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Blackstone, the largest investor in the data centres needed to power the artificial intelligence boom, is examining how Chinese start-up DeepSeek’s low-cost model could affect demand for an area where the company has invested $80bn.
Rising rents for data centres, amid breakneck spending by tech giants, have buoyed earnings for the alternative asset manager, which is building infrastructure for Big Tech groups such as Amazon, Microsoft and Alphabet.
Its fourth-quarter earnings were in part propelled by performance fees on funds invested heavily in data centres and other AI infrastructure.
Blackstone generated $2.2bn in distributable earnings in the quarter, a proxy for cash flows favoured by analysts, significantly beating forecasts.
Those results were buoyed by $1.4bn in performance revenues earned mostly from perpetual infrastructure and credit funds that either own or lend money to data centres.
Blackstone president Jonathan Gray said some of the group’s biggest customers had told it their plans were unchanged, and that Blackstone had no plans to alter what were currently ambitious investment goals.
“This does highlight the fact that compute costs are going to come down, and adoption is probably going to accelerate. It’s possible the use cases for data centres may change,” he said.
Gray noted that Blackstone only builds data centres leased to cash-rich tech giants, minimising its risks.
“You’re looking at what’s going on, and it could have an impact on the nature of usage, but we’re still evaluating it. We’re talking to people about it, and at this point, we still see a lot of need for digital infrastructure and power,” he said. “We still think this is a very favourable place to deploy capital.”
Blackstone’s results were also bolstered by a recovery in financial markets and transaction activity. In 2024, Blackstone raised $171bn in new investor cash and invested $134bn, , both near-record amounts.
Gray said the group was preparing to invest more, as confidence returned from pensions and endowments that had retrenched in recent years due to higher interest costs.
“The tone of the conversations and the commitments from [investors] feels like it’s normalising. We went through a period where rates went up, a bunch of markets became dislocated, and there was more caution from the institutional community,” said Gray.
In 2022, when interest rates rose sharply and public markets plunged, many pensions and endowments found themselves overcommitted to unlisted assets and cut back their investments.
But Blackstone sees conditions easing and will begin raising cash for a new flagship buyout fund after investing virtually all of a $20bn fund that closed last year.
Gray said that transaction activity was rising, matching the rhetoric around a return in animal spirits among dealmakers.
“We have all the ingredients for a good M&A soup with a strong economy, healthy debt and equity markets, and a more favourable regulatory environment,” said Gray. “We are now starting to see the deal pipeline pick up and I think it will increase as we move through the year.”
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