NYU finance professor Aswath Damodaran slammed private credit lenders funding the artificial intelligence data-center boom, warning that the rapidly growing industry is becoming increasingly reckless as capital floods into the sector.
Speaking in an interview with Lumida Wealth Management released Tuesday, Damodaran raised concerns about lenders financing large-scale AI infrastructure projects.
“Who are these lunatics who are lending money to the data centres?” Damodaran said.
The valuation expert, often referred to as the “Dean of Valuation,” argued that private credit has outgrown its original role of serving borrowers that traditional banks could not finance.
“People assume private credit guys must be smart guys. No, they’re not. They’re sheep,” he said.
AI Boom Draws Private Capital
Damodaran’s remarks come as private capital plays an increasingly important role in financing AI infrastructure. Goldman Sachs said earlier this month that private infrastructure and real-estate capital are expected to play a larger role in funding the AI-driven data-center buildout, raising its forecast for hyperscaler capital expenditure to $5.3 trillion between 2025 and 2030.
Private investors have already committed billions of dollars to AI-related infrastructure. Earlier this month, Apollo Global Management (NYSE:APO) and Blackstone (NYSE:BX) announced a $35 billion expansion of Anthropic‘s AI computing capacity, while Blackstone reportedly plans to also invest $30 billion in AI data centers in Japan.
‘Setting Itself Up For A Beating’
Damodaran argued that private credit, like hedge funds and private equity before it, has expanded beyond the niche that originally made it successful.
“They took a solid niche business … and made it 20 trillion,” he said.
“When you do that, guess what happens? You become sloppy.”
The professor warned that excessive lending could eventually create broader financial risks.
“Private credit is just setting itself up for a beating up to happen,” Damodaran said.
“The danger with private credit is they can take others down with them. You overreach, you create social costs. You take others down with you.”
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