The moneymen funding Big Tech’s AI dreams

One scoop to start: Centrica and Energy Capital Partners are in exclusive talks to buy the UK’s largest liquefied natural gas import terminal in a roughly £1.5bn deal from its owner National Grid.

In today’s newsletter:

• How private capital is bankrolling Big Tech

• IPO bankers under the microscope

Private capital plugs Big Tech’s AI shortfall

Big Tech groups have played up their plans to spend trillions of dollars on data centres as they race to build ever more advanced AI models.

Behind the bluster, it’s private capital groups that are gearing up to foot much of the bill.

AI models churn through vast amounts of information in the process of learning and that, tech giants argue, requires a huge expansion of data centre infrastructure.

Historically, it’s been the so-called hyperscalers — Amazon Web Services, Microsoft Azure and Google Cloud — that have bankrolled data centres with their own cash.

But Big Tech’s dreams are becoming more fantastical.

Meta, xAI and OpenAI have each announced supercomputer projects that will individually cost more than $100bn.

And that’s just the tip of the iceberg. Analysts at Morgan Stanley estimate that global spending on data centres will hit almost $3tn by 2029.

Those figures should — in absolute dollar terms — be taken with a heavy pinch of salt, as Alphaville has previously written.

But they highlight an important point: less than half of the cash for the data centre build-outs is expected to come from the hyperscalers. The remaining amount will probably be raised from more traditional moneymen, with private credit expected to fund the biggest chunk.

It’s a prediction that’s playing out in real time.

Meta, for example, is looking for $29bn from private capital giants including Apollo, KKR, Brookfield, Carlyle and Pimco, as DD’s Eric Platt and Oliver Barnes scooped earlier this year.

Apollo has already deployed $38bn on such infrastructure, and last week bought a majority stake in the data centre builder Stream.

A number of other big names in private capital such as Blue Owl and BlackRock’s Global Infrastructure Partners have ploughed in or promised billions in data centre investment.

Last year, Blackstone bought AirTrunk, the Australian data centre platform, for $14.9bn. It was the second-largest data centre deal after KKR and Global Infrastructure Partners’ $15.5bn purchase of US data centre owner CyrusOne.

Blackstone has also funded CoreWeave, an AI data centre operator, with a $10bn loan.

Both CoreWeave and OpenAI are non-investment grade borrowers. And the frenzy to lend means that increasingly speculative projects are securing funding, including some sites without an anchor tenant.

It’s a whole lot of cash bet on the premise that there will be almost limitless demand for AI infrastructure.

There’s a risk that sometime in the future, supply will outstrip demand. The pace of development also means some projects risk becoming obsolete before they really get off the ground.

At some point, the music will stop. What then?

For more on the funding gap that private capital is filling, read the latest story in the FT’s series on data centres here.

Have IPO bankers lost their touch?

Underwriters have been on the sidelines for the past couple of years after a lacklustre spell for public listings.

Now, a series of roaring stock market debuts is leading to accusations that bankers are mispricing deals, just as investors get their hopes up that the IPO window is reopening.

Yesterday, the Peter Thiel-backed crypto exchange Bullish soared 170 per cent on its debut, before ending the day up 83 per cent. It followed similar jumps over the past couple of months from the listings of stablecoin operator Circle Internet and design software maker Figma.

While those surges were celebrated by the newly public companies, critics of the IPO process were not so pleased.

Longtime sceptic Bill Gurley alleged Figma’s listing was evidence of “gross inefficiency in the modern IPO process”.

Big price jumps generate headlines and a sense of demand, but sceptics argue they leave money on the table for investors who have used the IPO to cash out.

Instead of those long-term backers getting all the gains, leaps in the share price after a company lists are often captured by the initial buyers of the IPO such as hedge funds.

While these criticisms are valid, they overlook the fact that the recent IPO pops appear to have been driven by retail demand.

Institutional buyers tend to be allocated the bulk of shares during IPOs, meaning retail investors who want a piece of the action have to buy in after the company goes public.That can drive prices higher post debut.

Circle and Bullish are crypto companies operating in an industry flush with everyday investors, and Figma drew its own flurry of retail interest. Such demand is inherently difficult to price, as Alphaville argued after Figma’s IPO.

The recent blockbuster listings are likely to draw the attention of private equity firms, which are sitting on record piles of vintage deals and searching for an exit.

Bankers might point to the flashy tech and crypto debuts of recent weeks as evidence IPOs are back.

But the types of businesses touted by buyout groups tend to be far less retail friendly than this year’s IPO winners. And one swallow doesn’t make a summer.

Job moves

• Ikea has named Juvencio Maeztu as its new chief executive. He will succeed Jesper Brodin in November and become the furniture group’s first non-Swedish boss.

• The UK Treasury has appointed ex-John Lewis chair Charlie Mayfield to its board.

• Citigroup has named Amit Nayyar as its co-head of UK and Emea technology investment banking. He joins from JPMorgan. Meanwhile Aashish Dhakad will join the bank as head of private credit origination for North America. He was previously at Ares Management.

• August has hired Jeremy Jacobs as a senior adviser in Washington, where he will provide strategic communications advice on M&A, shareholder activism and investor relations. He previously worked at Key Message, H/Advisors Abernathy and Joele Frank.

Smart reads

Strange union Perplexity’s bid for Google Chrome makes little sense on the face of it, Lex writes. There’s likely more to its offer than pure M&A.

Mumbo jumbo Transparency in private equity funds is becoming more important after Donald Trump’s executive order last week opened up retirement plans to the industry. One buyout group is making its figures incomprehensible, The Wall Street Journal writes.

Shorts season Hot weather is getting to Robert Armstrong, the FT columnist who coined the “Taco” trade acronym. Shorts in the office are verboten no more, he declares, paying homage to DD’s trunks-wearing trailblazer, Eric Platt.

News round-up

Saudi Arabia’s PIF makes $8bn writedown on value of flagship megaprojects (FT)

Porsche-Piëch family seek tie-ups on defence investment (FT)

Scott Bessent floats rolling out export tax to more industries (FT)

Retail investors fight for right to bet on natural disasters (FT)

Shell loses legal claim against US LNG operator Venture Global (FT)

Jewellery chain Claire’s UK business appoints administrators (FT)

‘Traffic-light’ dashboard lets PwC monitor office attendance (FT)