- Private equity companies investing in AI are looking to secure compute power
- Governments are also looking to do the same to ensure domestic AI startups have what they need for growth
- Investments and grants could use compute power as currency
If artificial intelligence (AI) has one major Achilles heel, it's that the technology’s entire existence relies on there being enough compute power to support it. So, it makes sense that investors pumping cash into AI are looking to make sure this soft spot is covered.
Nessim-Sariel Gaon is co-founder and managing partner of Luxembourg-based LIAN Group, an investment firm founded in 2017 that has poured more than $500 million into companies across the digital infrastructure, AI and blockchain segments. He told Fierce that some firms that have already invested heavily in AI are starting to turn their attention to the compute part of the equation.
Gaon said the idea is to “own their own compute and eventually subsidize that compute on a model of compute for equity.”
He added that while many venture capital (VC) funds don’t have a mandate to invest in hardware, several private equity firms are interested in going this route.
“It’s, I think, a smart way for them to be on both sides of the equation,” Gaon said. “First of all, own the infrastructure. It’s actually a competitive point for them when they invest in a startup is telling them we own our own private cloud, so you’re going to be able to grow and have good terms.”
For those who don’t already know, VC funds and private equity investors differ in the types of company risk profiles they invest in and the return timeframes they’re looking for. Private equity tends to go for lower-risk, longer-term plays.
Gaon said he’s already heard about a few large firms “already putting that into play.”
We’ve written previously about how private equity firms including Stonepeak, EQT, KKR and Grain Management have all made moves to either buy or invest in data centers and, by extension, the compute housed within them.
However, Gaon hinted another wave of investment is coming: “That’s something that we may see more [of] in the coming months.”
But they’re not the only ones looking to secure a dedicated supply of computing power for AI.
Gaon said governments across the globe are also eyeing compute investments to ensure startups in their countries have resources available to them to thrive.
Many governments are making a “big push” around AI and are starting to understand that “part of it is making compute available because companies cannot grow if they don’t have that fuel available.”
“I think we’re going to see more and more governments developing capacity and actually developing grants in the form of compute to allow new startups to grow,” he said