Apollo's president warns AI may not pay off for investors

US data centres alone could require $5 trillion to $6 trillion in investment over the next five years, and according to Apollo Global Management president Jim Zelter, that staggering figure is precisely why investors need to pump the brakes on their AI enthusiasm.

Speaking on Goldman Sachs' Exchanges podcast Thursday, Zelter drew on three decades of market cycles to make a pointed distinction between transformative technology and profitable technology. He referenced the cell phone era as a parallel: utility was never in doubt, but economic returns to capital owners were far less predictable.

"Just because companies need capital doesn't mean they're all great investments," he said. The comment cuts to the core of a debate increasingly dominating Wall Street: whether the AI buildout is creating value or simply burning through it.

One of Zelter's sharpest observations concerns the structural shift AI is forcing on the technology sector. Historically, software and platform businesses were celebrated precisely because they required little physical infrastructure. That dynamic is reversing fast.

"There's a massive capex cycle going on that's turning an asset-light business into asset-heavy," Zelter said. For investors accustomed to valuing tech on margin expansion, that shift demands a fundamental rethink of how risk is priced.

Zelter is not alone in his scepticism. Oaktree Capital Management Co-founder Howard Marks said in December that too many market participants are approaching AI with a "lottery-ticket mentality". Veteran economist Steve Hanke went further in February, telling Business Insider that AI is overhyped and potentially dangerous.

The KPMG US CEO survey further added these concerns by showing that three-quarters of CEOs at major companies believe that generative AI has perhaps been hyped up too much during the last year. Still, around 80% of these CEOs told KPMG that they would allocate at least 5% of their budgets towards AI investment in 2026.

In Apollo’s case, this influx of capital has opened an opportunity for financing. However, Zelter highlights that it is an opportunity that demands discipline.

He explained that the risk associated with investments that resemble equities cannot be considered that of fixed income and that financiers must ensure robust downside protection before funding AI infrastructure firms.