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AI Infrastructure Boom Risks Overcapacity

The flood of capital pouring into AI infrastructure is raising the risks of overcapacity as the world’s biggest investors look to cash in on the artificial intelligence boom, according to Ares Management corp.Co-President Kipp deVeer.

“If you look historically in areas like this over the past 20 or 30 years, typically when this much capacity comes online, some of it at the end of the day has to be marginal,” deVeer said, speaking on the sidelines of the Greenwich Economic forum in Connecticut on Tuesday. “These trends tend to lead to overbuilds in certain places, so us being selective and measured in what we build is vital.”

Choice asset management giants including Blackstone inc., Brookfield,Apollo Global Management Inc.and Ares have poured into data center projects as a way to cash in on booming demand for processing power that’s been unleashed by the advent of artificial intelligence. Many have pitched their investments as a more reliable way to play the AI boom while avoiding the risks of a gold rush into AI stocks, as it is indeed hard to predict winners and losers.

Los Angeles-based Ares last month unveiled more aggressive asset-raising targets,notably for data center investments and its wealth business. The firm said it’s aiming for more than $8 billion of equity fundraising to back data centers in the near term across London, Japan and Brazil. It also hiked its fundraising target for the wealth business by $25 billion, to $125 billion, by 2028.

Ares, which has historically focused on the financing of data centers thru its credit business, raised $2.4 billion in the first half of the year for the facilities and has a dedicated fund for digital infrastructure investments in Japan.Last year, it