Apollo's Strategic Entry into Data Centers: A High-Conviction Play on AI Infrastructure

The global AI infrastructure race is accelerating, and Apollo Global Management has positioned itself as a pivotal player in this next-gen digital gold rush. By acquiring a majority stake in Stream Data Centers (SDC) in 2025, Apollo has not only secured a direct entry into the data center sector but also aligned itself with the explosive demand for AI-ready infrastructure. This move, coupled with its $38 billion capital deployment since 2022 and a disciplined private credit strategy, underscores Apollo's ability to outperform peers in a market projected to grow from $236.44 billion in 2025 to $933.76 billion by 2030.

Strategic Acquisition of SDC: A Scalable Platform for AI-Driven Growth

Apollo's acquisition of SDC—a developer and operator of hyperscale data center campuses—provides immediate access to a 4+ gigawatt (GW) development pipeline across key U.S. markets like Chicago, Atlanta, and Dallas. These locations are critical for hyperscalers and AI providers, who require low-latency, high-power environments to process AI workloads. SDC's existing 650 megawatt (MW) near-term power capacity, accelerated by Apollo's capital, addresses a 19–27% annual capacity gap in these regions.

The transaction also includes a newly formed Apollo subsidiary taking over SDC's land fund, ensuring a steady pipeline of development-ready sites. This vertical integration allows Apollo to control both the physical and financial levers of growth, a rarity in the data center sector. By retaining SDC's management team and leveraging its expertise, Apollo minimizes operational risk while scaling its footprint.

Capital Allocation and Private Credit: Apollo's Secret Weapon

Apollo's strength lies in its private credit dominance. With 80% of its $690 billion AUM now in credit strategies, the firm has built a hybrid origination engine capable of funding long-horizon infrastructure projects. The recent $1.5 billion acquisition of Bridge Investment Group added $50 billion in AUM and 300 professionals to Apollo's credit arsenal, enabling it to underwrite AI-ready data centers with high-margin, long-term leases.

Apollo's perpetual capital base—bolstered by its Athene Holding Ltd. integration—provides a critical edge. With 60% of its AUM in long-term, insurance-based funding, Apollo can finance projects spanning decades, aligning with the seven-year grid interconnection timelines typical in data center development. This patience allows it to outmaneuver peers reliant on shorter-term capital, such as Blackstone and Brookfield, which face liquidity constraints in capital-intensive sectors.

Competitive Advantages: Renewable Integration and Regulatory Tailwinds

Apollo's AI infrastructure strategy is not just about scale—it's about sustainability. By integrating solar, wind, and geothermal cooling into SDC's designs, the firm meets both energy demands and ESG mandates. This alignment with the U.S. CHIPS and Science Act further accelerates domestic development, as Apollo's projects qualify for federal incentives aimed at boosting AI-ready infrastructure.

Moreover, Apollo's Apollo Portfolio Performance Solutions (APPS) team and the 25m Evolve incubator are transforming operational challenges into high-growth AI ventures. This dual approach—optimizing existing assets while innovating new ones—creates a compounding effect, enhancing returns across the value chain.

Investment Thesis: A High-Conviction Play on the AI Infrastructure Boom

Apollo's Q2 2025 results highlight its momentum: fee-earning AUM rose 22.2% year-over-year to $638 billion, while total AUM surged 36.1% to $840 billion. The firm's adjusted net income of $1.92 per share (exceeding estimates) and a forward P/E of 9.8x suggest undervaluation relative to its growth prospects.

For investors, Apollo represents a rare convergence of strategic execution and macroeconomic tailwinds. Its private credit leadership, perpetual capital, and AI-focused infrastructure pipeline position it to outperform in a sector where demand will outstrip supply for years. While risks like grid bottlenecks and regulatory shifts exist, Apollo's disciplined capital allocation and regulatory alignment mitigate these concerns.

Investment Advice: Apollo's strategic entry into data centers is a high-conviction play for long-term investors. The firm's ability to leverage private credit, scale AI-ready infrastructure, and align with regulatory trends makes it a compelling addition to portfolios seeking exposure to the next economic paradigm. With the AI infrastructure boom in full swing, Apollo is not just riding the wave—it's shaping it.