Apollo’s $114 Billion Loan Quarter Raises AI Chip Credit Questions

By Sophie Lindqvist

Apollo Global Management originated $114 billion in new loans in the third quarter, up 54.1% from the previous quarter and the highest quarterly volume on record, according to the Financial Times and other outlets reporting on the 3rd.

Apollo, one of Wall Street’s leading private-credit managers, recorded $356 billion in lending over the trailing 12 months, more than 30% above a year earlier. The report compares that scale with global banks HSBC and Citigroup, placing Apollo on a par with them.

What is Apollo financing?

Apollo is becoming a core financier of capital spending by large technology companies, especially for artificial-intelligence infrastructure. That marks an expansion for a private-credit manager historically focused on lending to companies acquired by private-equity funds.

The firm has provided funding to Anthropic and SpaceX. Separately, Apollo designs complex financing structures that raise large sums against high-priced AI chips used as collateral.

Apollo’s chip-backed structures create exposure to AI hardware. They do not establish chip shipments, production capacity, process nodes, wafer sizes or realized selling prices.

No chip operating figures accompany the financing data, so this activity should not be read as a chip-demand forecast.

How does Apollo earn on these loans?

Apollo invests premiums collected from customers by its life-insurance affiliate Athene into corporate loans and other assets. It aims to earn returns 0.3 to 0.4 percentage points above those on highly rated corporate bonds.

That figure is a target, not a disclosed AI-loan yield. The figures give no loan-level rate, collateral ratio, discount, maturity or borrower concentration.

It therefore does not show how much of Apollo’s new lending carries the targeted spread, how quickly the capital turns over, or how returns compare with realized losses.

Does AI-chip demand justify more financing?

Apollo expects demand for AI chips to exceed supply for some time and plans to expand the related financing business. The company offered no capacity number or independent market estimate with that expectation.

“What we know for sure is that society is going to use a lot more compute going forward,” Apollo President Jim Zelter said at the earnings event. He expects demand for energy and semiconductors to rise accordingly.

“Our new deal origination and investment activity is concentrated mainly in power and semiconductors,” Zelter said, calling both sectors areas of attractive risk-adjusted returns and high conviction.

The statements express Apollo’s investment conviction. They do not quantify how much new capital is allocated to either sector, nor do they show expected chip prices or returns under faster depreciation.

Can the collateral withstand faster depreciation?

Michael Arougheti, chief executive of rival Ares Management, recently said he avoids loans secured by AI chips. His reason is straightforward: the pace of semiconductor depreciation is difficult to predict.

Apollo says it reduces that risk through installment repayment through maturity and guarantees from firms with strong credit in anticipation of future collateral value declines.

The available information contains no chip-price schedule, stress-loss estimate, collateral discount or exposure limit. Ares’s avoidance is a stated risk preference. Apollo’s response is a financing structure. Neither supplies enough data for a direct comparison of expected losses.

Did record lending translate into stronger earnings?

Three reported measures diverged:

• Revenue: $4.74 billion, down about 52% from a year earlier.
• Net result: A $1.057 billion loss, compared with a profit in the prior-year period.
• Asset-management fee-related earnings: A record $802 million, up 23%.

Valuation losses on investment assets amid rising interest rates drove the earnings reversal. The figures do not isolate how much AI-chip-backed financing contributed to the quarter’s origination total.

The near-term commercial test is not merely whether Apollo can issue more debt. It is whether AI-chip demand stays above supply long enough to support collateral values while Apollo expands chip-backed lending that Ares CEO Michael Arougheti says he avoids.