Private credit is set to expand its role in financing what BlackRock's research head Jean Boivin describes as a "massive amount of infrastructure investment" for artificial intelligence, as companies seek capital for their outsized spending.
"We are in, you know, a global transformation like we probably have never seen before," Boivin said 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."
Boivin said the quickening pace of the AI buildout creates competing narratives of abundance versus scarcity across the economy.
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Private credit, which has grown rapidly in the last decade, is well-positioned to fill gaps left by traditional lenders, especially for large-scale, long-term projects. This trend is already visible in the financing of data center construction and energy infrastructure.
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.
Recent turbulence has hit the private credit market, as firms including Apollo Global Management and Ares Management have limited investor withdrawals from their funds. 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.
"But we've seen that broadening out now to smaller caps that are benefiting as well from the AI and I think there are going to be opportunities there as well," Boivin said. "The space for this to grow is quite significant."
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