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So there's a lot of noise about AI, but time's too tight for more promises. So let's talk about results. At IBM, we work with our employees to integrate technology right into the systems they need. Now a Global workforce of 300,000 can use AI to fill their HR questions. Resolving 94% of common questions, not noise. Proof of how we can help companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business. IBM,
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Bloomberg Audio Studios, Podcasts, radio news.
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Blackstone joining a growing and increasingly long list of companies placing big bets on AI, it reported a 26% jump in earnings in the second quarter. I asked the company's president and CEO, John Gray, how much of that jump was powered by AI.
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Well, it definitely was a heck of a quarter, Danny, and 26% up in earnings on top of 25% last quarter. And it was definitely powered by that strategic decision we made to lean into AI in 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 TPU's 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 in our strategic pivot has really made a difference for the firm and our investors just on that pivot.
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John, 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 in video or an Alphabet?
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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 and P. And yet when we look out over, 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 this strategic pivot we've made, I do think the market will change things. A rerating will come. Sometimes we've got to be a little patient. The key for us is just keep executing.
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I guess what I'm trying to understand is just to what degree Blackstone has been made and to not just an asset manager, but a pure AI play. And John, 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?
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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 in 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, in 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 I, I think for us and our investors, we want to deliver that premium return.
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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 Pax Blackstone's investments in deployment?
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Well, that's not what we're seeing today. In fact, it's the opposite. If you look across our datacenter platforms. We leased 1 gigawatt in 2024, we leased 2 gigawatts in 2025. And this year we're on pace to lease at least 7 gigawatts we believe, which is more than 100 billion of data centers and a couple multiples of that in terms of chips that go inside. If there is a slowdown, then yes, the pace of development would slow. The good news is you're not speculatively building and I think that's really important when you think about the telecom boom in the 90s where people built fiber something like 20 times more than was actually needed. In this case, we're only building to demand and long term contracts from very large creditworthy companies. That's really the focus for us. And to us it seems like a disciplined way to do this. I think fundamentally what people aren't getting is how powerful this technology is at companies. We're beginning to see real time examples, certainly in customer service, in coding. It's now starting to move to the revenue generation side where businesses are creating new lines, new revenue streams, new using this AI. And I think because this tool is so powerful, there's an underestimation of what's happening. We see the power of it and we're really focused on helping meet this computer.
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John, because you use the tool every day too, both at Blackstone. I know, and in your portfolio companies and you have partnerships like Anthropic. I got to ask though, there's a lot of fear and perhaps excitement around Chinese open source that they're cheaper, they're more efficient and they're just as good as the most advanced models. Have you guys tinkered around with any of them at Blackstone? And would you ever use a Chinese open source model?
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Yeah, I'm not the tech expert here, but our team has worked with a bunch of different models. I think the bigger issue, whether it's Chinese or American, is will there be a range of models? I think a bit almost like automobiles, will there be very high performance, more expensive, in this case frontier models where there be more regular sedans? I think there's going to be both. And I think what you go back to is as you bring down the cost of Compute. If you can bring down token costs with open source open weight models, what that's going to mean is there's going to be more demand. That's that Jevons paradox idea. As cost comes down, usage goes up. So again that will put more pressure on energy needs and data center needs and that will mean more physical investment. I also think, by the way, another area people are underestimating is what's going to happen when this technology gets deployed in the physical world. We're going to have more autonomous vehicles, robots, defense space. That's going to require further investment dollars. So I think bringing cost of compute down is helpful, but I think there'll be a range of models for a range of needs.
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It's almost as if maybe you were listening to Tesla and Elon Musk yesterday on their earnings call. To John, can we talk about the non investments? I know, as you say, Blackstone is large, it's global, it has other things. Clearly you've had some excellent realizations this quarter driven by AI. What about everything else? Because the thing this market had been worried about wasn't AI, it was being able to exit the more traditional companies, maybe ones that were bought in 21 and 22 when multiples were quite hefty.
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So what we've seen is really a bifurcation if you leave AI to the side. What we're seeing in terms of liquidity is for traditional, let's call it AI, unaffected businesses. There's pretty good liquidity out there. If you're a medical supply business, if you're a fast food chain, people want to own those kinds of businesses. We're now seeing, even in the real estate market, the logistics area as, as people see the strength given the lack of new building there, we're seeing some large M and A potentially with Prologis in the uk. So there is interest in the real world away from sort of the trade, I think where it's harder to get liquidity is where there's more uncertainty around the future. So that is in professional services, information services, software where people are saying I don't know what this company is going to look like five, ten years from now. Now in many cases these are great businesses, they're deeply embedded. They will become magentically forward and they'll succeed. But for now multiples have come down and you're seeing less M and a less financing activity, less IPOs for these businesses. I think that's going to stay for a while.
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That was my conversation with Blackstone President and CEO John Gray. Get the news you need in just 15 minutes.
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