Blackstone ($BX), a leading alternative asset manager, announced its perspective on 'unprecedented' investment opportunities arising from the accelerating adoption of artificial intelligence (AI). This positive outlook is coupled with expectations of a potential easing of monetary policy by the Federal Reserve later this year, which is forecasted to elevate the value of the firm's assets significantly. During a recent conference call regarding the firm's second-quarter results, CEO Stephen Schwarzman highlighted the vital role of data centers in supporting AI advancements.
The demand for electricity in the United States is projected to surge by 40% over the next decade, a notable increase compared to the 'minimal' growth witnessed over the past ten years, driven by the burgeoning need to power rapidly expanding data centers. Schwarzman emphasized the immense capital expenditures anticipated in the US, estimating around $1 trillion over the next five years will be allocated to the construction and facilitation of new data centers, with an additional $1 trillion expected from international markets.
He underscored this as a remarkable trend, positioning Blackstone to capitalize significantly as the world’s largest financial investor in AI infrastructure, leveraging its extensive platform, capital resources, and industry expertise. Looking ahead, Schwarzman forecasts that the Federal Reserve may begin to lower its benchmark lending rate in late 2024, a move that could considerably boost Blackstone's asset values and set the stage for a substantial realization cycle in the coming years. Currently, markets are predicting that policymakers will maintain interest rates during the upcoming decision on July 31, with nearly 94% likelihood of a 25-basis-point cut in September, according to insights from the CME FedWatch tool. In terms of financial performance for the second quarter ending June 30, Blackstone reported distributable earnings of $0.96 per share, up from $0.93 the previous year, while total segment revenue grew by 7% to $2.52 billion, although both figures fell short of analysts’ expectations of $0.98 and $2.56 billion, respectively.
Meanwhile, total revenue dipped slightly to $2.8 billion compared to $2.81 billion a year prior, with assets under management rising 7% to an impressive $1.076 trillion. In a positive sign for shareholders, Blackstone's shares increased by 3% during Thursday afternoon trading sessions. Moreover, net realizations saw a significant surge of 52%, reaching $308.4 million in the quarter; however, CFO Michael Chae acknowledged the results are still indicative of a market backdrop that has yet to demonstrate robust scale dispositions.
He expressed confidence that as market conditions improve and liquidity increases, Blackstone is well-positioned to experience a notable acceleration in net realizations over time. In a separate statement, Blackstone revealed that funds managed by Blackstone Tactical Opportunities made a minority investment in Symphony Infrastructure Partners, an Australian platform specializing in energy transition infrastructure services.
The investment is intended to facilitate 'multiple' pending acquisitions for Symphony. With the announced quarterly dividend set at $0.82 per share, which is a slight decrease from $0.83 previously, shareholders will receive the payout on August 5, 2024, for those on record as of July 29, 2024..