Blackstone on the AI Ecosystem, IPOs, and Real Estate | Jon Gray's Market Views July 2026

0:00 Can I go? Alright. Welcome to Market Views. We’re going to make it fun this time. It's always fun, right? 30 seconds. Biggest deals. Go! 30 seconds. Most important deals of the quarter. We did a big partnership with Google in TPUs to create a company. We created a company with Anthropic called Ode to deploy their technology. We did a big financing partnership with Broadcom. We’ve taken three companies public, including BXDC, our data center REIT.

0:31 I think today we're going to get one done with Jersey Mike's. We did a renewables renewables company in Europe called Eurowind. We did an aerospace company called Senior. There's a zillion things we did here. We sold a bunch of data centers to Digital Realty, who's been an amazing partner. We did a big partnership with Williams Company around energy for data centers. We have a lot of things going on. I could keep going. Did I do it in 30 seconds?

0:59 No, not even close. Okay. Sorry. My economic weather report is pretty positive. I'd say it's pretty sunny, a few clouds. That's obviously tied to the war, which is driving energy prices higher and interest rates higher. But despite that, we've seen remarkable performance from our private equity businesses, which are reflective, I think, of economic activity. Growth was 11% in revenue in the quarter, even stronger in the United States. And it's really being powered by this huge investment spend tied to AI and AI infrastructure.

1:34 And that feels like it's got a long way to run. Once you contract to build a gigawatt data center, that means you're spending 15 billion for a data center, $35 billion to buy chips. You're probably contracting for a very large power plant as well. And so that creates a lot of economic activity. And that's really creating strength in the economy. Weakness in Europe, weakness in the housing market with elevated rates. But overall I would say a pretty good picture.

2:04 I think about AI as almost a new operating system for the global economy. How we live our lives, how businesses function. I know there are a lot of people who are impatient. They're saying, gosh, this is taking so long, there's wasted tokens. I'm not going to discount that there's not going to be misallocation of capital. There are people who are doing things that may not turn out to have high returns. But I think the impatience is a little misplaced.

2:33 It takes some time for the applications to happen. It takes time. If you've been running your internal finance department a certain way for 40 years, to change that. So this technology is going to start to work its way into lots of areas. To me, the most exciting thing and the area that is starting to get a ton of traction with our companies are the revenue opportunities. And we're seeing more and more and you know, examples of this.

2:58 A company like Chamberlain that does garage door openers can create a digital doorman. That is a whole new product, that today out of nowhere has $40 million of revenue. And they're anticipating it'll grow to 500 plus million of revenue here over the next 4 or 5 years. To me, that's what the potential of AI is, giving customers better products at better prices and generating revenue. And it's creating a whole new world we can't anticipate. We are investing across the entire AI ecosystem.

3:32 And it really started when we bought QTS for $10 billion. This is a major data center company in the United States. And after the launch of ChatGPT, we began to see demand showing up in QTS from some of the biggest hyperscale companies who wanted more compute. And as this began to grow, we began to say, huh, there's opportunity here. Maybe we should invest more in energy, in pipelines, and renewables, because these things need a lot of power.

4:06 Maybe we should invest in electrical equipment because the grid is going to need to be expanded. Then we began to invest in neoclouds, which are companies that provide data centers as well as GPUs. And we did this in the form of debt and equity, and we began lending much more, by the way, to this ecosystem on the energy side, on the GPU side, on the data center side. We started investing in the foundational model companies.

4:37 In the Anthropics and OpenAIs space, SpaceX which houses xAI, which we did in our wealth platform. Really across this whole area. And we've even done some things derivative. We bought three hotels in the San Francisco Bay area, which are obviously benefiting from this resurgence of demand tied to AI. Now you've got to do it in a really responsible way. Much of what we're doing is sort of picks and shovels. It's long term contracted. It's based on the creditworthiness of very large, lowly leveraged companies, but it plays off of what is happening here, which is a fundamental shortage of compute and then a desire to apply that compute to the broader economy.

5:21 We said 2026 would be the year of the IPO. I'm feeling pretty good about that right now. IPO volume’s up sixfold. Obviously SpaceX helped, but we at Blackstone have done a number of IPOs. High quality businesses are getting a good reception in the public markets, and like a magnet that'll pull more companies in. And so I'm pretty optimistic that this trend continues for the balance of the year. Are hedge funds back? I think they never went away.

5:51 But yes, I think in terms of the consciousness of investors, I think there's much more openness to hedge funds. Not necessarily when they first came out, the idea was they're going to beat the stock market with full downside protection, long short equity. I don't think that's what it's about today. I think their objective today is to deliver an attractive, absolute return. A premium to what liquid 60 40 produces, meaning 60% stocks, 40% bonds.

6:22 Downside protection so you don't have the volatility of the markets. And liquidity that's different, better than what you get in private assets. That combination is really what individual investors and institutions are looking for. Well, I'd say the real estate cycle has been longer than most people would have anticipated. And I think part of it is the rate rise was very dramatic, which hit the sector. Obviously, office buildings got hit pretty hard by Covid and remote work.

6:54 And the sort of normalization of rates has taken longer, particularly the last two years with Liberation Day and now the war. But what we're beginning to see are some real green shoots. Look, it's all about supply and demand ultimately in real estate. New supply is down 60% in the major real estate asset classes in the US from the peak. And on the demand side, the healthy economy is really driving demand. So if you look at logistics, our Link Logistics platform has begun to grow rents and occupancies, which is a very good sign.

7:29 So we're seeing strong fundamentals there. We've seen a pickup in the hotel business that's gone from negative same store sales last year to positive mid-single digits. We're even seeing office markets improve. In New York, vacancy has come down from 21.5 to 14.5. And so based on that supply demand dynamic, even if rates stay elevated here, I think you'll begin to see a tailwind in values. Can I do a quick commercial? Yes? Sure. We're doing a new podcast called Inside Blackstone.

8:03 Hosted by my partner Christine Anderson. She's got a bunch of amazing guests, And it's going to be shockingly about insights that are coming from inside Blackstone. What we're seeing from our portfolio companies, what we're learning from our people here, and some of the amazing people who come to the building. And we're going to have them on as guests, And we're going to try to keep it lively and interactive. And I'm excited for it. So I'll probably participate a bit, but mostly just watch.

8:31 The big picture is that we're in the midst of a powerful technology transformation. And we as a firm have leaned into that in every element of it, particularly around the infrastructure, the compute, the data center, the chips, the energy. We're really uniquely positioned at this intersection of AI in the physical world, and I think it's going to make an enormous difference for our investors. The strategic decision we made here is going to lead to them, we believe, to higher returns, better outcomes.

9:06 And that makes me feel very good. And in the second quarter you just got to see a little piece of that. I think you're going to see much more over time. Market Views out. See you next quarter.