Blackstone CTO: "There is a whole chain of companies needed for AI to exist, and among them you can always find opportunities"

"If we think about it, AI is not very new. It has been used in all kinds of forms for many years. We all know the technology from the past as 'machine learning'. So today, when we want to examine the impact of this technology on an existing portfolio company of ours, or a company we are considering the possibility of investing in, we are mainly trying to understand today where the relevant data for the company is, and this is not public information that is easy to obtain," said John Stecher, CTO of Blackstone, which is the largest alternative asset manager in the world, with assets under management amounting to a trillion dollars. "Once we understand where the relevant data is, for example real estate transactions in a certain area, then we can try to understand the optimal use that each company can make of AI to improve and offer significant value, such as for example a better analysis of the real estate world, which makes it possible to better understand how this technology is relevant and how it will really affect companies in the industry," noted Stecher in a conversation with Yifat Oron, Senior Managing Director; Head of Tel Aviv Office at Blackstone during the Mind the Tech conference in New York.

How and in what way does Blackstone use AI within its portfolio?

"Blackstone has, as mentioned, assets under management amounting to a trillion dollars. We are focused on private companies, private equity, and as mentioned, we are looking for the relevant data. So we have a very big advantage, because we have a lot of information from the many private companies we invest in, and private companies are the majority of companies in the world. In fact, 3/4 of the companies in the world are private. The information that the companies in our portfolio provide us is a basis that allows us to make investment decisions in a wide variety of transactions. We must remember that AI ultimately makes people more efficient. In every transaction we do, we receive maybe 100 PDF documents. This is a huge amount of information. AI can analyze this information at an incredible speed, certainly compared to an analyst. This does not mean that the analyst is redundant, by the way, but the information we receive is used by us to make decisions, also in relation to business moves of companies already included in the portfolio.”

People think of ChatGPT as soon as they hear "AI". But I want to talk about the investment opportunities that exist on the periphery of the category. There are many opportunities in these areas, such as data centers, and Blackstone purchased a company for about $10 billion that operates in this field. What other opportunities is Blackstone looking for in this field?

"We invest in many companies thematically. Thematic investments are investments that are led by a certain theme. This is also true for AI, which in many ways is a very thematic field. You can invest directly in AI companies, but there are other ways to invest and be exposed to the field. And when you look at the field from this angle, there are many great companies to invest in. In order to produce all the power needed for AI, a lot of chips are needed. So chip manufacturers are of course companies involved in this theme. To produce chips, you need all kinds of special materials. So companies that produce these raw materials, and also mining companies, for example, are also opportunities, as far as the investment in the field when examined thematically. To allow AI to work and process large amounts of information, server farms and data centers are needed. So such companies are also on the radar. And for data centers to work as necessary, a lot of energy is needed. So also companies that operate in the fields of energy, traditional and more advanced, are investment options. In the end, there is a whole chain of companies that are needed for AI to exist, and among them you can always find attractive opportunities."

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