ARTICLE AD BOX
According to many Wall Street investors, research analysts and Silicon Valley investors and technologists artificial intelligence, AI is the fourth industrial revolution and artificial intelligence, AI will change profoundly how humanity works, consumes leisure and communicates.
In short, artificial intelligence, AI could makes us tremendously more productive, according to those forecasts.
However, if the current artificial intelligence, AI turns out to be a bubble, possibly the greatest financial bubble in history the hyperscalers Amazon, Microsoft, Alphabet and Meta will be disproportionately hurt. With them, however the market capitalization and value of small and medium sized artificial intelligence, AI technology companies will suffer. And not only AI companies, but almost all technology companies will loose value if artificial intelligence, AI turns out to be a bubble and bursts. More than 40 % of new technology investments go into artificial intelligence, AI companies. And since most other companies try to instill artificial intelligence, AI in their organizations, if AI bursts the technology sector and a large part of the global economy will be hurt.
Blackstone, KKR, Apollo, Carlyle, Ares, Blue Owl, CVC etc. and the other leading private equity, private credit, real estate and infrastructure asset management companies, along with small and mid-sized private equity managers have invested large part, in some cases more than 30 % of their newly raised assets under management in the artificial intelligence, AI boom, which means they have invested in artificial intelligence, AI companies, artificial intelligence, AI data centers, energy and infrastructure companies that provide the energy for the artificial intelligence, AI data centers. In short private equity, private credit, real estate asset management firms have financed to a large part the artificial intelligence, AI boom with hundreds of billions of USDs in artificial intelligence, AI related investments.
And if the current AI boom turns out to be a bubble, after artificial intelligence, AI technology companies and the energy companies supplying the artificial intelligence, AI data centers with energy, the next in line to loose hundreds of billions of USDs in value and market capitalization will be the private equity, private credit, real estate and infrastructure asset managers like Blackstone, KKR, Apollo, Carlyle, Ares, Blue Owl, CVC etc.
Private equity firms, if artificial intelligence, AI turns out to be a bubble that wipes out trillions of USDs of value will suffer magnified losses since they are triple leveraged on the artificial intelligence, AI boom. Namely, private equity firms via private equity leveraged buyouts of artificial intelligence, AI technology companies take only the equity portion which is around 30 %, while borrowing the rest of the private equity buyout in debt and thus private equity firms leverage themselves several times. Via private credit lending to artificial intelligence, AI technology firms at interest rates of 7 % to 15 % usually, private credit asset managers take out additional leveraged, because their high interest loans are usually the first to be wiped out of the capital structure. In addition, private credit firms invest in securitization via buying Collateralized Loan Obligations, CLOs Collateralized Debt Obligations, CDOs. Private credit companies usually own the most junior tranches of Collateralized Loan Obligations, CLOs Collateralized Debt Obligations, CDOs, so they stand in line to be the first to loose possibly tens of billions of USDs of value. In addition, artificial intelligence, AI is operationally leveraged. So all private equity, private credit, real estate asset management firms that have invested in artificial intelligence, AI are essentially triple leveraged. Triple leverage magnifies gains, but it also tends to cause multiple fold increase of losses.
If the artificial intelligence, AI boom turns out into a bust, technology companies will loose trillions of USDs of value, while private equity firms will loose hundreds of billions of USDs of value on their investments, according to Wolfteam Ltd.'s projections and estimates.
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