Blackstone CEO Stephen Schwarzman says firm is 'mindful' of 'excessive exuberance' in AI

Blackstone ( BX ) CEO Stephen Schwarzman said Thursday that his firm has been selective in its investments in the AI infrastructure boom as the company delivered a jump in profits for the second quarter.

The private markets giant reported Q2 distributable earnings of $2 billion, or $1.52 per share, up 26% from a year earlier. That compared with analyst expectations of $1.7 billion.

In a post-earnings conference call, Schwarzman, the firm's 79-year old billionaire CEO, pointed to Blackstone's earlier investments in data centers, energy, power and AI companies as the most significant driver of the results.

But he cautioned that there are also plenty of uncertainty in the rapidly expanding AI boom.

"In terms of risks, we're mindful of the potential for excessive exuberance in this area, and we've carefully chosen our spots, leveraging our scale and knowledge advantage to build conviction," he said.

Schwarzman added that AI will have as great an impact on society as the commercialization of electricity and the industrial revolution but that it will come faster and with more complexity.

"Major change of this type also creates anxiety due to the uncertainties of how the technology will evolve," he said. "We will need to monitor these developments as a society and course correct when necessary."

Blackstone clinched a series of big AI-related deals in the second quarter.

Its credit and insurance business launched a $35 billion investment platform with Broadcom and Apollo Global Management (APO) that aims to lower the compute and power costs for training AI models. (Disclosure: Yahoo Finance is owned by Apollo).

In May, the company also l aunched a AI cloud provider in partnership with Google parent Alphabet Google ( GOOG , GOOGL ).

Blackstone's infrastructure business within its private equity division was the firm's best performing major investment strategy, growing 7.2% quarter and 28.6% for the last twelve months through June.

The Wall Street fund manager also manages private equity funds holding stakes in some of the AI boom's core companies including SpaceX ( SPAX.PVT ), Anthropic ( ANTH.PVT ), OpenAI ( OPAI.PVT ) and CoreWeave.

Major private market investors like Blackstone represent a crucial driver of the AI boom.

Across private equity, credit and real estate, nearly $200 billion of data center deals have been completed in the private markets since early last year, according estimates from Goldman Sachs.

Blackstone's stock fell slightly on Thursday. Its down more than 20% since the beginning of January. So far it has been a tough year for shares of Blackstone and Wall Street's other private money manager giants.

The once hot world of private credit is cooling as retail investors are increasingly asking to take money out of those non-traded funds. Investors asked to pull $4.4 billion (10%) of their shares last month from Blackstone's flagship private credit fund, Bcred (Bcred) but the firm capped withdrawals at 5% after allowing investors to redeem their full requests in the first quarter.

Blackstone's second quarter results did reflect some of that weakness. Net realizations in its credit and insurance division dropped 95% from the second quarter of last year to $3 million. That division's contribution to earnings fell 6% from the same period.