Nvidia Chief Executive (NVDA) Jensen Huang recently said that AI was more of an infrastructure than a group of chips.
Now, Microsoft (MSFT) and BlackRock are partnering to fund AI infrastructure in the U.S. On Sept. 17 the software stalwart and the asset-management titan said they'd join the Global Artificial Intelligence Infrastructure Investment Partnership, with plans to raise $30 billion in private equity and an overall target of $100 billion in investments, according to a statement.
The initiative focuses on two things: building more data centers to handle the growing demand for AI computing power, and improving energy infrastructure to power these centers.
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Other participants include Global Infrastructure Partners, which BlackRock is in the process of acquiring, and UAE-based tech investor MGX, which focuses on building data centers and energy projects.
“Mobilizing private capital to build AI infrastructure like data centers and power will unlock a multitrillion-dollar long-term investment opportunity,” said Larry Fink, BlackRock’s (BLK) CEO. “Data centers are the bedrock of the digital economy, and these investments will help power economic growth, create jobs, and drive AI technology innovation.”
Nvidia, the leading producer of artificial-intelligence-related chips, will support the AI investment partnership with its expertise. “Accelerated computing and generative AI are driving a growing need for AI infrastructure for the next industrial revolution,” said Huang.
The announcement came together with the Federal Reserve's decision to cut interest rates by 0.5 percentage point. A rate cut typically benefits fundraising efforts by lowering borrowing costs and driving investor demand toward higher-risk assets.
“The timing, as the Fed enters a rate-cutting cycle that should improve project hurdle rates and borrowing costs, is another sweetener,” said TheStreet Pro’s veteran analyst Chris Versace.
What it means for tech companies
Major tech companies are sharply boosting their spending on data center infrastructure to stay competitive in AI, putting U.S. energy producers under pressure to meet soaring demand. According to Bloomberg Intelligence, electricity usage could increase up to 10 times by 2030.
Microsoft said in July’s earnings call that it planned to scale its spending on AI infrastructure to meet demand.
Related: Analyst revisits Microsoft stock price target amid AI spending ramp
“Cloud and AI-related spend represents nearly all of our total capital expenditures,” said Microsoft Chief Financial Officer Amy Hood. “Within that, roughly half is for infrastructure needs where we continue to build and lease data centers that will support monetization over the next 15 years and beyond.”
Microsoft’s latest quarterly revenue growth from Azure and other cloud services missed analysts’ forecast. The company reported 29% growth for the fiscal fourth quarter, while analysts had expected 31%.
Tech companies are also trying to avoid increasing energy costs. The Washington Post reported that Google, Amazon, Microsoft, and Meta are opposing American Electric Power Ohio's proposal, which states that a tariff hike is required to prevent new infrastructure costs from shifting to households and businesses if the tech industry doesn't meet its energy-intensive plans.
AEP Ohio's proposed rate increase aims to push data centers into making long-term financial commitments, getting them to “have more skin in the game," according to AEP Vice President Matthew McKenzie.
Modest financial accretion yet significant strategic accretion, analyst says
Morgan Stanley analyst Michael Cyprys calls this partnership an "impressive" first-time AI fund for BlackRock and one of the largest ever in this field.
He affirmed an overweight rating on the stock, citing the strength of BlackRock's brand, connections and platform.
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Morgan Stanley expects the fund to add 60 to 80 cents to BlackRock's earnings per share, about 1%-2% of its 2025 EPS estimate of $49.34.
The analyst calls that the "financial accretion modest, but strategic accretion significant," according to thefly.com.
Related: Veteran fund manager sees world of pain coming for stocks
