(Bloomberg) -- Private credit is poised to take on an even bigger role in financing the "massive amount of infrastructure investment" for artificial intelligence as companies look for capital to fund outsized expenditures, according to the head of BlackRock Inc.'s research arm.
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"We are in, you know, a global transformation like we probably have never seen before," BlackRock's Jean Boivin said Tuesday in a Bloomberg Television interview. "The world will have to leverage up as a result. Leveraging up comes with risk that would need to be managed, but there's no real alternative to really build out the AI or the global infrastructure that are needed to get to a place where we're going to require more funding."
His endorsement of the role of private credit comes at a time of rising concern over potential froth in an explosive market. Bloomberg Intelligence projects that capital expenditures for the six largest US hyperscalers will reach nearly $820 billion this year, up almost 80% from 2025's then-record levels. Boivin said the quickening pace of the AI buildout creates competing narratives of abundance versus scarcity across the economy.
Companies' capital needs are so vast, they will have to borrow just about everywhere. This scenario creates a "big tailwind" for private credit, Boivin said. "The space, the asset class, I think, is going to be positioned for playing an even bigger role."
Boivin rejected historical comparisons to the 2001 dot-com bubble or 2008 housing crisis, calling the current AI transformation unprecedented. At the same time, the AI boom is so large that it's creating displacement effects across the economy, with capital flowing toward the buildout at the expense of non-AI sectors, he said.
"It's putting pressure on resources that the non-AI part of the economy will not be able to grow at the same pace if we are really continuing to build that out," Boivin said. Tech companies have been seeking capital aggressively, including efforts such as Alphabet Inc.'s plan to raise $85 billion in equity last month and Amazon.com Inc.'s $25 billion debt offering on Tuesday.
The private credit market has faced recent turbulence, with firms from Apollo Global Management Inc. to Ares Management Corp. curbing investors' fund redemptions. Larger companies with strong balance sheets offer safer lending opportunities, Boivin said, though it's too early to determine which ones ultimately will win from AI investments.