Blackstone, the leading investor in data centers that support the artificial intelligence sector, is assessing the impact of a low-cost model developed by Chinese start-up DeepSeek on the market, where it has invested $80 billion.
With tech giants increasing their spending, rents for data centers have surged, positively influencing the earnings of the alternative asset manager, which is constructing infrastructure for major technology companies such as Amazon, Microsoft, and Alphabet.
In its fourth quarter, Blackstone’s earnings were significantly enhanced by performance fees attributed to funds heavily invested in data centers and AI infrastructure. The firm reported $2.2 billion in distributable earnings for the quarter, exceeding analysts’ expectations. This was supported by $1.4 billion in performance revenues primarily from ongoing infrastructure and credit funds that finance or own data centers.
Jonathan Gray, the president of Blackstone, mentioned that major clients had assured the company that their strategies remain unchanged, and there are no intentions to modify the ambitious investment plans currently in place. He indicated that the reduction in compute costs could accelerate adoption and potentially alter usage scenarios for data centers.
Gray emphasized that Blackstone exclusively constructs data centers leased to wealthy tech companies, which reduces its risks. He acknowledged ongoing evaluations regarding usage changes but maintains that there is still strong demand for digital infrastructure.
The company’s results also benefited from an improvement in financial markets and increased transaction activity. In 2024, Blackstone successfully raised $171 billion in new capital from investors and deployed $134 billion, both figures nearing record highs.
Gray noted that the firm is preparing for additional investments as confidence among pensions and endowments is returning after a period of retrenchment due to rising interest rates. He observed that discussions with investors are trending toward normalization following a period of market dislocation and caution from institutional investors.
In 2022, many pensions and endowments, facing high interest rates and declining public markets, had to reduce their commitments to unlisted assets. However, Blackstone now sees a shift toward easier conditions and is set to initiate fundraising for a new flagship buyout fund after nearly fully deploying a $20 billion fund from the previous year.
Gray indicated that deal activity is on the rise, supported by a stronger economic environment, healthy equity and debt markets, and improved regulatory conditions. He expects to see an increase in the pipeline of deals as the year progresses.
photo credit: www.ft.com
