Inside Blackstone’s Bid to Rule Over AI Financing

In May, Blackstone unveiled a new joint venture with Google that revolved around a big number: The Wall Street giant was promising to spend $5 billion to buy 500 megawatts’ worth of Google’s tensor processing units, and it said it would use the chips in a new company that would deliver computing power to leading AI firms.

Four months later, Blackstone’s plans have only gotten larger, according to a person with knowledge of the effort. Blackstone actually anticipates buying many more TPUs—several “multiples” beyond the originally announced figure, the person said.

In other words, Blackstone is likely to commit tens of billions of dollars to securing multiple gigawatts of AI chips. Blackstone declined to comment on exactly how many more TPUs it’ll buy.

Jas Khaira, the leader of a Blackstone team dubbed N1 that is leading the company’s push into AI investments, said in an interview that the firm’s “biggest conviction bet continues to be compute.” The company, he said, views the infrastructure build-out as something that will be bigger than a simple technology cycle. “This is definitely more akin to an industrial revolution,” he said.

Formed in 1985 by two Lehman Brothers bankers to do leveraged buyouts, Blackstone in recent decades has expanded into real estate, credit and insurance. Even before the AI boom, it was already the world’s largest private equity firm. It currently controls $1.3 trillion in assets under management.

Blackstone now has its sights set on becoming the largest AI financier in the world. It controls $275 billion in digital infrastructure assets—a figure that seems likely to swell in the immediate future—and has announced a dizzying array of new ventures and investments this year.

The TPU purchases form just one such splashy deal. Blackstone has also said it would join Goldman Sachs and four other firms to finance $500 billion of Nvidia’s graphics processing units. In addition, it is partnering with Broadcom and Anthropic on a deal separate from the Google joint venture to finance TPUs Anthropic will lease. And Blackstone raised $2 billion in a publicly traded vehicle to buy data centers. That’s all on top of the equity stakes it owns in Anthropic and OpenAI—and the loans it has made to companies such as Firmus Technologies and Aligned Data Centers that are poised to benefit from the AI boom.

This year Blackstone also formed a consulting firm with Anthropic that will deploy a Palantir-like strategy of sending teams of engineers to help businesses better use the AI lab’s agentic coding technology.

With the Google joint venture, Blackstone is demonstrating another bit of evolution, showing a desire to take on the kind of dealmaking that was long the redoubt of Silicon Valley: forming and incubating startups, and coupling that with the long-term capital commitments usually reserved for big infrastructure projects.

Blackstone figures it can become a dominant player in the AI race because its giant supply of capital far exceeds what tech companies can get from their traditional source of funding: venture capital. And the AI era has greatly magnified Silicon Valley’s demand for money as the industry wrestles with affording the enormous sums needed to buy semiconductors and build data centers.

“Venture has such control over the narrative of tech, but they are losing it because [AI] is so much bigger than what they can deal with,” said one person who has worked in both Silicon Valley and Wall Street.

Blackstone isn’t alone among the investment firms spending big on AI. The other big private equity pioneers have gotten in on the action, too: KKR, for instance, raised $10 billion earlier this year to build a data center company, while Apollo recently partnered with Blackstone on the Broadcom deal, which involved funding $35 billion in chips. Meanwhile, Blue Owl, a relative newcomer on Wall Street, also plans to raise $6.5 billion for a publicly traded fund that will own data centers. To muscle out its rivals, Blackstone believes it can simply put in more capital than they can, offering financing to an AI company across its lifespan—no matter what its capital needs.

Blackstone’s wager on AI obviously isn’t without risk: It is committing tens of billions of dollars to a technology that is still in the most nascent stages of commercialization. It has faced trouble from large bets it made in the past—particularly on hotels and commercial real estate.

And skeptics, including at least one former senior executive, say the firm’s incentives are more aligned with raising money—from large institutional investors and everyday investors alike—than generating top returns. The more money Blackstone raises, the more it can collect from simply managing those assets regardless of anything else. The fees it collects managing assets or advising the companies in its portfolio have climbed to more than $8 billion in annual revenue, up from $4.1 billion five years ago. They accounted for over half of all firmwide annual revenue since 2021, when Blackstone set a record on the back of massive investment returns.

A Blackstone spokesperson disputed the notion that the firm is only focused on raising money. “This is categorically false. We are always completely focused on delivering strong returns for our investors,” said the spokesperson.

Nonetheless, telling investors you have bet big on an industry that will do everything from replace entire industries to cure cancer can be a good marketing strategy. Beginning in 2022, when Blackstone faced withdrawal requests from investors in one of its flagship real estate funds, it highlighted its AI investments in the fund in an effort to slow the pace of withdrawals.

The responsibility for navigating the AI landscape falls on Khaira, a longtime Blackstone executive with a history of involvement in some of the firm’s most defining investments.

Khaira, who was an Eagle Scout as a teenager and studied business and history at the University of California, Berkeley, joined Blackstone in 2004. Four years later, he helped with its $930 million purchase of GSO Capital Partners. The firm would become the foundation of the credit and insurance unit that was actively involved in the Broadcom chip deal, among other AI-related loans. In 2015, Khaira was involved with Blackstone’s first data center investment—a facility for Microsoft—and he led the firm’s first investment in CoreWeave in 2023.

Khaira lunches with Sam Altman and talks with Dario Amodei, and he has called Blackstone “the Switzerland” of AI financing for its role in helping archrivals in equal measure, according to a person who has heard him use the term.

At N1, a newly created team to explore and probe where Blackstone can next make its mark in AI, Khaira will act as the firm’s point man in Silicon Valley. He will also have to get a growth equity team back on track after a series of lackluster consumer internet bets. In recent months, he has taken an active role in hiring for the Google joint venture.

Benjamin Treynor Sloss, who previously spent more than two decades at Google, is running the joint venture, which aims to provide a one-stop shop for computing needs, pulling together everything from power access to networking equipment and software. On Wednesday, Blackstone and Google unveiled its official name: Crux AI.

The venture recently poached Jessica Fischer, chief financial officer of Charter Communications, and it has hired chief operating and chief development officers. It’s close to hiring a chief technology officer as well.

As Khaira tries to ensure no potential AI play goes unnoticed, he is part of a group that convenes every two weeks at the company’s 345 Park Avenue headquarters to discuss AI investments. CEO Stephen Schwarzman is often there, and so is Jon Gray, the firm’s president, according to one person with direct knowledge of the meetings.

According to Khaira, Blackstone is gleaning insights about AI by studying how the companies within its traditional private equity business use the technology—what applications they buy, for instance, and their thinking about open-source models.

Blackstone also bought data center developer and operator QTS for $10 billion in 2021, during the pandemic.

Blackstone initially premised its bet on QTS on the continued growth in cloud computing. The purchase put Blackstone in an ideal—and lucky—position when OpenAI introduced ChatGPT in November 2022, igniting a huge rush for the computing power QTS could offer.

Blackstone is now the largest owner of data centers in the world outside the large tech companies, according to the firm, and in April, Schwarzman said its data center portfolio had grown to $150 billion. Another $160 billion is in various stages of development.

Other bets have yet to pay off. The firm sold $2 billion of shares in May in Blackstone Digital Infrastructure Trust, with an intention to use the money to buy data centers. Blackstone hasn’t made any acquisitions even as competitors like KKR and Blue Owl have been unveiling their own plans, though its executives have said they are in talks to buy their first assets.

Blackstone isn’t afraid to go the pioneering route. Its IPO was one of the first in the private equity industry, which had long eschewed the public markets. Its QTS investment made it look smart. And in 2023, it helped create the first loan backed by AI chips.

The investment was part of a $2.3 billion financing for data center developer CoreWeave, which had signed a lease with Microsoft. Before Blackstone advanced the money, a team of executives from its tactical opportunities team, including Khaira, flew out to the Santa Clara, Calif., headquarters of Nvidia, whose chips go into CoreWeave facilities, according to a person with direct knowledge of the diligence. Over several weeks, the team studied GPUs and other parts of the business.

Then as now, a big question was whether the chips would have a useful life once the initial Microsoft lease ended. In the end, Blackstone executives avoided the issue altogether by basing their investment decision on Microsoft’s creditworthiness and the terms of its lease payments. They looked at CoreWeave’s contract with the tech giant and thought it offered greater protection to a potential lender than similar deals they’d seen, the person said.

“That deal was the most intensive process that we went through,” said Brannin McBee, a founder of CoreWeave and the firm’s chief development officer. “And [it was] one of the most important because many on Wall Street did not yet understand the long-term value of GPUs at the time.”

Many other companies have since replicated the structure of the Blackstone-CoreWeave deal to underwrite subsequent loans for GPUs, often also relying on the end user’s creditworthiness. That is beginning to change, Khaira said. Earlier this year, Blackstone participated in a deal that gave CoreWeave more money than its current leases would support—a wager by the lenders on its ability to keep signing a bounty of new leases.

Looking ahead, Khaira is focused on finding the next big bet. Open-source models are a big trend, but understanding how to invest in them will be difficult, he said. Their proliferation challenges the AI business models Blackstone is funding and provides less opportunity for the firm to use its capital advantage.

Still, Khaira thinks the trend isn’t going to fade away. He summed up the growing trend in AI with succinctness. “Open source is going to be important,” he said.