Blackstone's Jon Gray Addresses 700+ Clients | May 2026
In a Nutshell
Blackstone sees the AI infrastructure buildout as the dominant investment theme, with $300 billion committed this year alone across data centers and chips, driving power, energy, and defense opportunities. Private credit and secondary markets offer attractive returns as traditional banks lose share to direct lending, while software faces valuation resets from agentic AI disruption. Jon Gray emphasizes delivering co-investments, maintaining culture, and focusing on returns as the top priorities amid a healthy economy facing near-term volatility.
These notes were generated by AI and may contain inaccuracies.
The global economy faces near-term challenges from the Middle East conflict, which has pushed oil prices and energy costs higher while driving up 10- and 30-year Treasury rates globally. However, a longer-term view reveals resilience. Since 2020, nearly every year began with significant crises including COVID, the Russian invasion of Ukraine, Silicon Valley Bank, Liberation Day, and the Iran war, yet markets ultimately resolved these issues and moved higher.
The US and global economies remain healthy. Blackstone's private equity portfolio companies achieved double-digit revenue growth in the first quarter, with Europe showing weaker but still positive performance. Inflation shows mixed signals: oil prices are elevated with lingering tariff impacts, but shelter costs and rental housing costs run approximately one-third below government data showing 3% growth. The labor market has cooled from 5% wage growth two years ago to 3% currently.
A significant productivity boom is expected from technology adoption. Kevin Warsh is set to inherit a relatively healthy economy as the new head of the US Central Bank.
The technological revolution, particularly AI, represents the greatest source of excitement. Five major companies plan to spend $800 billion on AI infrastructure. Blackstone's data center leasing business expects to sign 6 gigawatts this year, representing $100 billion in data centers plus $200 billion in chips from hyperscalers, totaling $300 billion—the size of Finland's economy.
This investment cycle mirrors the 1990s internet revolution but at massive scale. Efficiencies are already emerging in coding and engineering, with diffusion to the broader economy expected. Blackstone established a business specifically to accelerate this productivity transformation, which will benefit growth and corporate earnings.
The disruption accompanying AI advancement presents significant challenges. Professional services, information services, and software businesses face transformation similar to what happened to yellow pages over 20 years ago. Autonomous vehicles will impact automotive repair and insurance sectors.
Investors must navigate this uncertainty while recognizing enormous growth opportunities. The infrastructure enabling AI represents the best risk-adjusted investment approach, including electricity generation, data centers, robots, autonomous vehicles, and reindustrialization—all requiring power infrastructure.
Power and energy investments across pipelines, utilities, renewables, electrical equipment, utility services, and energy transition present compelling opportunities. Data centers and neo clouds converting electrons into tokens face enormous demand, with power shortages, turbine shortages, and memory chip constraints creating barriers to overbuilding. Political pushback against data center development is growing.
Defense spending represents a major growth industry, particularly in Europe where governments are increasing defense budgets from 1-1.5% to as much as 5% of GDP. Real estate is positioned for tailwinds as investors seek stability amid disruption, with sharp declines in new construction and falling debt costs creating favorable conditions. Logistics represents the most attractive real estate segment.
Secondary markets will be compelling due to a large universe of sellers, creating favorable dynamics for secondary investment strategies. Credit opportunities include corporate solutions tied to AI infrastructure needs, providing private capital at scale across both investment grade and non-investment grade securities.
Geographic focus centers on regions embracing capitalism, encouraging risk-taking, and maintaining thoughtful taxation policies. Primary markets include the US (particularly middle America), the Middle East (GCC countries and Israel expected to rebound), India, and Japan following recent transformations.
Anthropic Service Co was established as a joint venture to bridge the gap between powerful AI models and portfolio companies struggling to implement workflow changes. The initiative brings together investment firms with portfolio companies to deploy cutting-edge AI technology, particularly Claude code, across 275 Blackstone portfolio companies.
BXDC (Blackstone Data Center Company) was created under Nick Pell to provide a natural home for the hundreds of billions of data centers being built, ultimately expected to reach trillions in value. These assets, leased to major global companies, lacked institutional ownership structures until this platform was established.
Google TPU partnership addresses the gap in AI chip infrastructure. While Nvidia maintains dominant GPU market share, Google's TPU technology—already training Anthropic and Gemini—represents an alternative with growing demand. The platform provides computer-as-a-service capabilities, reducing capital requirements for users.
BXN1 consolidates high-growth company investments previously scattered across business units. Similar to the successful BXCI credit consolidation, this platform brings together structured investments, growth equity, and common equity under unified leadership with access to Blackstone's portfolio companies for technology deployment.
Software faces significant disruption as companies transition from per-seat pricing to agentic models. Historical parallels exist with retail transformation, where Amazon's rise eliminated Sears, Kmart, and Toys "R" Us, but Costco stock rose sevenfold, Walmart sevenfold, and TJ Maxx approximately 40-fold.
Companies with deeply embedded systems of record and management teams committed to transformation will succeed, similar to the on-prem to cloud transition. However, multiples will reset lower from the 20x levels seen 12 months ago, reflecting uncertainty around recurring revenue sustainability. Blackstone took significant markdowns in Q1 on private equity growth equity holdings in software, though this represents only 6.5% of overall firm activities.
Private credit faces criticism from traditional financial institutions and long-only fixed-income managers whose business models have been disrupted. The direct-to-customer model eliminates origination, financing, CLO, and securitization costs, delivering higher returns to investors while providing borrowers pricing certainty.
Traditional banking involves 13x leveraged banks selling to 11x leveraged CLOs, while private credit operates on unleveraged or 1x leverage basis using investor capital directly. As base rates decline and portfolios mature, loss rates may increase modestly, but high yields and low leverage suggest returns will moderate rather than collapse.
Investment grade private credit, particularly for AI infrastructure build-out, presents the greatest growth opportunity due to the need for flexible, structured capital at unprecedented scale.
2026 remains positioned as the year of the IPO. The three largest private companies globally—SpaceX, Anthropic, and OpenAI—may see two go public this year. Companies taken public in 2025, including Medline and Legion, have performed exceptionally well. Recent IPOs include a data center company and an Indian office REIT.
AI beneficiaries and unaffected companies like fast-food restaurants and medical supplies should find receptive markets, while software companies face greater challenges due to valuation uncertainty.
Blackstone has managed over $300 billion in the private wealth channel for approximately 25 years. This represents natural business evolution from US pension funds to global pension funds, family offices, and sovereign wealth funds.
Institutional investors remain the bedrock of the business, providing committed, non-pro-cyclical capital that can be deployed when opportunities emerge. The private wealth channel expands access to private asset returns and diversification benefits.
Committed capital is not a promise. For larger investors in the room, the question is whether co-invest is being delivered as promised. The amount of co-invest delivered to clients has doubled each of the last two years. Returns have been exceptionally strong virtually across the board.
The scale of capital creates a competitive advantage. Having this capital in the context of BXPE allows deals like Jersey Mike's or Whole Foods to be completed without calling outside third parties. The same advantage applied to the Google TPU business, where the scale of capital allowed the transaction to proceed when others could barely discuss it.
There remains a commitment to delivering returns and honoring promises to the group of people involved.
Genuine love for the work makes prioritization and execution significantly easier. Enthusiasm remains even when traveling halfway around the world because constant learning is occurring.
Core Priorities
The first priority is returns. Without delivering returns, nothing else matters because no one will allocate capital based solely on a good LP meeting.
The second priority is culture, people, and organization. This requires constant evolution. The focus remains on attracting, retaining, and motivating the best people: the most driven individuals who care deeply, are entrepreneurial, smart, and also good human beings.
Growth in the business creates opportunity for younger people. The environment is not static. There is an enormous commitment to the investment process, including reading memos and thinking about where the world is heading to stay one step ahead and generate excess returns for clients. Rigor, downside protection, focus, and diligence are essential to being great stewards of capital.
Maintaining Connection and Culture
Blackstone TV holds an internal Zoom call every Monday to keep people connected and maintain a shared sense of mission. The goal is for team members to feel they are part of something special.
The session concluded with thanks to attendees for being present.
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