Apollo Global Management President Jim Zelter Talks SpaceX IPO, Iran & More

**SPEAKER_1** (0:02)
Bloomberg Audio Studios, Podcasts, Radio, News.

**Jonathan Ferro** (0:07)
Apollo Global Management President, Jim Zelter, is highlighting a pressure point on the horizon. He writes the following, if Alphabet can't self-fund AI CapEx, think about the smaller players. June is shaping up to be a real stress test for the investment grade market. Jim joins us now from what, Jim, good morning. Good to see you.

**Jim Zelter** (0:21)
Good morning, always fun to be here.

**Jonathan Ferro** (0:22)
Think about the paper that we've been moving. We have priced almost a trillion dollars, a trillion dollars plus of investment grade credit in almost record time so far this year. We're talking about mega IPOs on the horizon, Alphabet, Alphabet issuing, numbers that are so difficult to internalize an $85 billion capital raise.
Is the demand out there to meet the supply?

**Jim Zelter** (0:45)
I think it just shows the breadth of these global markets and I think if I've come here in the last couple of years and I've used a term, it's always and not or. It's the IG market and the private credit market and the equity market and I think that theme just really continues. I mean, certainly what Alphabet executed this year, last this past week in the scale, the scope, I suspect it won't be the first big mandatory convert that gets done. I'm sure many other companies in that sector are now looking at these securities, the ability for an investor to clip a nice coupon and have a debt exposure to these companies. I think that's a new market. But I think also, I would also ask you to take another step back. It's not only the scale of these. I mean, last 15, 20 years, the annual equity issuance between IPOs and equity capital markets activity has been plus or minus 200 billion a year. That's the number of the last 20 years. You take the year of 21 out of SPACs. With OpenAI, Anthropic and SpaceX, those three companies will eclipse that number.
I think there's commentary about what it means to take a company public today. I mean, the scale that you need to achieve to be relevant is much, much higher than it ever was before. That impacts a lot of smaller enterprises that are five to 10 billion.
I also think as much as we're talking in the last four to six weeks about the AI CapEx boom, which is phenomenal and unprecedented, I think we're forgetting that there's a lot of other industries. There's the defense industry, there's the utility industry, there's going to be a number of other industries. So I think it's broader, but these numbers are unprecedented, but it just shows you the scale of the marketplace.

**Jonathan Ferro** (2:39)
You're getting to the heart of a potential issue, though, is the space for everyone. How much crowd and gap will there be?

**Jim Zelter** (2:45)
Well, I do think, you know, we've been consistent and Torsten's been consistent about the impact on longer tenor rates for governments around the globe. I think that is a very real issue. I've been consistent here, coming here in January and February and April, the rates were not going down in the short term. I do think, you know, we've always talked about 15, 20 years ago, the crowding out effect of government debt. I think you're seeing a potentially long-term crowding out of this massive, long-duration cap ex boom around the globe and the impact on government debt yields around the globe. So, I think there is some dynamics there. But as I said a few weeks ago, this year, the IG market will have net issuance higher than the Treasury market in the US.
I mean, we got to put these numbers in perspective.
The MAG 7 cap ex this year will be larger than the Defense Department spending. I mean, these are phenomenal numbers. And again, I just think it's broader. I think there is no doubt that there is health and breadth in the market. But I think some pullbacks once in a while and some good questions that get answered, these numbers are unprecedented and these companies will have to make the return on capital to justify the cap ex.

**Lisa Abramowicz** (4:02)
How are you at Apollo trying to protect yourself against the increasing risk as these numbers get bigger and bigger and as expectations get higher?

**Jim Zelter** (4:10)
Well, it all goes down to what your liability is. For us, because we have our third-party business as well as our regulated balance sheet, we're trying to find areas where we can fund the picks and shovels, the AI infrastructure, not just the AI cap ex to the equity. There's a difference.