Authored by Ed Dowd via 'Beyond The Narrative' substack,
The signs are piling up faster than the hype can spin them. AI capex has been the rocket fuel for markets, but the second derivative is turning. Factors ending the party:
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Private credit stalled — flows reversing, redemptions surging, industry effectively paused.
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Enterprise demand cracking — ROI skepticism, token costs biting, data/alpha extraction backlash.
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Power constraints hitting hard — the grid can’t scale without massive, long lead time builds or dystopian reallocation.
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Open-source pressure — Chinese based DeepSeek and now the new open-source frontier model Kimi K3 are rivaling OpenAI and Anthropic frontiers labs at fraction of the price, commoditizing the economics.
Credit markets always end the party. We’re watching it live.
Private Credit: The Silent Pause Button on AI Capex
This is where financing reality bites. Morgan Stanley estimated private credit could fund up to 50% of the external financing needs for the massive AI data center buildout. That channel is now under serious stress.
Flows in private credit are going the wrong way. The industry is effectively paused. Redemption requests are surging, funds are gating, and h
