Blackstone flags hidden risk in AI boom as Pimco warns of $10 trillion spending bill: What's the catch?

The artificial intelligence boom is creating an enormous financing challenge for the global financial system, with Blackstone warning that lenders could become increasingly exposed to the companies driving the expansion even as investors question whether markets can absorb the scale of spending.

Blackstone President Jon Gray said the next phase of AI infrastructure development would require greater reliance on equity financing, as banks and other lenders face growing concentration risks from their exposure to major technology companies.

Speaking at the Hong Kong Monetary Authority's Global Financial Leaders' Investment Summit on Tuesday, Gray said the scale of investment needed to build data centres and support computing capacity was creating fresh challenges for debt markets.

The concern is that lenders are taking on growing risks without enjoying the same potential rewards as shareholders. While equity investors can benefit from rising company valuations, creditors typically earn fixed returns through interest and principal repayments.

Pimco warns AI spending could reach $10 trillion in five years

The warning from Blackstone came alongside concerns from Pimco chief executive Emmanuel Roman, who questioned whether financial markets would be able to support the AI industry's growing appetite for capital.

Roman said AI-related investment could reach approximately $10 trillion over the next five years, citing an estimate by General Atlantic chief executive Bill Ford.

He also pointed to around $550 billion in AI-related debt issued in various forms so far this year, highlighting how quickly borrowing is becoming part of the infrastructure race.

Even if companies combine equity and debt to finance their expansion, the funding requirement would remain enormous, Roman said. He compared the potential investment with the global corporate bond market, which stands at approximately $20 trillion.

"At some point in time, it's going to be too much," Roman warned.

Goldman Sachs estimated in a report published on Monday that meeting global demand for data centres would require around $8.5 trillion in capital spending over the next five years.

The investment will go towards building data centres and securing the supporting infrastructure needed to run increasingly powerful AI systems.

Gray said the financing would have to come from several sources, including public markets, banks and private capital. Companies are also exploring structured financial arrangements to reduce the amount of debt they need to carry on their balance sheets.

Cash generated by large technology companies, commonly known as hyperscalers, is expected to fund a portion of the expansion.

"The creativity is needed because the scale of capital is enormous," Gray said.

He said demand for computing power was "running well ahead of supply", suggesting that the industry's infrastructure expansion still has considerable room to grow.

AI adoption is also translating into measurable business benefits. Spending on AI models across Blackstone's portfolio companies has increased 20-fold over the past year, Gray said.

Businesses are increasingly using AI for tasks such as software coding, customer engagement and content creation, with companies seeing financial benefits from these applications.

However, expanding capacity is proving more difficult. Securing suitable land, obtaining permits, accessing advanced chips, arranging reliable power supplies and raising the necessary capital are all becoming increasingly challenging.

The emerging tension is central to the AI investment boom: demand for computing infrastructure continues to accelerate, but financing that growth is becoming a much bigger test for lenders and investors.