Blackstone President/COO Jon Gray Talks AI Power

**SPEAKER_1** (0:02)
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**Dani Burger** (0:14)
Blackstone joining a growing and increasingly long list of companies placing big bets on AI.
It reported a 26 percent jump in earnings in the second quarter. I asked the company's president and COO, John Gray, how much of that jump was powered by AI?

**Jon Gray** (0:30)
Well, it definitely was a heck of a quarter, Dani, and 26 percent up in earnings on top of 25 percent last quarter. And it was definitely powered by that strategic decision we made to lean into AI and the AI ecosystem. It really started for us back in 2021 when we bought QTS, this big data center business, and it gave us a front row seat in terms of what's happening around AI.
And we made a strategic decision, hey, we should lean in here, not just with data centers, but with Neo clouds, large language models, electrical equipment, energy. And that decision is paying off and it's delivering for our clients, which is the most important thing. And what's also very exciting is we're not done here. Just in the second quarter, we announced partnerships with Google and TPUs, with Broadcom and Financing chips, with Anthropic and deploying their technology. We continue to see a lot of opportunity in this space to generate favorable returns. We announced a couple of big sales in the last few weeks, one of data centers for $8 billion. We announced yesterday a battery storage company we sold for $7 billion.
So AI and that ecosystem and our strategic pivot has really made a difference for the firm and our investors.

**Dani Burger** (1:56)
Just on that pivot, Jon, I was really struck last month. You were at a Morgan Stanley Conference and you made the case that Blackstone is one of the least expensive ways out there to play AI today. Blackstone, of course, trades more akin to financials, multiples that look like that. Do you think Blackstone should be trading at tech multiples? Should you look more like an NVIDIA or an alphabet?

**Jon Gray** (2:16)
Well, what I would say about Blackstone is we're a company that operates with virtually no capital. We don't have any insurance liabilities. We have virtually no debt. We've shown incredible growth. Look at our earnings in the first half of the year. Today, we're yielding 4%, which is one of the highest dividend yields in the S&P.
And yet, when we look out over the horizon, we see real growth potential. We see it with our institutional clients, with our insurance companies, and with individual investors.
And today, we're trading at a discounted market multiple. Yeah, we see it very differently. But I think as the market begins to see the earnings power of this firm and what we can deliver as we grow, as we generate these great returns from the strategic pivot we've made, I do think the market will change things, so re-rating will come. Sometimes, we've got to be a little patient. The key for us is just keep executing.

**Dani Burger** (3:18)
I guess what I'm trying to understand is just to what degree Blackstone has been made to not just an asset manager but a pure AI play. And Jon, a lot of people might look at that and get concerned that you've bet the house on one theme. How do you assuage investors who might be concerned about just concentration risk in AI bets?

**Jon Gray** (3:39)
Well, we've got a big diverse firm. Obviously, we've got a very large real estate business. We invest in secondaries. We're in the hedge fund space. We have all different forms of credit out there. Our private equity business owns lots of regular way businesses like Jersey Mike's. So there's more to this firm than that. But I think the decision here to lean in, when you see this huge shortage of compute that is out there, and an opportunity to earn favorable returns by aggregating capital at scale, having terrific platforms. To me, that makes a lot of sense. So there's more to this firm. By the way, it's a global firm, as you know, as well, with big strength in Europe and India and Japan and around the world. But I'm not...
I feel very good about what we've done in terms of this concentrated focus, because this really is a new operating system for the world, and you want exposure to it. It would be a little bit like, hey, I don't want to own the S&P 500, because there's big exposure to technology growth and AI.
I think for us and our investors, we want to deliver that premium return.

**Dani Burger** (4:48)
By the way, there has started to be somewhat of a market pushback on just the amount of capex that's being spent by the hyperscalers. Many hyperscalers you've partnered with, you can see it in alphabet, results this morning fears over just that big chunky number they announced in their spending. If those hyperscalers do start to pull back because of the market pushback, how does that impact Blackstone's investments in deployment?