Investcorp is steering clear of large-scale data centre investments, arguing that excessive capital inflows have compressed returns and reduced the sector’s appeal for private equity investors, according to a Reuters report.

Speaking on the sidelines of the World Economic Forum in Davos, Rishi Kapoor, co-chief executive and chief investment officer of Investcorp, said the firm is instead targeting domestic services businesses that offer better risk-return profiles and greater insulation from geopolitical volatility.

“Ironically, we are not really going big and deep into data centres mainly because too much capital has gone into it,” Kapoor told Reuters. “Returns have gotten compressed to levels where arguably, you can get a better risk-return trade-off in other areas.”

Investcorp is focusing on professional, commercial, healthcare, IT, and transportation services, with geographic priorities including the US, the Gulf region, and India. The firm manages around $60bn in assets.

Kapoor said concerns about inflated valuations and a potential AI bubble are emerging, even as investment into artificial intelligence infrastructure continues to surge. He added that Investcorp sees a strong IPO pipeline across its core markets and has several portfolio companies that could list this year.

India remains a key focus, with IPOs proving “a very valid, viable route to monetisation for private sponsors”, Kapoor said.

The comments reflect a growing divergence in private equity strategies, as some investors chase AI-linked infrastructure while others seek defensively positioned services businesses with more predictable cashflows.

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