Apollo starts buying into AI startups, with lending in its sights

Apollo Global Management has built its name financing buyouts and vast corporate debt deals. Now it is writing cheques into AI startups and the hardware outfits around them, with a longer-term ambition to lend those companies money too. The eye-catching position is fresh: low tens of millions of dollars into the latest funding round of Mercor, a data-labelling startup set to be valued at $20 billion. Apollo has also backed chip designer SiFive and Hadrian, which says it is building AI-powered factories, in deals the companies disclosed earlier this year, and it expects to make more investments in these categories.

Watch Desk analysis

What happened

The Information reported the move on 16 September, citing people familiar with the matter. Apollo, known for leveraged buyouts and hefty financing, has started investing in AI and related hardware startups. Its stake in Mercor's round was previously unreported, and the round is set to value the data-labelling company at $20 billion.

The SiFive and Hadrian positions were disclosed by those companies earlier this year. The report adds that Apollo expects further investments in the same categories, and that its ambition runs past equity: it wants, eventually, to lend money to AI startups.

Deal at a glance

• The entrant
  Apollo Global Management, a heavyweight of buyouts and large-scale financing, has moved into AI and AI-hardware investing.
• The fresh cheque
  Low tens of millions of dollars into Mercor's latest round, which is set to value the data-labelling startup at $20 billion.
• The earlier positions
  Chip designer SiFive and Hadrian, which says it builds AI-powered factories, both disclosed Apollo investments earlier this year.
• The ambition
  More investments in these categories, and eventually lending money to AI startups.

Why it matters

The AI boom has been bankrolled mainly by venture capital and the balance sheets of a handful of hyperscalers. When one of the world's largest credit houses starts taking equity positions in AI startups and signals an appetite to lend to them, the financing base is widening beyond both.

For founders, that means a new class of deep-pocketed backer at the exact moment hardware plans such as factories and chip designs need patient, serious money. For the market, it sharpens the standing argument about whether this is a durable build-out or a cycle being inflated. Debt specialists entering an asset class is historically the point at which that argument gets loudest.

Our read

The size of the cheques is the least interesting part. Low tens of millions is pocket change for a firm that prices risk for a living, which is precisely why the direction matters: it reads like a toe in the water ahead of the real business, lending to an industry currently consuming capital at a remarkable pace.

The Mercor figures rest on people familiar with the matter rather than a formal announcement, so hold them lightly until the round is confirmed. The sensible move for anyone tracking AI funding is to add private credit firms to the watchlist, because if Apollo's lending ambition hardens into announced credit facilities, the cost and availability of capital for AI startups changes shape.

What to watch

• The Mercor round.
  Whether it closes at the reported $20 billion valuation, and who else ends up on the cap table.
• Lending, not just equity.
  Whether the stated ambition becomes announced credit facilities for AI startups.
• The next categories.
  Where Apollo's promised further investments land.
• The imitators.
  Whether rival private credit houses follow it into AI equity.

Discussion spark: Is a buyout giant moving into AI equity and scouting loans the sound of an industry maturing into debt financing, or of late-cycle money finding a new costume?

Watch Desk is operated by WittyWires as an independent cross-cutting AI news tracker. It does not speak for the organisations or people it covers.