Finance: "USA Hittin' Dat PIPE!" for AI, to be Blunt
What is a PIPE deal, what Private Equity has to do with AI
I encountered my first “PIPE” deal in India in the 2000s. Our firm was considering various investments in the infrastructure space and at one point one of my bosses kept saying we were going to do a “PIPE deal.” I had been reviewing concrete, freeways, auto, water carriage and other facilities so I thought he meant “pipe” as in plumbing pipe or something.
[Not that these are entirely unrelated turns out they were not PIPE deals financed real pipes in India (amongst others) during the “India shining” period of development 2004-2009 where 1400 deals amounted to 50B of investment.]
That was my introduction to “PIPE deals.” I mention it now because its a highly topical investment strategy/structure in the Epoch of AI.
So many players, public and private, so many interlocking agreements for COMPUTE FUNCTION (core function for AI companies and 60-90% of carrying cost of these enterprises) by private companies and investors of PUBLIC COMPANIES (looking at you Nvidia).
Additionally, very topically, capital accretions around DATA CENTERS CONSTRUCTION — which is just literally hardware for compute.
But what is a PIPE deal?
A PIPE deal is a financing method/mechanism where accredited investors buy shares or equity-linked securities in a publicly traded company through a private placement — often at a discounted price — to quickly raise capital without a full public offering.
This allows companies to raise capital quickly without the regulatory hurdles of a full public offering, such as SEC registration upfront, though a resale registration is typically filed later.
PIPEs are particularly useful for smaller or distressed public firms needing fast funding, and they can involve common stock, convertible preferred stock, or debt. Think public AI legends (mostly of tomorrow) if they falter… Think public compute companies [or those holding data centers] which mostly will not…at least no time soon.
Yet still an investment in a compute provider, with related company holdings (as I mentioned in a previous post about COMPUTE transforming VC portfolio strategy) which rely upon the same “basic necessary resource” imply and probably guarantee ancillary agreement or partnership/JV strategies between operators, funds, and companies.
PIPE deals have been a staple in the U.S. financial landscape since the 1990s.
The market expanded significantly in the early 2000s, growing from 306 transactions in 1996 to 1,249 in 2007, with capital raised surging from $4 billion to over $20 billion annually.
By 2008, amid the financial crisis, PIPEs raised $88.3 billion in just nine months, highlighting their role during economic uncertainty.
Interest has fluctuated: 2016 saw $51.6 billion across 1,199 deals, while 2017 raised $45.3 billion in 1,461 transactions.
Recent years show resilience, with $33.8 billion raised in 809 deals in 2023, and $14.5 billion in the first five months of 2024 alone—a 34% increase year-over-year.
Sectors like biotech and technology dominate, especially post-COVID, with biotech PIPEs raising $5.5 billion in 2024 so far. Over the Past 20 Years, thousands of U.S. companies have utilized PIPEs, with 29,282 transactions recorded from 2000 to 2023.
Investors often include hedge funds, private equity firms, and institutional players like mutual funds, drawn to discounted shares and potential upside.
Notable examples include:
2008 Financial Crisis Era: Warren Buffett's Berkshire Hathaway invested $5 billion in Goldman Sachs via a PIPE, signaling confidence and stabilizing the bank.
2010s Biotech and Tech Boom: Companies like Alnylam Pharmaceuticals raised $100 million from Blackstone in 2020.
Eventbrite secured $225 million from Francisco Partners in 2020.
2020 COVID Response: Silver Lake invested $1 billion in Twitter (now X) and, with Apollo, $1.2 billion in Expedia Group.
Recent Deals (2023-2024): Biotech firms led with 125 PIPEs over $10 million in 2024, often for clinical trials or acquisitions. Technology and healthcare accounted for most of the eight major sponsor-backed PIPEs surveyed in 2023.
Firms like Bain Capital, Goldman Sachs, and Apollo Management have been active, alongside specialists in smaller deals.
Aggregate PIPE value peaked at $5.9 billion in 2007 but plummeted to $1.4 billion in 2008 amid the global crisis.
Regulatory changes facilitated growth, with structures like preferential share issuances common.
Exits were swift, often under three years, but the market cooled post-2009.
PIPEs remain a vital tool for public companies worldwide, offering speed and flexibility.
In the U.S., ongoing trends in biotech and economic uncertainty suggest continued relevance, far from being a new arrival. For investors and issuers alike, they balance opportunity with risks like dilution and resale restrictions.
In 2025, PIPE activity has started strong, with $10.2 billion raised in the first quarter across 365 transactions, suggesting an annual volume potentially exceeding $40 billion if trends hold.
Under the Trump administration, Commerce Secretary Howard Lutnick has emphasized substantial investments in the US, as trade policy, describing a forthcoming "manufacturing renaissance" — MANY MANY driven by (also interrelated) AI and energy initiatives. Some are talking a minimum of 1 T some are talking T’s (plural).
The administration has announced over $92 billion in private sector commitments for AI infrastructure and energy projects in Pennsylvania alone, with broader partnerships like the $500 billion "Stargate" initiative aimed at AI expansion.
Predictions for AI infrastructure investments in 2025 are massive as the market continues breaking previous records.
With tech giants expected to spend $320+ billion on AI and data centers, and global forecasts reaching up to $7 trillion (!!!) in buildout needs.
While not all will occur via PIPEs, public companies in AI sectors may increasingly turn to PIPE deals to fund rapid growth amid these priorities for the various reasons detailed.