KKR Sees Gold in AI's Growing Pains

While most investors are nursing AI-related losses this quarter, KKR is sharpening its pencils. The $3.6 trillion private equity giant told investors this week it's hunting for opportunities in artificial intelligence sectors hit by recent market turbulence.

The firm's co-CEO Henry Kravis didn't mince words during an earnings call: "Volatility creates the best buying opportunities we've seen in years." With AI stocks down 23% from their October peaks and several high-profile startups struggling to meet revenue projections, KKR sees a landscape ripe for opportunistic investments.

The Volatility Opportunity

KKR's interest comes as the AI sector faces its first major correction since the ChatGPT boom began. Rising interest rates have made growth-stage funding scarce, forcing many AI companies to accept lower valuations or seek alternative financing. Several unicorns that raised at $10+ billion valuations in 2024 are now open to strategic partnerships at significant discounts.

The firm is particularly eyeing AI infrastructure companies—those building the data centers, chips, and networking equipment that power artificial intelligence. These businesses often require massive capital investments that venture funds can't provide, creating an opening for buyout specialists like KKR.

"We're not betting against AI," explained KKR's North America head Pete Stavros. "We're betting on the companies that will survive the shakeout and emerge stronger."

Beyond the Hype Cycle

KKR's strategy reflects a broader shift in how institutional investors view artificial intelligence. Rather than chasing the next OpenAI, they're focusing on the picks-and-shovels businesses that support AI development regardless of which specific models or applications succeed.

The firm has already deployed $2.1 billion in AI-adjacent investments over the past 18 months, including stakes in semiconductor manufacturers and cloud infrastructure providers. These companies benefit from AI growth without being subject to the winner-take-all dynamics of consumer AI applications.

This approach mirrors KKR's historical playbook during previous tech downturns. The firm made some of its most profitable investments during the dot-com crash, buying enterprise software companies at depressed valuations before the market recovered.

The Talent Migration

Perhaps more intriguingly, KKR is also targeting the human capital side of the AI equation. As major tech companies implement hiring freezes and layoffs, top AI talent is becoming available for the first time in years. The firm is backing management buyouts where experienced AI teams can acquire the companies they've been building.

This strategy addresses one of private equity's biggest challenges in tech investing: finding experienced operators who understand rapidly evolving technologies. By backing existing teams, KKR gains both technical expertise and operational continuity.