Blackstone models its AI retail therapy

As President Jon Gray said on a call to discuss results with analysts, Blackstone has been here before. Retail fund BREIT was a runaway success until 2022, when rising interest rates sparked a real-estate panic. Investor withdrawals were ultimately capped for over a year.

Now, though, chatbot mania is offering a helping hand. Data centers have risen from 1% of BREIT’s portfolio in 2020 to 27% by June. The insatiable demand for server farms servicing ChatGPT, Claude and the like promises plenty of rental income. It also makes for tempting M&A targets: last month, Blackstone sold a stake in three data centers to Digital Realty for $3.5 billion.

Sure enough, net proceeds from real-estate asset sales jumped nearly 500% year-over-year. Fees earned for the performance of perpetual property-focused vehicles, like BREIT, hit their highest level since 2022. And BREIT itself this year began seeing net investor inflows again.

Gray happily touts the firm’s AI fever across all of its strategies. There are very real worries about how long this can last: tech giants’ shares slumped on Thursday morning after Alphabet promised to spend yet more money on the chatbot race. For now, though, it’s the first plausible path to reassure the worried investing masses.