Private Credit And The AI Boom

 

The largest private credit companies recently reported their 2 quarter 2026 results.

The main theme was that a large part of the private credit's industry raised funds go into financing artificial intelligence, AI data centers, energy companies powering data centers and infrastructure companies that build out the data center boom.

Artificial intelligence, AI centers are central for investors' interest. That is why the giants of the private credit industry invest in AI, out of fear of missing out on a market beating opportunity.

The tens of billions of USDs going from private credit firms' assets under management into AI data centers projects annually risk stoking a bubble, but for now they are providing excellent returns and are not threatening the private credit industry's returns.

Who Pays For The AI Boom?

 

The hyperscalers, namely Alphabet, Amazon, Microsoft and Meta are the companies that give out most money to finance capital expenditures on artificial intelligence, AI mainly in the form of building out artificial intelligence, AI data centers and the accompanying infrastructure.

The second pillar that pays for the AI boom are the spending on AI compute tokens by corporations and individuals.

In 2026 Alphabet will spend circa 185 billion USDs, Meta will spend circa 130 billion USDs, Amazon will spend circa 200 billion USDs, Microsoft will spend circa 150 billion USDs.  

In 2027 Alphabet plans to spend circa 255 billion USDs, Meta plans to spend circa 170 billion USDs, Amazon plans to spend circa 230 billion USDs and Microsoft plans to spend circa 200 billion USDs according to analyst projections and WSJ and FactSet data estimates.

NVIDIA and SpaceX are also planning multi billion USDs capital expenditures on artificial intelligence, AI.

How are the hyperscalers, namely Alphabet, Amazon, Microsoft and Meta basically able to afford to spend more than 100 billion USDs a year, sometimes several hundreds of billions of USDs a year on artificial intelligence, AI capital expenditures?

The hyperscalers, namely Alphabet, Amazon, Microsoft and Meta each have more than 40 billion USDs on their balance sheet in the form of cash and short-term investments. In some cases of the hyperscalers, namely Alphabet, Amazon, Microsoft and Meta have even close or more than 100 billion USDs in cash and short-term investments.

In addition, the hyperscalers, namely Alphabet, Amazon, Microsoft and Meta plan to issue new equity as Alphabet did. Alphabet plans to raise 80 billion USDs of new equity to finance AI capital expenditures.

Are such huge multi billion USDs capital expenditures sustainable? 

Not according to some media reports.

Not in the long run. Up until now the hyperscalers, namely Alphabet, Amazon, Microsoft and Meta have been valued at more than 1 trillion USDs each because they were huge growth and multi billion USDs net profit cash generating machines. And they were asset light. Now, however, the hyperscalers, namely Alphabet, Amazon, Microsoft and Meta are becoming asset heavy with huge, multi billion investments in artificial intelligence, AI compute and data centers.

Moody's recently published a report saying that the large capital expenditures by the hyperscalers could threaten the credit quality of Microsoft, Amazon, Alphabet, Meta, Oracle and CoreWeave. 

It is not unfforeseeable that soon, in 2-4 years the hyperscalers, namely Alphabet, Amazon, Microsoft and Meta could start reporting yearly losses if they continue to invest close to 100 billion USDs or more each in AI infrastructure.

This will in turn affect their valuations and market capitalization.

If the hyperscalers, namely Alphabet, Amazon, Microsoft and Meta start making yearly losses their market capitalization could fall by more than 44 % from the current levels. Simply because the hyperscalers, namely Alphabet, Amazon, Microsoft and Meta from making huge profits will turn into loss making enterprises.

If, on other hand in 5 to 7 years the hyperscalers, namely Alphabet, Amazon, Microsoft and Meta's multi billion USDs investments in artificial intelligence, AI compute and data centers turn out to be cash positive, starts making hundreds of billions of profits for the hyperscalers, namely Alphabet, Amazon, Microsoft and Meta, then the hyperscalers, namely Alphabet, Amazon, Microsoft and Meta' market capitalization could more than double from current levels.

However, in order for the AI capital expenditure to return multi fold its money, the AI boom not only has to continue, but artificial intelligence, AI has to infiltrate almost every area of our lives, make us much more productive and able to enjoy leisure.

And not only that. Artificial intelligence has basically to devour other industries and start producing their revenue.

And now that is a bit farfetched assumption requiring quite a stretch of the imagination.

So, basically, the hyperscalers, namely Alphabet, Amazon, Microsoft and Meta are taking on a big risk with their multi billion USD investments each of them makes in artificial intelligence, AI compute and data centers.

NVIDIA and SpaceX also take on a big risk with their  artificial intelligence, AI compute and data centers investments.

The risk could turn out positive and AI could make extraordinary progress and build huge amounts of profits. 

Or the AI boom could turn into a bust defined by the Nasdaq Composite falling more than 62 % from its recent peak.

The second pillar which pays for the artificial intelligence, AI boom are corporations and individual consumers, who buy the AI compute tokens.

This is already a tens of billions of USDs industry as OpenAI and Anthropic apparently have 25 billion USD and 47 billion USD annual revenue run rates respectively.

However, the AI token industry is unprofitable as OpenAI for example recorded a 38.5 billion USD loss in 2025.

If the AI token industry does not become profitable, this could threaten the viability of the AI boom and the AI boom could turn into a bust, defined by the Nasdaq Composite falling 62 % or more from its recent peak. 

 

Tesla Derives Much Of Its Value From Implicit And Explicit Subsidies. Valuation Upon That Premise

Tesla car buyers and Tesla itself gets indirect subsidies in the form of emission credits.

Since 2008 Tesla got around 14.3 billion USDs of emission credits disbursed by the US government from money gotten from the other combustion engine automobile producers active in the USA.

Without these 14.3 billion USDs Tesla would have most probably been unprofitable.

In addition Tesla got an estimated 3.4 billion USDs from an $7,500 tax credit for EV buyers which ended in 2019. This perk essentially allowed Tesla to sell American-made electrical vehicle at a higher price than manufacturing without the subsidy would have allowed. 

Elon Musk himself admitted that Tesla was on the verge of bankruptcy in 2019.

In short, Tesla's intrinsic worth is 120 billion USD and this is the value of the electric vehicle technology itself. Because Tesla would be unprofitable, loss making without the implicit and explicit government subsidies.

The issue is the electric vehicle engine requires large quantities of ferrous metals, namely lithium, cobalt, nickel copper and other expensive ferrous metals. This makes producing electric vehicles currently unprofitable, Basically, if a car company produces electric vehicles without implicit and explicit government subsidies the automobile manufacturer looses money. 

Essentially, Tesla and electric vehicle manufacturers essentially need to achieve a technological, engineering breakthrough to produce electric cars profitably.

If Tesla does not achieve a technological breakthrough, its value could go to 0, zero. It could become insolvent.

A lot of the value of Tesla, according to Wall Street investors and equity research analysts and Silicon valley investors and technologists comes from the promise of robotized taxi manufacturing and humanoid robots production by Tesla.

This is basically an option on the future. A claim on a future technological breakthrough to produce robotized taxis and humanoid robots. Self-driving cars have been a goal of the car manufacturing industry since the 1950's when the head of Daimler, the producer of the Mercedez brand said that self-driving cars will be a reality in 30 years.

Yes. If Tesla achieves a technological breakthrough and starts producing electrical vehicles and starts producing robotized taxis and humanoid robots, than it might substantiate its current market capitalization.

Can Private Credit Recover From The Current Crisis?

 

If artificial intelligence, AI does not prove to be a bubble and does not burst, defined by the Nasdaq Composite falling 62 % or more, private credit asset managers will recover their balance and most of their positions.

If AI proves to be the largest bubble in history and bursts, the constant capital raising and investing and buying up high interest credit and companies along and selling them off in opportune times, defining the private credit asset managers' business model will prove untenable and they can face solvency issues. 

Is SpaceX Actually A Space Natural Resources Mining Investment Play?

 

SpaceX is touted by Wall Street investors, equity research analysts and Silicon Valley investors and technologists as satellites in space, internet beamed by satellites, space rockets launch infrastructure and artificial intelligence, AI chat bot investment opportunity.

With the future growth forecast by Wall Street equity research analysts to come roughly 70 % from AI chat bots and 30 % from satellites launching in space and the associated internet.

Actually, SpaceX could be a space mining for base metals, precious metals and rare earths and other resources investment operation. There are many proofs and observations that asteroids from space contain huge, possibly hundreds of trillions of USDs or even more potential for base metals, precious metals and rare earths and other resources extraction. Other planets according to various studies and observations most certainly huge, possibly hundreds of trillions of deposits of base metals, precious metals and rare earths and other resource.

So SpaceX could actually be a way to put mining infrastructure in space on asteroids, the Moon, Mars, Jupiter mainly and other planets which could be used to mine the possibly hundreds of trillions of USDs or even more potential for base metals, precious metals and rare earths contained there in.

SpaceX now provides the rockets which could potentially get people on asteroids, the Moon, Mars, Jupiter mainly and other planets, also the satellites which could provide the infrastructure there, also the internet.

So, basically SpaceX could be an investment to build a base on asteroids, the Moon, Mars, Jupiter mainly and other planets to mine the base metals, precious metals and rare earths and other resources deposits which some estimate to be hundreds of trillions of USDs or more.

The Grok AI could also prove useful chat bot to mine the base metals, precious metals and rare earths and other resources deposits in Space.

However, first SpaceX has to achieve overall profitability to finance the mining of the base metals, precious metals and rare earths and other resources deposits in space on the Moon, Mars, Jupiter mainly and other planets. Investor money only could not prove enough. And investor money could suffer a 'sudden stop' if SpaceX does not show a clear path for profitability.

Currently, SpaceX's intrinsic value is about 210 billion USDs and only if the Grok chat bot AI investments losses are significantly reduced in the very near term. That compares with SpaceX's current 1.91 trillion exorbitant market capitalization. 

To mine the possibly hundreds of trillions of deposits on asteroids, the Moon, Mars, Jupiter mainly and other planets other companies are needed to provide the ecosystem of space base equipment, rockets, infrastructure, internet, mining equipment, food, drinks, etc. 

Private Credit Hold Off Large Part Of Redemptions

 

According to various sources various private credit asset managers have held off roughly 40 % of the recent redemption requests.

Big private credit asset managers like Blackstone, BlackRock, KKR, Apollo, Carlyle TPG, Ares, Blue Owl, Parners Group, CVC, EQT are trying to weather the recent storm engulfing the sector after the bankruptcies of Tricolor, First Brands, Market Financial Solutions caused a large wave of redemption requests since late 2025

Private credit asset managers answered by gating the investments outflow.

As long as the AI boom does not turn out to be a bubble defined by the Nasdaq Composite falling by more than 45 % from its peak, private credit will be able to absorb the current difficult times.

 

What If AI Turns Out To Be A Bubble And Bursts?

 

If AI turns out to be a bubble and busts there are two possible scenarios:

1) Mild realistic scenario:

The Nasdaq Composite falls 46 % from its peak.

1) Apple's market capitalization falls to 1.7 trillion USDs from 4.53 trillion USDs currently.  

2) Microsoft's market capitalization falls to 1.4 trillion USDs from 2.90 trillion USDs currently

3) Alphabet's market capitalization falls to 2.0 trillion USDs from 4.36 trillion USDs currently.

4) Amazon's market capitalization falls to 1.5 trillion USDs from 2.61 trillion USDs currently

5)  Meta's market capitalization falls 800 billion USDs from 1.48 trillion USDs

6) Tesla's market capitalization falls to 0.5 trillion USDs from 1.23 trillion USDs currently

7) NVIDIA's market capitalization falls to 2.3 trillion USDs from 4.71 trillion USDs currently 

 

1) Pessimistic scenario scenario:

The Nasdaq Composite falls 62 % or more from its peak.

1) Apple's market capitalization falls to 800 billion USDs from 4.53 trillion USDs currently.  

2) Microsoft's market capitalization falls to 600 billion USDs from 2.90 trillion USDs currently

3) Alphabet's market capitalization falls to 700 billion USDs from 4.36 trillion USDs currently.

4) Amazon's market capitalization falls to 600 billion USDs from 2.61 trillion USDs currently

5) Meta's market capitalization falls 400 billion USDs from 1.48 trillion USDs

6) Tesla's market capitalization falls to 120 billion USDs from 1.23 trillion USDs currently

7) NVIDIA's market capitalization falls to 420 billion USDs from 4.71 trillion USDs currently 

 

Actually in a worst case scenario the Nasdaq Composite could fall 82 % or more as in the Dot Com boom and bust.

In such a worst case the Magnificent 7 stocks Apple, Microsoft, Alphabet, Amazon, Meta, Tesla and NVIDIA's market capitalization could fall 80 % or more from their current levels.