Two recent transactions by Apollo Global Management this year illustrate opposing trends in AI funding: one points to abundant capital hunting for investments, the other shows higher prices as lenders reassess risk.
Plenty of capital, too few deals
Apollo’s purchase of a stake in Mubadala Capital, the Abu Dhabi government-backed asset manager, reflects a view that Wall Street’s immediate shortage is not capital but investable opportunities. Apollo’s retirement arm reportedly collects about $1 billion a week that needs to be deployed, and its origination capacity cannot keep up. By investing in Mubadala, Apollo gains preferential access to a steady pipeline of transactions.
That deal underscores a market dynamic in which excess capital chases a limited number of attractive opportunities, concentrating deal flow among those with privileged access.
Rising cost of capital: the SpaceX chip lease
By contrast, Apollo’s $40 billion chip-lease financing for SpaceX highlights rising borrowing costs. In a check six days before the closing, the riskiest tranche of SpaceX’s financing appeared likely to be priced at roughly 3.5 percentage points over a US Treasury baseline — steep but reasonable for a company with an investment-grade rating. When the transaction closed this week, the spread had widened to 3.95 percentage points, significantly more expensive than earlier expectations for an investment-grade borrower.
The wider spread signals that, although capital remains available for AI-related deals, providers are increasing pricing to reflect perceived risk.
Market reaction and investor stance
A Wall Street executive commented that market participants have rapidly become more cautious: “I won’t say they were dumb until four weeks ago, but… they’ve gotten a lot smarter, fast.” The remark captures how quickly lenders and investors are re-pricing AI exposure.
David Solomon, chief executive of Goldman Sachs, told analysts on a recent call that while the firm is proud of the privileged role it plays in the AI investment cycle, nobody yet knows how demand for capital and compute will evolve as the broader AI ecosystem matures. He said that clarity will come as technology and markets continue to develop.
Implications for investors
Together, Apollo’s transactions convey that available funds for AI projects are substantial, but pricing and access diverge. Some investors are securing access to deal flow and exclusive sources (as Apollo did with Mubadala), while capital providers elsewhere are demanding higher risk premia, increasing financing costs for capital-intensive AI investments.
The market’s next moves will depend on both technological progress and the expansion of investable opportunities; how those factors play out in the coming months will be decisive.
