Oaktree Capital Management co-founder Howard Marks argued that more than $5 trillion in projected global AI data-center investment could compete with federal borrowing for capital, putting upward pressure on interest rates.
The AI Capital Crunch
According to Marks’ Sept. 22 memo, “Shall We Repeal the Laws of Economics – Part III,” the U.S. government’s need to fund massive federal deficits is colliding with the capital requirements of the technology sector.
Marks wrote, “The need to fund the massive federal deficits comes on top of the routine need for capital that accompanies the growth of the U.S. economy, and to that is added the multi-trillion-dollar investment in AI.”
He noted that this combination generates strong demand for both debt and equity capital. “The simplest rule of economics is that increased demand for something causes its price to rise,” Marks stated.
“It’s entirely understandable, therefore, that this growing demand for capital should put upward pressure on the price of money: interest rates,” he added.
Upward Pressure on Yields
Marks cited a projection from McKinsey & Company, which estimated that “over $5 trillion will be spent worldwide through 2030 on data centers directly related to AI.”
Whether this funding is borrowed or generated through equity sales, Marks explained that it “will draw from the total supply of available capital, affecting the interest rates bonds must pay to attract investors.”
Combined with the U.S. Treasury’s need to refinance maturing securities and finance roughly $2 trillion in new net issuance, Marks argued this dynamic adds “to the supply investors must absorb, putting upward pressure on yields and arguing against the likelihood of a decline in interest rates anytime soon.”
ETF Infrastructure Expressions
While Marks discussed macroeconomic trends rather than specific securities, his focus on the $5 trillion AI data center buildout highlights distinct market sectors. Investors monitoring these infrastructure themes can track related Exchange Traded Funds.
The Global X Data Center & Digital Infrastructure ETF (NASDAQ:DTCR) and the Pacer Data & Infrastructure Real Estate ETF (NYSE:SRVR) hold companies that operate the physical data centers Marks referenced. The State Street Utilities Select Sector SPDR ETF (NYSE:XLU) tracks the utilities sector responsible for the power generation required by AI infrastructure. Finally, the iShares Semiconductor ETF (NASDAQ:SOXX) tracks the hardware companies absorbing the multi-trillion-dollar investments Marks described.
| Stocks | 1-Month | 6-Months | YTD | 1-Year | 5-Years |
| DTCR | 1.66% | 19.96% | 35.74% | 39.49% | 60.57% |
| XLU | -5.24% | -9.23% | -5.06% | -4.86% | 23.64% |
| SOXX | 10.14% | 72.26% | 87.85% | 112.27% | 266.96% |
| SRVR | -4.73% | -2.90% | 4.72% | -5.66% | -27.85% |
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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