.5 trillion USDs, according to Wolfteam Ltd.'s projections and estimates.

Artificial intelligence, AI simply develops very fast and compensates for the billions of USDs of capital outlays. 

Carlyle And Its Leveraged Investments In AI

 

Carlyle Group Inc, the fourth largest listed private equity, private credit, real estate and infrastructure group and the second largest private credit alternative asset manager in terms of managed private credit assets in the world, has invested a large part of its newly raised private credit funds in loans to mid and large capitalization artificial intelligence, AI technology companies, private equity buyouts of AI technology companies and lending to buy and invest in AI data centers and AI energy infrastructure.

The private credit loans in which Carlyle is most active in giving out to AI technology firms carry interest rates of usually 7 % to 15 %. By giving out private credit to AI firms Carlyle essentially takes on financial leverage, because at such high interest rates the tens of billions of USDs of private credit loans Carlyle disburses each recent year could be completely wiped out since they are high on the capital structure of the AI technology firms that receive these very high interest of 7 % to 15 % loans. Since Carlyle is the second largest alternative asset manager in terms of private credit assets under management in the world managing 208 billion USDs in private credit, this makes Carlyle deeply financially leveraged on the AI technology sector.

Carlyle also makes billions of USDs of private equity buyouts of technology firms a year. Since only 30 % of these investments is via an equity down payment and the rest is borrowed debt via bank lending and high yield bonds, Carlyle's private equity investments are also leveraged.

Artificial technology, AI as most technology investments is operationally leveraged. That said, the leading hyperscalers Amazon, Microsoft, Alphabet and Meta are investing circa 25 billions USDs a year in AI data center infrastructure, which makes them a capital intensive business. A similar capital intensive AI investments trend is observed in mid sized AI technology firms. That said, AI technology still provides operational leverage. And AI firms are still valued as not capital intensive technology firms by Wall Street equity research analysts and investors and Silicon valley technology investors and technologists.

So Carlyle is double leveraged via financial borrowing leverage and technology operational leverage on AI in its assets under management investments.

If the AI boom continues to flourish, Carlyle's market capitalization could reach 109 billion USDs.

If the AI boom turns into a bust and the Nasdaq Composite falls more than 62 % from its recent peak, Carlyle's market capitalization could fall to 9 billion USDs from the current 23.65 billion USDs Carlyle market capitalization. , according to Wolfteam Ltd.'s projections and estimates.

 

Apollo And Its Leveraged Investments In AI

 

Apollo, the third largest private equity, private credit, real estate and infrastructure asset management firm has invested large part of its newly raised assets in the last 5 years in artificial intelligence, AI technology firms via private equity buyouts, private credit lending at interest rates of 7 % to 15 % to mid and large technology companies, real estate AI data centers investments and AI energy infrastructure investments.

Apollo's AI technology firms private equity buyouts are leveraged since only about 30 % of the investments is via equity down payment, the rest circa 70 % are sourced via high yield bonds or bank lending, which makes the private equity AI technology firm buyout an essentially leveraged 2.3:1 investment from Apollo's private equity assets under management.

Apollo gives out private credit loans at interest rates of 7 % to 15 % to mid sized technology companies, which makes for a financially leveraged investment.

Apollo's real estate AI data centers investment are usually done with additional leverage in the form of bank loans and high yield debt.

Apollo's AI energy infrastructure investments are also financed in part via leveraged bank lending and high yield bonds.

Add to that, that artificial intelligence, AI firms are operationally leveraged on the AI technology. That said, lately AI technology firms are becoming very capital intensive as they build out data center infrastructure.

So in short, large part of Apollo's assets under management invested in artificial intelligence, AI are essentially double leveraged.

If the AI's boom continues, Apollo's market capitalization could rise to 203 billion USDs.

If on the other hand, AI turns out to be a bubble and it bursts dragging the Nasdaq Composite more than 65 % from its peak, Apollo's market capitalization could fall to 40 billion USDs, from Apollo's current market capitalization of 86.33 billion USDs., according to Wolfteam Ltd.'s projections and estimates.

KKR And Its Leveraged Investments In AI

KKR & Co Inc, KKR the second largest private equity, private credit, real estate, infrastructure asset management firm in the world invests large part of its newly raised assets in artificial intelligence, AI technology related investments.

Also large part of KKR's newly raised assets in the last 7 years have been invested in AI technology related assets like private equity leveraged buyouts of AI technology companies, private credit lending to AI technology companies, investing in AI data centers real estate and energy companies AI related infrastructure.

The KKR private equity AI buyouts are leveraged, because only around 30 % of the deals are financed with equity down payment, the rest is debt via high yield bonds or bank lending. The KKR private credits to AI technology companies are also essentially leveraged since the private credits are given out at 7 % to 15 % interest rates. There is also secularization investing. KKR's real estate AI data centers and AI related investments are also leveraged because they are usually to a large extent financed with debt.

On top of that all AI technology investments are operationally leveraged since usually little hard assets are needed and the initial amount of capital is not great. With the advent of AI data centers, however, such businesses are becoming very capital intensive.

That said, AI is still operationally leveraged.

KKR has made a large, concentrated bet on AI. Since the investments of KKR in AI are double leveraged, once using borrowed financial means to invest in AI, the second part AI is operationally leveraged, if it wins, KKR stands to win big.

In an artificial intelligence, AI positive case, KKR's market capitalization could reach 302 billion USDs.

If on the other hand the current AI boom turns out to be a bubble and bursts with the Nasdaq Composite falling from peak to trough more than 65 %, KKR's market capitalization could fall to 50 billion USDs, from KKR's current 118 billion USDs market capitalization, according to Wolfteam Ltd.'s projections and estimates.

 

Blackstone And Its Leveraged Investments In AI

 

Blackstone, the worlds largest private equity, private credit, real estate, infrastructure asset manager has invested large part of its newly raised funds in artificial intelligence, AI data center projects, AI technology companies and AI related energy and infrastructure companies.

Many of those investments were made via leveraged buyouts, which means putting up circa 30 % of equity and borrowing in debt and high yields bonds the rest 70 % to purchase an AI technology buyout company via a leveraged buyout. Private credit lending to artificial intelligence, AI also entails leverage, since the private credit loans are usually made with 7 % to 15 % interest rates and automatically make the companies quasi distressed, since according to credit agencies companies that borrow via high yield loans with interest rates between 7 % and 15 % are usually with sub investment credit rating. The artificial intelligence, AI real estate and infrastructure investments of Blackstone's assets under management and own proprietary funds are also leveraged, because they entail taking on debt and/or high yield loans to buy the AI related real estate and infrastructure assets, to magnify the prospected returns.

Add to that the fact the artificial intelligence, AI companies are operationally leveraged, meaning they usually require small initial investments in hard assets and magnify returns by leveraging usually know how and technology.

In short, Blackstone's investments of its assets under management and proprietary funds in private equity buyouts, private credit lending, real estate and infrastructure assets purchasing are essentially double leveraged. This double leverage magnifies potential returns, but also could double potential losses in Blackstone's investments portfolio, according to Wolfteam Ltd.'s projections and estimates.

That said, the artificial intelligence, AI boom is in full swing and will continue with small corrections in the next 3 years according to Wolfteam Ltd.'s current projections and estimates.

Which means Blackstone's leveraged investments in artificial intelligence, AI related companies will continue to produce double leveraged returns and stand to beat the S&P 500 as private equity has largely done in the last 15 years, since the AI boom began in 2011 - 2015.

If there is a sharp drop in AI related technology companies' stocks, though, for example 30 % fall as measured by the Nasdaq Composite, Blackstone's returns on its AI related investments could realize 40 % losses. That said, however, a still bigger part of Blackstone's assets under management is invested in stable, positive cash flow, dividend producing companies which will mitigate the possible negative AI effect on Blackstone, altogether.

In short, Blackstone is undervalued and Blackstone's market capitalization could double from current levels in the next 4 years, according to Wolfteam Ltd.'s projections.

If there is an AI related stocks fall of 30 %, however, Blackstone's market capitalization could fall 55 % from current levels.

Private Equity And High Yield Debt

 

A large part of the companies bought by private equity are with low or distressed ratings, according to various publications.

The percentage varies but the the top 15 private equity companies in the world have between 5 % and 32 % of the companies in their portfolios with low or distressed ratings.

The reason is twofold. Whey Blackstone, KKR, Apollo, Carlyle, Ares, Bain Capital, TPG, Warburg Pincus, CVC, etc. leading private equity firms buy a company they use only 30 % in equity and the rest is in debt. This makes for them buying many high risk companies in the first place.

In addition, the private equity companies usually take out additional debt for their portfolio companies and load them up with debt. The higher debt levels naturally decrease the credit ratings of many of the private equity portfolio companies sometimes to distressed levels even.

So, in short private equity to a large part is a high yield business, which entails above moderate risk.

Private equity companies mitigate the risks by buying mature businesses, which can endure the high debt load.

In addition, private equity companies strive to make their portfolio companies run better, with better management which improves their durability.

And private equity often do substantive job cuts in their portfolio companies.

All this makes for the fact that private equity is a leveraged business and it tends to outperform the economy and the stock market in boom times. And do worse in recessions.

In the last rolling year, however, the largest listed private equity companies Blackstone, KKR, Apollo, Carlyle, Ares, Blue Owl, CVC underperformed the S&P 500 even though the S&P 500 clocked in a 16.5 % gain for 2025.

Part of the reason is the high interest rate environment in the US and the valuation concerns of investors about artificial intelligence, AI technology companies in which the leading private equity firms have invested heavily and makes them leveraged once on the AI technology, which is an operationally leveraged business and second the leveraged nature of the private equity buyout investments Blackstone, KKR, Apollo, Carlyle, Ares, Blue Owl, CVC etc. have done.

So Blackstone, KKR, Apollo, Carlyle, Ares, Blue Owl, CVC, etc. leading private equity firms could outperform the S&P 500 in 2026 if artificial intelligence, AI continues to perform and the S&P 500 rises more than 10 % in 2026, according to Wolfteam Ltd.'s projections and estimates. 

Private Equity And The Relatively High Interest Rates Levels In The USA

 

Many analysts claim the relative under performance of the stocks of the largest private equity firms in the world Blackstone, KKR, Apollo, Carlyle, Ares, CVC etc. is due to the high levels of interest rates currently in the USA.

The Federal Funds Rate, the leading rate set by the Federal Reserve was lowered to 3.75 % on the 10th of December 2025.

Wall Street equity research analysts claim the high interest rates needed to finance the circa 70 % of debt financed leveraged buyouts puts downward pressure on the value and valuations the leading private equity firms Blackstone, KKR, Apollo, Carlyle, Ares, CVC etc. are prepared to pay for leveraged buyout acquisitions. That is intrinsically true, of course.

But the huge wave of money available in the global financial system going after currently mainly artificial intelligence, AI technology company investments applies upward pressure on value and valuations. This could create a virtuous deal cycle that could recycle private equity firms 2021 and earlier investments and provide new cash flows for new investments, according to Wolfteam Ltd.'s projections and estimates.

The valuations of the S&P 500 are historically high, but this does not mean they could not go higher.

If the AI boom turns into bust, however, which could affect the whole US stock market, private equity companies could loose large part of their value.

Blue Owl And AI

 

Blue Owl Capital Inc, Blue Owl the globally leading private credit asset management firm recently announced it is planning  together with Meta to build a 27 billion USDs AI data center project in Louisiana.

Blue Owl manages 152.1 billion USDs in private credit assets, so the Louisiana data center build out along with Meta, Facebook's owner is a huge bet by Blue Owl on artificial intelligence, AI and its potential to make humanity more productive and able to rest better.

Large part of Blue Owl's assets under management are already invested in AI projects.

Blue Owl, along with the other private equity, private credit and real estate asset managers has underperformed grossly the S&P 500 in 2025. One explanation is that private equity, private credit and real estate assets of the leading firms Blackstone, KKR, Apollo, Carlyle, Ares, Blue Owl, etc. are basically leveraged investments in large part in artificial intelligence, AI. The magnificent 7 AI companies Apple, Microsoft, Amazon, Alphabet, Meta, Tesla and NVIDIA and the broader AI sector did not perform very well in 2025. With notable exceptions like the chip stocks Broadcom, Micron, NVIDIA etc.

So private credit being in large part a leveraged investment on AI did not perform well in 2025, hence Blue Owl's  stock lackluster performance in 2025.

If AI lives up to the current hype, though Blue Owl's market capitalization could rise fourfold from current levels, according to Wolfteam Ltd.'s projections and estimates. 

If the AI's boom, turns into bust, however, Blue Owl market capitalization could fall further from current levels. 

2026 For Private Equity

 

2026 could be the year that finally speeds up private equity deal making to similar boom levels as during 2021.

The Federal Reserve could lower the Federal Funds Rate two times in 2026, while a spade of coming IPOs, according to various media sources of mega capitalization companies like OpenAI, Anthropic, SpaceX and other large, medium and small companies from technology and other sectors joining and completing IPOs could unlock capital for private equity companies.

The possible large, high publicity IPOs could invoke other companies to do and IPO. IPOs are traditionally a liquidity event for the private equity asset managers.

The IPOs could be a precursor to active deal making, private equity asset managers selling portfolio companies and returning money to their Limited Partners institutional investors pension funds, endowments and insurance companies, thus realizing carry for themselves.

Which could turn 2026 in a very prosperous year for Blackstone, KKR, Apollo, Caryle, Ares, CVC etc. large, medium and small private equity asset managers, according to Wolfteam Ltd.'s projections and estimates.

All this is barring a large, negative geopolitical, economic or of natural consequences event, the happening of which could derail the possible coming IPOs and a wave of deal making.