I'm Jon Gray. This is Market Views. Quick table of contents, some things we're going to talk about today. We're going to talk a bit about investing through this volatility. We're going to talk about digital and energy infrastructure, the pivot to hard assets, to real estate. We're going to talk private credit. We're going to talk about software. Are there other things we're going to talk about? I don't know, but we're going to talk a lot.
But my economic weather report is more optimistic than the headlines. We had COVID, then we had Russia's invasion of Ukraine. Last year we had Liberation Day, now this war in the Middle East. And yet somehow in each of those previous conflicts, we got through it. And the US economy in particular has had a resilience and strength that people have underestimated. And I think 2026 will be the same story.
When we look at our companies in Q1 in private equity, their average revenue growth was 10 percent, and it reflects this strength. Now, there is some weakness in middle and lower end consumers. Europe is certainly slower. But the core of the US economy is very healthy.
The one risk factor I'd put on all of this is there will be a fair amount of disruption. Because of AI, there will be businesses that will face pretty significant challenges, particularly in the white collar world: professional services, information services, software. But the overall picture in aggregate, I think, is much more bullish than people realize.
And then the main thing, of course, is this huge investment boom in infrastructure, energy, data centers, that will power what we think will be a very profound change in productivity. AI demand is enormous. It's really, at our companies, becoming a reality.
To give you a sense, at the Blackstone portfolio companies, spending around large language models is up 15-fold in the last year. Now it's off a small base, but it gives you the direction of travel. And what we're seeing is a range of use cases. So at Blackstone, we're trying to be better investors. That's what we do. We invest, so we want to be better at that.
So we're having the models consume lots of real-time data and information we've got, historic information from old investment committee memos, evaluating the current deal. It's a powerful tool to make our people better and more efficient.
I still think it's the year of the IPO. You're going to have a couple of the largest tech companies in the world go public. That should obviously help the IPO market. We as a firm have nine companies on file right now, globally in the US, Europe, and Asia. And I think there'll be strong receptivity. So all of that is very exciting.
Okay, welcome to credit. There's no news on credit, is there? Private credit is in the news all the time. And it's amazing to us, people who are living it every day, to see what's happening on the ground with our portfolios and our borrowers, and then to read the newspaper. And it is bizarre how far the gap is between the reality and the hype out there. And hopefully we can do a little bit to demystify things here.
It's a business model that has grown quite a bit because of its ability to bring certainty to borrowers in terms of pricing, its ability to reduce a lot of costs by bringing investors right up to borrowers, and it also deleverages the system because these vehicles are much less leveraged than traditional financial institutions. So it's got a lot of benefits.
I think what people are sort of conflating is returns that have come down as a result of base rates coming down, some spread tightening, and also maturities of portfolios, which leads to an increase in defaults, that's led to some degradation of returns. But the leap to some sort of broad systemic problem for this lowly leveraged asset class just doesn't make much sense.
We actually had an almost record fundraising quarter in credit from institutional investors who are saying, wow, spreads have gapped out. This looks pretty interesting. We had a hugely successful fund close off in our opportunistic credit fund with more than $10 billion of investable capital, all a reflection of the confidence institutional investors have in this area.
So I think it's a very healthy part of the overall credit system. You know, calls for almost Armageddon in private credit by market participants. You have seen this elevated level of redemptions, but ultimately the facts on the ground and the ability of these vehicles to deliver premium returns over liquid non-investment credit, that is the key. We have a lot of confidence in that.
I think when it comes to software, there's a lot of nuance. A few points I think that are relevant. First off, these companies actually are the best performing sector in our portfolio today. Now that's backwards looking, but I think it's relevant for credit quality. The second thing I would say is not all software is created equal.
You know, we saw this in the retail world with how Costco and Walmart had performed relative to say Toys R Us or Kmart over time. And so the same thing I think applies in software where you have companies that are deeply embedded systems of record, that ripping them out will be quite difficult. And so there'll be different outcomes for those different types of players.
And then the final thing I'd say as it relates to private credit in software is that there's a big difference between debt and equity. When you think about most of these loans, there's probably a 60% cushion that the equity has put in. They're the ones in that first loss spot. The debt is senior. And so the enterprise value of the company has to fall very dramatically. So you're in a more protected place.
If you think about warehouse assets, those assets are going to benefit from agentic commerce and re-industrialization. People are still going to take vacations in hotels. They're still going to go to grocery anchored shopping centers to buy their groceries, to go to a restaurant, nail salon. So those things in the physical world, there's very low risk of obsolescence.
We've made a strategic decision to try and be the biggest investor in AI infrastructure in the world. So to give you a sense of our data center activities, we are forecasting this year across our platforms that we will sign six gigawatts of leases for data centers. So how do I put numbers around that?
That's about $100 billion of spend on data centers, most of that in the United States. The hyperscalers, who will sign the leases, will put in probably $200 billion of chips. That's $300 billion of spend. What's $300 billion? It's almost the size of the economy in Finland or Portugal.
I mean, these are massive things that are happening, and this is one company here at Blackstone and what we're doing in the data center space. And so the scale of what's happening in the global economy to build the compute needs of the future is hard to comprehend.
I would say that it is very easy to get nervous when you're in a world with this kind of volatility. But as an investor, you've got to stay the course. I say to everybody here at Blackstone, stay calm, stay positive, never give up. I think those are watchwords for investors as well. Okay, that was Market Views. See you next quarter.
