Jon Gray on Blackstone’s 50% Earnings Surge, AI Data Center Boom & Rising M&A Activity | CNBC

Andrew, great to be with you. We had a heck of a quarter. We have a really simple business model. We've got to deliver for our customers. We did that. We've really leaned into digital and energy infrastructure that has paid big dividends. When we deliver, we raise more capital. We raised $54 billion in the quarter, the fourth quarter in a row of over $50 billion. And it produces really extraordinary results for shareholders, distributable earnings up 50%. But what's really exciting here is that we've got a cyclical updraft that's happening in the deal markets. It's gonna keep all of you busy, I think, going forward. And then we have some big secular tailwinds out there in wealth, in insurance, what's happening into India and life sciences. And so as we look forward, despite all the uncertainty, we feel very optimistic.

Yeah, definitely feels like things are changing. If you look at the overall M&A market in the U.S. in the third quarter, it was up 64 percent. The IPO market was up 100 percent. We've seen cost of capital come down. Obviously, the Fed cutting rates, the long end has come down, spreads have tightened. At Blackstone, we did three IPOs in the third quarter in India, Europe and the United States. That hadn't happened since, uh, 2021. We announced this week an $18 billion deal with Hologic. You can feel sort of those animal spirits recovering. And deal activity, as you know, has been very muted. And this is obviously a positive for us and our investors.

Well, I'd say a couple of things specifically on what we're doing in data centers. We're very focused on who our counterparty is and the length of the leases we sign. We're not building these things speculatively. These are not condos in Miami or Dubai during a boom period. We have 15 to 20 year leases with the biggest companies in the world who have market caps of a trillion to four trillion dollars. So this to us seems like a very sensible way to play this very large investment theme. But I do think the AI, which gets a lot of bubble talk, it's worth thinking about why people are investing this much capital. We are beginning to see now some really powerful examples of productivity in coding and customer engagement on the legal side in the content area. And if you think about what's happening, it's a huge investment boom in chips and data centers and power, which will enable this big productivity boom. And if you think about the numbers involved, labor costs globally are $60 trillion. If this technology makes companies 15% more efficient, that's $9 trillion of annual productivity gains. That means a lot of value created. That justifies a lot of this capital spent. But it's worth noting there will be misallocations of capital. There will be poor investments. We saw that with railroads, with the Internet. But in aggregate, the prize here is very large. So the investment aggregately, I think, makes a ton of sense. The question is doing it in a responsible way where you're thoughtful about your investors' capital.