OpenAI's strategy involves getting partners like Oracle and Microsoft to bear the immense balance sheet risk of building data centers and securing chips. OpenAI provides the demand catalyst but avoids the fixed asset downside, positioning itself to capture the majority of the upside while its partners become commodity compute providers.

Unlike debt-laden startups, tech giants are funding AI buildouts with cash and can weather a downturn. They fully expect smaller, leveraged competitors to go bankrupt, creating a strategic opportunity to purchase their data center assets for pennies on the dollar, thereby reducing their own future capital expenditures.

Instead of bearing the full cost and risk of building new AI data centers, large cloud providers like Microsoft use CoreWeave for 'overflow' compute. This allows them to meet surges in customer demand without committing capital to assets that depreciate quickly and may become competitors' infrastructure in the long run.

Large tech companies are creating SPVs—separate legal entities—to build data centers. This strategy allows them to take on significant debt for AI infrastructure projects without that debt appearing on the parent company's balance sheet. This protects their pristine credit ratings, enabling them to borrow money more cheaply for other ventures.

Private credit has become a key enabler of the AI boom, with firms like Blue Owl financing tens of billions in data center construction for giants like Meta and Oracle. This structure allows hyperscalers to expand off-balance-sheet, effectively transferring the immense capital risk of the AI build-out from Silicon Valley tech companies to the broader Wall Street financial system.

The largest tech firms are spending hundreds of billions on AI data centers. This massive, privately-funded buildout means startups can leverage this foundation without bearing the capital cost or risk of overbuild, unlike the dot-com era's broadband glut.

Financier Blue Owl Capital takes on risky equity positions in massive AI data centers by applying a real estate model. It mitigates risk by structuring deals to receive regular payments on equity and locking tenants like Microsoft into 15-year leases that are extremely difficult to exit.

In the current market, buying existing data center platforms means accepting very low cap rates of 2-3%. Stonepeak sees a better risk/reward proposition in building new capacity. This strategy, while slower and more complex, can deliver much higher returns—such as 9-10% cap rates in the US—with strong, long-term customer contracts secured from the outset.

Evaluating data center investments is like analyzing net lease real estate. With a tenant like a MAG-7 company, the investment is primarily a bet on the counterparty's creditworthiness, not the long-term value or potential obsolescence of the physical data center itself.