Blackstone plays down threat of AI bubble

By the Editorial Team · Friday, October 23, 2026

Blackstone's COO Jon Gray minimized concerns about an AI investment bubble, emphasizing that rising credit spreads on AI-related debt offer investors opportunities for higher yields despite market volatility. Despite a 34% drop in net realizations, the firm reported stronger-than-expected Q3 profits, driven by significant inflows into credit and insurance businesses, pushing assets under management to $1.37 trillion.

Blackstone, a leading global investment firm, has downplayed concerns about a potential artificial intelligence (AI) bubble in financial markets. Jon Gray, the company's chief operating officer, highlighted that widening credit spreads on AI-related debt present an opportunity for investors to secure higher returns amid a rapidly evolving landscape.

Speaking to analysts, Gray noted that while borrowing costs have surged and skepticism about the longevity of the massive AI investment boom has increased, these conditions may allow investors to command higher yields on newly originated AI-linked assets. “On the new assets that you haven’t yet leased, I think you’ll be able to command a higher yield to absorb this,” Gray said. He suggested that this dynamic could ultimately position investors in a stronger place despite current volatility.

Blackstone has been aggressively investing in the expansion of AI infrastructure, directing substantial capital toward the sector. The firm is among the largest lenders to CoreWeave, an AI-focused company backed by chipmaker Nvidia, whose shares recently tumbled. The drop in CoreWeave’s stock sparked broader concerns, resulting in a global sell-off in AI-related equities.

Despite market turbulence, Blackstone reported better-than-expected third-quarter profits, propelled by robust inflows into its fee-generating businesses. The firm’s share price rose nearly 6 percent following the earnings announcement. While dealmaking activity slowed, limiting immediate returns from some investments, healthy inflows boosted Blackstone’s assets under management to $1.37 trillion. This growth supported a 6 percent increase in fee-related earnings.

The investment environment has been challenged by rising bond yields, expectations that interest rates will remain elevated for an extended period, and market instability linked to geopolitical tensions in Iran. These factors have contributed to a slowdown in mergers and acquisitions and initial public offerings throughout the first half of the year.

Blackstone’s net realizations, which measure proceeds from exited investments, declined 34 percent to $332 million in the quarter. The decline was primarily driven by a near 50 percent drop in the firm’s private equity business. On the inflow side, Blackstone’s credit and insurance operations attracted nearly $36 billion, representing the largest portion of new capital, followed by private equity with $12.6 billion.

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