00:00Do you think that there is a real question now to whether these tech giants can continue to spend
00:05in the way that they are when it comes to AI and data centers? Is this the market trying to
00:10force
00:10them to pump the brakes? I mean, look, the market has been trying to force them, I would say, over
00:15the course of the last year or maybe two years. And all that keeps happening is they keep upgrading
00:19those CapEx expectations. I think what the market is likely underappreciating, I think, are two
00:24things. You know, first of all, is that there is an ROI on a lot of the spend that's being
00:29rolled out.
00:30And the reason why you would spend five, six, seven hundred dollars, billion dollars, I should
00:34say, into CapEx and data centers is because you're expecting to see your cloud revenues grow as a
00:40result of that. We're seeing that certainly from the hyperscalers. We also see, as we've talked about
00:45last time, the hyperscaler cloud backlog of a trillion and a half. So all of those revenues are yet to
00:50be
00:50booked. So I do think that's one thing the markets are underappreciating. The other is there was an
00:56interesting point this morning about Amazon and how AI enablement of Amazon can actually allow them
01:04to be better at placing ads, to be better at product recommendations. And so, you know, so actually
01:10the companies like some of those same hyperscalers are going to benefit in the other parts of their
01:17business, whether it's digital advertising, whether it's e-commerce, whether it's social media, etc. So I think
01:23that's something that investors also should not lose sight of.
01:26Does it, though, just make life more difficult when they sell off like this? Do they get as warm of
01:30a reception in bond
01:32markets, for example, when they go to issue new debt? Can you continue to see M&A be stock only
01:36deals? I think it was
01:37Qualcomm earlier this week that did a stock only transaction. Just the sheer mechanics of falling stock prices.
01:43Does that make it difficult for them just to continue the project that they're on right now?
01:47I mean, sure, to the extent that you see some widening, for example, in credit spreads. And do you want
01:51to then
01:52tap the credit market if your credit spreads are widening? That's where the mechanical connection there.
01:56Look, I do think the bond market mechanism is an important one here. It is good to have that sort
02:01of
02:01scrutiny. And look, these companies should absolutely be watching their free cash flow. And for some, that has
02:07dipped into negative territory for others. It has not. And the bond market is a nice disciplining mechanism, for sure.
02:15I was going to say, part of the thesis, I'm sure you're coming at it, is from a private markets
02:19point of view, too,
02:20because you've also, Partners Group, undergone, as many of your peers have, this AI infrastructure build-out and the funding
02:26of that.
02:26How closely are you watching what's happening on the public markets in order to kind of inform where the private
02:32market side goes?
02:33I mean, the two are absolutely connected. But, you know, you have one set of opportunities in public markets, though,
02:39but I think you have a lot more in private markets. And areas of focus for us, you're absolutely right,
02:44has been on AI infrastructure build-out. And we've been investors in data centers for several years.
02:50We had a successful exit of a data center at North. We have several other data centers on our platform.
02:56Edgecore, for example, is a large and scaling data center operator here in the United States, digital halo out of
03:04Asia.
03:05So we're firmly committed to that space. And I think what's interesting is that the first wave of AI has
03:10been about building out the chat bots and the co-pilots
03:13and what I call conversational AI. The next phase of AI, what we're really excited about, is work as a
03:20service, a workflow automation.
03:22And so that requires a whole lot more data center capacity and a whole lot more chips, et cetera.
03:27So I think we also have to invest with that in mind. And again, in our infrastructure business,
03:32there's been a big focus on power and any which way that you can get it.
03:36So whether it's mobile power generation and getting that to the data center in case there's an outage elsewhere,
03:43whether it's investing in an independent power producer in California and making sure that we have natural gas supply power
03:50and eventually combining that with battery storage. So all of those things are very investable and available, I would say,
03:57in private markets.
03:58And then on the private equity side of things, you know, we have a distinction that we have to draw
04:03there.
04:04You can invest in AI natives, but you're going to pay a big, big multiple for that.
04:08You're going to pay off for that. Or you can find what we're calling the AI reinvention candidates.
04:13And maybe it's some of the heavier industries like like energy, like materials, like industrials and see or even software
04:22and see what kind of AI capabilities we can infuse and then hopefully have a higher exit multiple on top
04:28of that.
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