Known for leveraged buyouts and mega-financing deals, Apollo Global Management has started investing in artificial intelligence and related hardware startups, with an eye toward lending to such companies in the future.

According to sources, in a previously undisclosed deal, Apollo has joined the latest funding round for data-labeling startup Mercor, contributing tens of millions of dollars. Following the round, Mercor is valued at $20 billion. Earlier this year, the firm also completed two publicly announced investments: one into chip company SiFive and another into Hadrian, which aims to build AI-driven factories. Sources say Apollo plans to ramp up its investments in these areas.

Apollo's move is another example of large financial institutions expanding their venture capital operations, hoping to cultivate client relationships that serve their core businesses. The AI boom has completely reshaped the financing landscape for startups, providing the backdrop for Apollo's entry. Model makers like Anthropic and OpenAI have already locked in over $1 trillion in deals related to chip purchases, data centers, and computing power leases. Many of those transactions bring in private equity firms and use complex financing structures to secure AI computing supply.

Meanwhile, the hardware needed to run and train AI has given rise to a new generation of startups. These companies develop chips and industrial equipment, and expanding their operations requires loans and various forms of external financing.

Sources indicate that Apollo, which manages roughly $1 trillion in assets, believes more AI startups will soon need financing tools beyond venture capital. Previous-generation software startups often waited until they were very large before taking on debt. AI hardware companies are a completely different story. Apollo executives say that beyond equity investments, they can offer startups debt financing, asset-backed lending, or hybrid structures involving multiple funding participants.

Hardware and defense-tech startups must spend heavily upfront on equipment and factories, often years before they reach mass production or commercial deployment. The financing demand is already evident in the industry: investment firm Coatue is in talks with chip startup MatX about a multi-billion-dollar chip-financing joint venture to lock in capacity and fund future chip components.

Apollo is already providing capital for AI startups' hardware needs. Earlier this year, Apollo participated in a deal to purchase Google chips and then lease them to Anthropic. Banks and private equity firms have long dabbled in venture investing to build relationships with founders and win future financing and advisory mandates, but results have been mixed.

PitchBook data shows that earlier this year, Blackstone folded its growth-stage venture unit into a new AI-focused division called BXN1, after its previous growth fund underperformed peers. Thoma Bravo, meanwhile, shut down its growth investing unit entirely to focus on large buyouts. Unlike rivals such as KKR, which maintain separate growth funds, Apollo is taking a differentiated path. Sources say Apollo is making investments through its existing funds, including its hybrid capital solutions unit that offers mezzanine-style equity and debt. The firm has not announced a dedicated venture fund.

Apollo has also partnered with venture firm 8VC, founded by Palantir co-founder Joe Lonsdale. The two announced a collaboration last October, planning to deploy billions into fast-growing, capital-intensive companies to fuel what they call an "American industrial renaissance," spanning AI, robotics, autonomous systems, biotech, and nuclear energy.

In January, Apollo joined a funding round that valued SiFive at $3.6 billion. The 11-year-old company develops chips based on the open-source RISC-V architecture, which competes with Arm's CPU designs. In August, Apollo invested in Hadrian, which builds advanced manufacturing plants for defense and aerospace. The round valued the company at $7.8 billion. The Information previously reported that Mercor is closing a new round led by General Catalyst. Mercor provides top AI companies with human labelers who fine-tune model outputs, helping train large language models. That business also gives Mercor a close view of leading AI firms' computing needs.