Jason Thomas, Carlyle Group's head of global research and investment strategy, said investors should limit exposure to the AI ecosystem to roughly 15%. Thomas said the risks extend beyond data centers to semiconductor manufacturers, energy companies and other businesses tied to AI. Thomas said private credit allocating roughly 40% of assets under management to AI-related financing would be excessive given recent experience.
The AI infrastructure buildout could require $5 trillion over the next several years, including as much as $1 trillion in private credit financing. Companies' internal cash flows are expected to cover more than half the investment. Growing reliance on debt raises concerns that lenders could be exposed to businesses disrupted by AI. Thomas cited the recent software stock selloff following new AI tool releases as evidence of how quickly market sentiment can shift. Equity investors can offset losses with gains elsewhere. However, private credit lenders face potentially permanent losses if borrowers default and collateral fails to cover outstanding debt.
Thomas questioned assumptions underpinning AI infrastructure financing, including GPU useful lives, depreciation schedules and unprofitable AI companies' ability to meet long-term contractual commitments. Some deals rely on residual-value guarantees or other support from semiconductor manufacturers and hyperscalers to protect lenders if projects encounter trouble. However, Thomas compared reassurances about these arrangements with arguments about complex financial structures before the 2008 financial crisis. Thomas said documentation differs between deals, with lenders potentially holding claims against GPUs, data centers and power infrastructure. Those overlapping claims could complicate restructurings if borrowers default.
Thomas said concentrated exposure and uncertain collateral values could create problems for individual lenders. Thomas advised investors to establish exposure limits before committing additional capital, rather than relying on market conditions to indicate excessive industry concentration. However, Thomas said having no AI exposure would also be unreasonable given the range of potential outcomes and returns some investments could generate. Thomas said investors must balance those opportunities against the risk that a rapidly expanding industry could expose lenders to risks not yet fully tested.
Carlyle Warns Private Credit Exposure to AI Could Exceed 40%
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Summary
Carlyle Group’s Jason Thomas warned that private credit with over 40% exposure to AI could be excessive, citing FLASH AI. He flagged risks in data centers, semiconductors, and energy, noting potential losses if collateral fails. Thomas questioned GPU depreciation models, comparing them to pre-2008 structures. The risk-to-reward ratio in AI financing remains unclear. Investors should watch support and resistance levels in collateral values.
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