AI Firms’ Debt-Fueled Bets Echo Dot-Com Bubble, With Shakeout Ahead, Ardian’s Schmitz Says

Jan Philipp Schmitz, executive president of France’s Ardian, the world’s largest secondary investor

"Supply bottlenecks are far more severe in energy than in semiconductors."

Jan Philipp Schmitz, executive president of France’s Ardian, said in a recent interview with The Korea Economic Daily during a visit to Seoul that power, energy and infrastructure — not semiconductors — stand to be the biggest beneficiaries of supply shortages relative to demand. Founded in 1996, Ardian manages $200 billion in assets and is the world’s largest secondary investor. It is the global leader in secondaries, buying and selling fund stakes held by pension funds, private equity funds and other investors before maturity. Schmitz, who was in Seoul to attend an investor event, urged caution on semiconductor investments. He also advised Korean companies to actively pursue mergers and acquisitions of privately held family-owned businesses in Europe.

▷Isn’t the outlook for the semiconductor industry bright?

"Investors should not forget that semiconductors have historically been cyclical. The industry has consistently gone through downturns after heavy capital spending and explosive growth. In that sense, I believe success in investing in the AI era will depend on energy. Balancing energy supply and demand is also a long-term challenge for humanity. That is why Ardian has expanded investment in this area in recent years."

▷What investments have you made in power and energy?

"After acquiring Verne, a Nordic data-center specialist, in 2023, we invested $3.2 billion to build a data center in Iceland. We also acquired Energia, an Irish power company, which supplies electricity to Microsoft data centers in the US. We have also secured 11 gigawatts of renewable power generation capacity, among the largest portfolios held by an alternative asset manager in Europe. That is enough to meet New York City’s peak summer power demand."

▷What is your long-term view on the AI industry?

"AI will clearly transform every part of industry and the economy, on a par with the invention of electricity and the internet. But investors need to remember that every boom is followed by a correction. I cautiously expect the AI market to replay what happened during the dot-com bubble of 2000 and 2001, when internet and technology companies collapsed in waves."

▷AI company valuations have risen too far lately.

"Some AI-related companies are investing too aggressively in capacity expansion or taking on too much debt. That is raising concerns about overheating in the market. As the market goes through a correction, the winners and losers will become clearer."

▷Korean companies are also showing strong interest in Europe.

"Europe is attractive to Korean companies now because succession issues at long-established businesses are converging with rising investment demand. Europe is the world’s second-largest economic bloc after the US. Korean companies should pay attention to acquisitions of small and mid-sized privately held companies in Europe. Precision machinery, industrial automation and advanced materials look especially promising. There are many privately held, family-owned businesses with histories stretching back hundreds of years. They could help take Korea’s manufacturing capabilities to the next level. I would recommend companies such as Germany’s TRUMPF, a supplier to ASML, as well as the strong midsized German technology firms known as the Mittelstand."

▷What is your investment strategy for Korea?

"Ardian manages $10 billion in commitments from about 60 institutional investors in Korea, including large pension funds and insurers. We have invested indirectly in companies through private equity managers such as MBK Partners, Hahn & Co. and Premier Partners. Going forward, we also plan to make direct investments."

▷Which sectors are you considering?

"We see promise in advanced precision manufacturers, healthcare companies and businesses in the food-sector value chain. All of them are small and mid-sized companies."

▷Secondary deals are still unfamiliar in Korea.

"Secondaries help institutional investors recover capital tied up in funds earlier than scheduled. They also support the stable operation of funds for private equity and infrastructure managers. Ardian has completed investments from Ardian IX, the world’s largest secondary fund, with $29.6 billion in capital, and is preparing to raise Fund X. Global secondary transaction volume is set to exceed $300 billion for the first time this year. It is the fastest-growing segment in alternative investments. Demand is surging because private equity M&A assets are not being absorbed smoothly around the world."

▷Rising interest rates are becoming a bigger concern.

"High US interest rates will persist for a long time. There may be some small rate cuts, but we will not return to the era of ultra-low rates seen in the past. In a high-rate environment, investors should build a defensive buffer with private credit and infrastructure assets. Over the long term, equities have always outperformed bonds. Investors should keep allocating to private equity with patience, while diversifying by vintage, country and sector."

About Jan Philipp Schmitz

△ Born in Germany in 1976 △ Worked in private equity transaction advisory at Arthur Andersen and Ernst & Young △ Joined Ardian’s Frankfurt secondary and primary team in 2005 △ Head of global business development and investor relations in 2014 △ Led customized investment and private wealth solutions businesses △ Became executive vice president of Ardian in 2023 △ To become executive president of Ardian in 2026

Ahn Dae-gyu, The Korea Economic Daily reporter powerzanic@hankyung.com