Investcorp shies away from data centres to focus on services

Alternative investment firm Investcorp is eschewing big investments in data centres, a space it considers too crowded, its vice president and chief information officer said on Wednesday, opting instead for sectors offering better returns and shelter from geopolitical risks.

Investors have poured billions of dollars into artificial intelligence, including data centres, as high expectations for what many view as a transformative technology have driven spending, creating insatiable demand for capital.

However, unease around sky-high company valuations and fears of a possible AI bubble have now begun to emerge.

“Ironically, we are not really going big and deep into data centres mainly because … too much capital has gone into it. Returns have gotten compressed to levels where arguably, you can get a better risk-return trade-off in other areas,” Rishi Kapoor told Reuters.

Speaking on the sidelines of the World Economic Forum in Davos, Switzerland, Kapoor said Investcorp is focusing on investments in domestic professional, commercial and healthcare services and IT services, as well as transportation.

“We are kind of picking and choosing, placing our bets in areas where we see clear high conviction and some degree of insulation, if not resilience, to these risks that are otherwise hard to quantify or mitigate,” he said.

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Investcorp is the Middle East’s biggest alternative investment firm and had $60 billion in assets under management as of the end of June.

It is focusing on the US, the Gulf region and India, Kapoor said, adding that Investcorp sees a healthy IPO pipeline and backdrop in these markets. The company has a handful of assets that could potentially be listed this year, he added, without providing further details.

Asked about the red-hot Indian market, which ranked as the world’s No. 2 for primary equity issuances last year, Kapoor said that the momentum is likely to remain with IPOs proving “a very valid, viable route to monetisation for private sponsors”.