Blackstone, Bullish on AI, Charges Into Data Centers

Deals included a $7.5 billion debt financing Blackstone and other firms provided in May to CoreWeave, an AI-focused cloud services provider and data-center operator. Blackstone accounted for $4.5 billion of the total, making it the firm’s largest-ever debt-financing package, Schwarzman said.

Blackstone expects demand for around $2 trillion in generative AI-related investments worldwide in the next five years. “We believe these explosive trends will lead to unprecedented investment opportunities for our firm,” Schwarzman said of AI and the soaring demand for electricity from related data-center development.

Blackstone is looking to capitalize on the AI boom through multiple strategies, including credit, infrastructure, real estate and renewable energy, Schwarzman said. He cited developer QTS Data Centers, which has expanded its lease capacity seven times since Blackstone took it private roughly three years ago, as an example of current trends.

“We have a robust, ongoing dialogue with the world’s largest data center customers,” Schwarzman said. “We’re also providing equity and debt capital to other AI-related companies.”

Schwarzman compared the potential impact of AI with the invention of the electric lightbulb, while highlighting his involvement with the technology. He has pledged more than $500 million of his own money to fund AI education and research at universities including the Massachusetts Institute of Technology and Oxford University.

In the U.S. alone, $1 trillion in data-center investments will be needed over the next five years and an additional $1 trillion will be required overseas, Schwarzman said. He wants Blackstone to play a big role in supplying the capital.  

“Blackstone is positioning itself to be the largest financial investor in AI infrastructure in the world,” Schwarzman said. “Our portfolio today consists of $55 billion of data centers, including facilities under construction, along with over $70 billion in prospective pipeline development.”

The rising value of data centers also boosts Blackstone’s real estate strategy. Data centers, along with warehouses and residential rental buildings, represent roughly three quarters of the firm’s property holdings, according to Schwarzman.

“In real estate, values were stable overall in the quarter, supported by strength in data centers and global logistics,” Michael Chae, Blackstone’s chief financial officer, said during the call. He added, however, that “this was offset by declines in our office portfolio, including life-sciences office, and certain other factors.”

Blackstone’s net income fell 26% to $444.4 million in the second quarter from the same period last year as the value of its investments rose less than during the year-earlier period. Distributable earnings—or cash that can be returned to shareholders—inched higher to about $1.25 billion, or 96 cents a share, from $1.21 billion, or 93 cents a share, in the year-earlier period. 

The firm raised $39.4 billion in fresh capital during the second quarter, which helped lift its total assets to about $1.08 trillion, compared with roughly $1 trillion a year earlier.

In a sign that private-equity asset sales are starting to pick up again, Blackstone sold $23.5 billion in assets in the latest quarter, or about 37% more than the $17.2 billion in realizations during the same period a year earlier. 

“As markets heal and liquidity improves, we are well positioned for a significant acceleration in net realizations over time,” Chae said.

Blackstone’s shares had risen nearly 2% by Thursday afternoon, after the firm posted its results.

Miriam Gottfried contributed to this article.

Write to Luis Garcia at luis.garcia@wsj.com