WEBVTT - Blackstone President & COO Jon Gray Talks Earnings & Tariffs

0:00:02.520 --> 0:00:08.760
<v Speaker 1>Bloomberg Audio Studios, podcasts, Radio news John This morning, Blackstone

0:00:08.760 --> 0:00:12.480
<v Speaker 1>posted a twenty five percent jump in distributable earnings and

0:00:12.520 --> 0:00:15.400
<v Speaker 1>a lot of this was due to retail activity flying

0:00:15.440 --> 0:00:18.680
<v Speaker 1>into Blackstone more and more. How far does this trend

0:00:18.760 --> 0:00:23.040
<v Speaker 1>go with more retail investors coming into private funds, especially

0:00:23.040 --> 0:00:24.600
<v Speaker 1>in the middle of all of this uncertainty.

0:00:26.320 --> 0:00:29.240
<v Speaker 2>Well, Shanale is always great to be with you. I

0:00:29.280 --> 0:00:32.280
<v Speaker 2>would just start with the quarter. It was tremendous for us.

0:00:33.040 --> 0:00:36.160
<v Speaker 2>First off, we delivered for our investors, that's the most

0:00:36.200 --> 0:00:40.440
<v Speaker 2>important thing. We had the most fund appreciation in nearly

0:00:40.560 --> 0:00:44.720
<v Speaker 2>four years. We delivered for shareholders, as you noted, with

0:00:44.800 --> 0:00:48.280
<v Speaker 2>strong growth and earnings per share. We also saw another

0:00:48.400 --> 0:00:52.440
<v Speaker 2>fifty two billion dollars of inflows. And what gets us

0:00:52.600 --> 0:00:56.600
<v Speaker 2>excited is we've got some cyclical tailwinds here in terms

0:00:56.600 --> 0:00:59.160
<v Speaker 2>of deal activity picking up as we look into the

0:00:59.200 --> 0:01:02.520
<v Speaker 2>new year, and then some of these secular growth trends

0:01:02.920 --> 0:01:06.880
<v Speaker 2>in infrastructure, in private credit and in private wealth, which

0:01:06.880 --> 0:01:10.480
<v Speaker 2>you noted, and I think that area still has a

0:01:10.640 --> 0:01:12.080
<v Speaker 2>lot of running room.

0:01:12.440 --> 0:01:13.440
<v Speaker 3>It's early days.

0:01:13.440 --> 0:01:17.160
<v Speaker 2>If you think about our institutional customers, they are about

0:01:17.200 --> 0:01:17.960
<v Speaker 2>a third.

0:01:18.280 --> 0:01:20.560
<v Speaker 3>Allocated two private assets.

0:01:20.800 --> 0:01:23.880
<v Speaker 2>And yet when we look at individual investors, they've got

0:01:23.920 --> 0:01:27.160
<v Speaker 2>just one two percent allocated to private so it's a

0:01:27.200 --> 0:01:29.800
<v Speaker 2>big world and we've done a very good job in

0:01:29.840 --> 0:01:33.160
<v Speaker 2>that area too. The performance of our products has been exceptional,

0:01:33.280 --> 0:01:37.920
<v Speaker 2>so the market potential are positioning our brand, the breadth

0:01:37.959 --> 0:01:40.959
<v Speaker 2>of what we do, the products we've offered to track record.

0:01:41.240 --> 0:01:44.040
<v Speaker 2>We think that sets up for a great outcome over time.

0:01:44.520 --> 0:01:47.960
<v Speaker 1>John, how much are you feeling certain and confident about

0:01:47.960 --> 0:01:50.240
<v Speaker 1>the second half of the year given that there are

0:01:50.400 --> 0:01:53.800
<v Speaker 1>still uncertainties around the administration's trade deals.

0:01:55.520 --> 0:01:56.560
<v Speaker 3>Well, it's interesting.

0:01:56.640 --> 0:02:00.120
<v Speaker 2>Ninety days ago we talked about this and we have

0:02:00.200 --> 0:02:04.240
<v Speaker 2>said consistently to sort of be a little bit patient,

0:02:04.400 --> 0:02:09.280
<v Speaker 2>let this tariff diplomacy settle. We have seen good progress

0:02:09.320 --> 0:02:12.200
<v Speaker 2>in terms of deals made with the UK and Japan

0:02:12.320 --> 0:02:15.080
<v Speaker 2>and Vietnam, and there's sort of a contour of what

0:02:15.200 --> 0:02:16.440
<v Speaker 2>these deals will look like.

0:02:16.880 --> 0:02:19.880
<v Speaker 3>It's obviously not a straight line.

0:02:19.919 --> 0:02:22.440
<v Speaker 2>We could have some more bumps here in early August,

0:02:22.840 --> 0:02:26.720
<v Speaker 2>but I think market participants, businesses are beginning to get

0:02:26.760 --> 0:02:30.120
<v Speaker 2>a sense that, you know, there will be resolution and

0:02:30.160 --> 0:02:34.120
<v Speaker 2>that six twelve months from now, tariffs and tariff diplomacy

0:02:34.160 --> 0:02:37.560
<v Speaker 2>will not be the main thing. And the US economy

0:02:37.600 --> 0:02:41.040
<v Speaker 2>has shown incredible resilience, and at the same time we

0:02:41.200 --> 0:02:46.480
<v Speaker 2>have this AI revolution coming towards us, huge investment around that,

0:02:47.080 --> 0:02:50.560
<v Speaker 2>and that and the productivity gains that should come give

0:02:50.680 --> 0:02:51.800
<v Speaker 2>us a lot of confidence.

0:02:52.080 --> 0:02:53.880
<v Speaker 3>It's never a straight line.

0:02:53.600 --> 0:02:55.560
<v Speaker 2>But there are a lot of good things when you

0:02:55.600 --> 0:02:58.600
<v Speaker 2>sort of look out over the horizon, particularly as we

0:02:58.680 --> 0:03:00.480
<v Speaker 2>get through some of these terriffics issues.

0:03:00.840 --> 0:03:03.160
<v Speaker 1>You mentioned deals a little bit earlier, but I want

0:03:03.160 --> 0:03:05.840
<v Speaker 1>to note that realizations for the second quarter were just

0:03:05.880 --> 0:03:08.880
<v Speaker 1>sixty three percent of what they were just four years ago.

0:03:09.360 --> 0:03:12.280
<v Speaker 1>The deal market industry wide has been slow to come

0:03:12.320 --> 0:03:16.480
<v Speaker 1>back in terms of private equity exits in particular, how

0:03:16.520 --> 0:03:18.400
<v Speaker 1>fast and heavy could it come back in the second

0:03:18.440 --> 0:03:21.600
<v Speaker 1>half of the year and when will they be materially

0:03:21.720 --> 0:03:25.800
<v Speaker 1>showing more IPOs and more M and A among portfolio

0:03:25.800 --> 0:03:27.320
<v Speaker 1>companies for Blackstone and others.

0:03:28.400 --> 0:03:30.320
<v Speaker 3>Well, Shanala, You're absolutely right.

0:03:30.360 --> 0:03:33.720
<v Speaker 2>It has been a tough three years for realizations. They've

0:03:33.720 --> 0:03:37.840
<v Speaker 2>been running down about two thirds m and A and

0:03:37.920 --> 0:03:43.160
<v Speaker 2>IPOs generally, that activity capital markets that ties to realizations

0:03:43.200 --> 0:03:46.360
<v Speaker 2>now for an extended period of time. But as we

0:03:46.400 --> 0:03:49.600
<v Speaker 2>look forward, we are seeing good signs. The equity markets

0:03:49.680 --> 0:03:53.000
<v Speaker 2>back at record highs. Debt spreads are back to pre

0:03:53.120 --> 0:03:57.320
<v Speaker 2>Liberation day levels, the economies hanging in there. We've got

0:03:57.320 --> 0:04:01.480
<v Speaker 2>a more favorable regulatory environment for in a and there's

0:04:01.520 --> 0:04:04.360
<v Speaker 2>a strong desire to do transactions. So when we look

0:04:04.520 --> 0:04:09.080
<v Speaker 2>at our portfolio, we see an IPO pipeline. That's the

0:04:09.120 --> 0:04:13.080
<v Speaker 2>biggest since it's been in twenty twenty one. We did

0:04:13.080 --> 0:04:16.160
<v Speaker 2>an IPO in Europe a couple of weeks ago our first.

0:04:15.800 --> 0:04:16.799
<v Speaker 3>And many years.

0:04:17.520 --> 0:04:20.280
<v Speaker 2>When we look in our dead area, the number of

0:04:20.320 --> 0:04:23.720
<v Speaker 2>new credits we're screening is up fifty percent from year end.

0:04:24.120 --> 0:04:26.800
<v Speaker 2>All of that is positive, but I would caution that

0:04:26.880 --> 0:04:30.039
<v Speaker 2>it takes a bit of time. So getting an IPO done,

0:04:30.120 --> 0:04:33.440
<v Speaker 2>of bringing a company out for sale, that activity is

0:04:33.480 --> 0:04:34.600
<v Speaker 2>definitely going to pick up.

0:04:34.640 --> 0:04:36.360
<v Speaker 3>As we move towards the end of the year.

0:04:36.760 --> 0:04:40.159
<v Speaker 2>You're going to see exit activity, but that itself, it's

0:04:40.240 --> 0:04:42.040
<v Speaker 2>like bringing plane out to the runway.

0:04:42.240 --> 0:04:43.760
<v Speaker 3>We'll take a bit of time, but the.

0:04:43.680 --> 0:04:47.280
<v Speaker 2>Path of travel here looks good, and I do think

0:04:47.400 --> 0:04:51.080
<v Speaker 2>we'll see a step function increase in transaction activity in

0:04:51.080 --> 0:04:53.200
<v Speaker 2>the capital markets in the second half.

0:04:53.240 --> 0:04:56.120
<v Speaker 1>I realize you're probably hesitant to talk about particular deals,

0:04:56.120 --> 0:04:57.960
<v Speaker 1>but you are sitting on what was supposed to be

0:04:58.000 --> 0:05:01.520
<v Speaker 1>one of the year's biggest IPOs and others of Medline,

0:05:01.960 --> 0:05:03.880
<v Speaker 1>How long would it take to get a company like

0:05:03.920 --> 0:05:06.239
<v Speaker 1>that back to market? What would you need to see

0:05:06.600 --> 0:05:10.640
<v Speaker 1>before you had the ability to bring that to an IPO.

0:05:12.640 --> 0:05:15.279
<v Speaker 2>Well, we're never going to talk about specific companies, but

0:05:15.920 --> 0:05:19.320
<v Speaker 2>Medline is a terrific business, and we own a number

0:05:19.360 --> 0:05:23.919
<v Speaker 2>of other terrific businesses, and there are often considerations to

0:05:23.960 --> 0:05:29.000
<v Speaker 2>individual businesses in terms of operational things, transactions, other reasons

0:05:29.040 --> 0:05:30.320
<v Speaker 2>why you make decisions.

0:05:30.520 --> 0:05:33.320
<v Speaker 3>But it's also, as we've talked about, a function.

0:05:33.040 --> 0:05:37.400
<v Speaker 2>Of the market backdrop, and as the equity market stay healthy,

0:05:37.800 --> 0:05:40.520
<v Speaker 2>as the IPO market grows, it's a little bit of

0:05:40.520 --> 0:05:43.440
<v Speaker 2>a magnet pulling things in. So to me, on some

0:05:43.480 --> 0:05:46.640
<v Speaker 2>of these great companies we own, it's really a question

0:05:46.920 --> 0:05:49.560
<v Speaker 2>of when, not if, and when we think it's the

0:05:49.640 --> 0:05:53.080
<v Speaker 2>right time, we'll do it. Market conditions getting better is

0:05:53.120 --> 0:05:55.200
<v Speaker 2>obviously very helpful for our business.

0:05:55.320 --> 0:05:57.159
<v Speaker 1>Now, I want to read you a quote from Oppenheimer

0:05:57.200 --> 0:05:59.640
<v Speaker 1>off the heels of your results this morning. They said

0:05:59.640 --> 0:06:02.440
<v Speaker 1>blacks Zone is deploying more in real estate than it

0:06:02.480 --> 0:06:06.080
<v Speaker 1>is realizing, indicating some bullishness on its part as it

0:06:06.120 --> 0:06:08.600
<v Speaker 1>puts more money to work than it's taking off the table.

0:06:09.080 --> 0:06:11.400
<v Speaker 1>Do you agree with that categorization? Can you give any

0:06:11.400 --> 0:06:13.080
<v Speaker 1>color around how bullish you might be?

0:06:14.839 --> 0:06:17.080
<v Speaker 3>I would agree with that characterization.

0:06:17.440 --> 0:06:21.440
<v Speaker 2>I guess what I'd say is real estate has also

0:06:21.520 --> 0:06:23.920
<v Speaker 2>been through a tough patch here now for three and

0:06:24.000 --> 0:06:26.800
<v Speaker 2>a half years. It was a combination of COVID in

0:06:26.839 --> 0:06:30.320
<v Speaker 2>the office market and then just the rising cost of capital.

0:06:30.760 --> 0:06:34.359
<v Speaker 2>Interest rates went up a bunch, and so multiples came down.

0:06:34.520 --> 0:06:36.240
<v Speaker 3>In real estate, cap rates went up.

0:06:36.760 --> 0:06:39.840
<v Speaker 2>But we're beginning to see some promising signs as we

0:06:39.880 --> 0:06:43.839
<v Speaker 2>look forward. We're seeing new supply come down pretty sharply,

0:06:44.279 --> 0:06:46.039
<v Speaker 2>and that takes a bit of time because of the

0:06:46.160 --> 0:06:50.440
<v Speaker 2>lag between construction going down and new deliveries. That's going

0:06:50.520 --> 0:06:52.680
<v Speaker 2>to start to show up in the fundamentals as we

0:06:52.720 --> 0:06:55.080
<v Speaker 2>head towards the end of the year into next and

0:06:55.200 --> 0:07:00.000
<v Speaker 2>cost of capitals coming down, borrowing costs, spreads, base rates.

0:06:59.800 --> 0:07:00.600
<v Speaker 3>That's helpful.

0:07:00.839 --> 0:07:04.599
<v Speaker 2>And we're seeing the early signs of transaction activity starting

0:07:04.640 --> 0:07:09.520
<v Speaker 2>to accelerate, particularly amongst smaller assets. The CMBs markets up

0:07:09.560 --> 0:07:12.640
<v Speaker 2>something like forty percent year to date, and so real

0:07:12.760 --> 0:07:17.720
<v Speaker 2>estate's a cyclical business. Apartment demand, logistic demand, These things

0:07:17.760 --> 0:07:20.720
<v Speaker 2>are not going away, but you have to work through

0:07:20.760 --> 0:07:21.480
<v Speaker 2>this cycle.

0:07:21.800 --> 0:07:22.880
<v Speaker 3>We're at that point.

0:07:22.880 --> 0:07:25.880
<v Speaker 2>We're getting closer, I think, to this tipping point where

0:07:25.920 --> 0:07:28.640
<v Speaker 2>the market sort of bottomed eighteen months ago. We talked

0:07:28.680 --> 0:07:31.080
<v Speaker 2>about that then, we said it wouldn't be a v

0:07:31.120 --> 0:07:31.880
<v Speaker 2>shape recovery.

0:07:31.920 --> 0:07:32.840
<v Speaker 3>That's what's happened.

0:07:33.040 --> 0:07:35.920
<v Speaker 2>But when we look out over the horizon, things certainly

0:07:35.960 --> 0:07:38.440
<v Speaker 2>look better for real estate, and of course, the way

0:07:38.480 --> 0:07:41.360
<v Speaker 2>we react to that is by trying to deploy capital

0:07:41.640 --> 0:07:43.040
<v Speaker 2>ahead of that recovery.

0:07:43.160 --> 0:07:46.280
<v Speaker 1>What you're speaking to is an easing of conditions before

0:07:46.320 --> 0:07:49.320
<v Speaker 1>we've even seen successive rate cuts this year from the

0:07:49.320 --> 0:07:52.040
<v Speaker 1>federal reserves. Obviously, the President has been very vocal for

0:07:52.120 --> 0:07:55.880
<v Speaker 1>his desire to see much more aggressive cuts than the

0:07:55.920 --> 0:07:59.960
<v Speaker 1>market is pricing in. Do you worry that cuts subsequent

0:08:00.160 --> 0:08:04.480
<v Speaker 1>cuts could spur another bout of inflation at this point.

0:08:05.680 --> 0:08:08.640
<v Speaker 2>Well, I think the Fed has done a very effective

0:08:08.800 --> 0:08:12.680
<v Speaker 2>job getting inflation down. They were a little late, as

0:08:12.680 --> 0:08:15.720
<v Speaker 2>we know, originally to raise rates, but then moved quickly.

0:08:16.280 --> 0:08:19.160
<v Speaker 3>And what we do is look at our proprietary data.

0:08:19.200 --> 0:08:21.960
<v Speaker 2>We have two hundred and fifty companies and thirteen thousand

0:08:22.000 --> 0:08:25.280
<v Speaker 2>pieces of real estate, and consistently for the last couple

0:08:25.320 --> 0:08:28.960
<v Speaker 2>of years. Others have been talking about sticky inflation. We've

0:08:29.040 --> 0:08:32.120
<v Speaker 2>just been looking at the proprietary data we have and

0:08:32.160 --> 0:08:36.440
<v Speaker 2>it continues to show inflation heading lower. Shelter costs, which

0:08:36.440 --> 0:08:39.840
<v Speaker 2>are the biggest component of CPI, are running well below

0:08:39.880 --> 0:08:43.040
<v Speaker 2>the government's three point eight percent, and so we think

0:08:43.080 --> 0:08:46.800
<v Speaker 2>that'll come down. Energy costs obviously coming down, and when

0:08:46.840 --> 0:08:50.360
<v Speaker 2>we survey our companies about the labor market, they're saying

0:08:50.400 --> 0:08:53.360
<v Speaker 2>it's the easiest to hire that it's been since COVID.

0:08:54.280 --> 0:08:58.480
<v Speaker 2>Wage growth is now down back around three percent. So

0:08:58.520 --> 0:09:00.160
<v Speaker 2>I think the Fed's going to have a lot of

0:09:00.200 --> 0:09:03.040
<v Speaker 2>good data. We could see an uptick in goods inflation

0:09:03.200 --> 0:09:06.960
<v Speaker 2>given what's happening in policy, but in aggregate I think

0:09:06.960 --> 0:09:10.520
<v Speaker 2>inflation continues to drift down. As a result, I think

0:09:10.559 --> 0:09:13.640
<v Speaker 2>the FED has the room to cut rates. So I

0:09:13.760 --> 0:09:17.400
<v Speaker 2>don't think given where inflation is, that's going to reignite

0:09:17.400 --> 0:09:21.720
<v Speaker 2>about of inflation, and so I think that will happen gradually.

0:09:22.160 --> 0:09:26.199
<v Speaker 2>Given the tariffs, given low unemployment, the FED is being patient,

0:09:26.480 --> 0:09:28.680
<v Speaker 2>but I think the facts will give them the room

0:09:28.679 --> 0:09:31.200
<v Speaker 2>to cut rates, and that again should be helpful to

0:09:31.240 --> 0:09:32.040
<v Speaker 2>the economy.

0:09:32.280 --> 0:09:33.960
<v Speaker 3>It should be helpful to markets.

0:09:34.160 --> 0:09:36.720
<v Speaker 1>With all the rhetoric, the push pull between the President

0:09:36.760 --> 0:09:39.120
<v Speaker 1>and the Federal Reserve that we've seen on and again,

0:09:39.200 --> 0:09:41.920
<v Speaker 1>off again threats to even let the FED chair go.

0:09:42.160 --> 0:09:44.800
<v Speaker 1>Do you worry about FED independence from where you're sitting.

0:09:46.360 --> 0:09:48.160
<v Speaker 2>Well, in the last couple of weeks, I think we've

0:09:48.160 --> 0:09:51.240
<v Speaker 2>heard from both the President and the Treasury Secretary that

0:09:51.280 --> 0:09:54.320
<v Speaker 2>they expect the FED chairman to continue to the end

0:09:54.360 --> 0:09:58.000
<v Speaker 2>of his term. I think the FED will continue to

0:09:58.040 --> 0:10:01.520
<v Speaker 2>be independent p and we'll have a choice to make

0:10:01.559 --> 0:10:05.679
<v Speaker 2>a replacement here. And I think this system has worked

0:10:05.720 --> 0:10:08.480
<v Speaker 2>well over time. I think it continue to work well.

0:10:08.559 --> 0:10:10.080
<v Speaker 2>There's a board of governors as.

0:10:09.960 --> 0:10:12.600
<v Speaker 3>Well, so I think the system works.

0:10:13.000 --> 0:10:19.000
<v Speaker 2>And ultimately there have been friction between the administration and

0:10:19.040 --> 0:10:21.880
<v Speaker 2>the Federal Reserve over time. This isn't the first time,

0:10:22.240 --> 0:10:24.400
<v Speaker 2>but I have a lot of confidence, just like I

0:10:24.480 --> 0:10:27.480
<v Speaker 2>do in the entire Madisonian system in the US, and

0:10:27.600 --> 0:10:30.160
<v Speaker 2>ultimately I think the FED will make the right calls

0:10:30.440 --> 0:10:31.400
<v Speaker 2>based on the data.

0:10:32.040 --> 0:10:34.360
<v Speaker 1>John, what do you think of this move that we're

0:10:34.360 --> 0:10:37.280
<v Speaker 1>seeing in terms of more CAPEX spending as well? I

0:10:37.280 --> 0:10:39.240
<v Speaker 1>want to shift gears and talk about data centers because

0:10:39.280 --> 0:10:42.520
<v Speaker 1>you did see Alphabet report overnight coming in with a

0:10:42.520 --> 0:10:46.160
<v Speaker 1>bigger CAPEX plan than what Wall Street was expecting. You

0:10:46.280 --> 0:10:49.120
<v Speaker 1>about a week ago were in Pennsylvania for a large

0:10:49.120 --> 0:10:52.560
<v Speaker 1>summit that the President himself attended, as well as, of

0:10:52.600 --> 0:10:55.600
<v Speaker 1>course Senator David McCormick, who has been pushing more investment

0:10:55.720 --> 0:11:01.120
<v Speaker 1>into the state. At what point does this become an

0:11:01.200 --> 0:11:05.199
<v Speaker 1>issue where investors stop rewarding CAPEC spending. You are already

0:11:05.200 --> 0:11:09.120
<v Speaker 1>seeing a little bit of weakness in Alphabet shares on

0:11:09.160 --> 0:11:12.160
<v Speaker 1>the heels of that announcement. Do you think that investors

0:11:12.200 --> 0:11:14.000
<v Speaker 1>are going to ask for question at some point?

0:11:15.960 --> 0:11:20.000
<v Speaker 2>Well, investors will ultimately look at the returns.

0:11:19.520 --> 0:11:20.960
<v Speaker 3>On the invested capital.

0:11:21.520 --> 0:11:25.400
<v Speaker 2>And the companies, the hyperscalers, the big tech companies are

0:11:25.440 --> 0:11:29.240
<v Speaker 2>spending an enormous amount, but it's because they believe that

0:11:29.320 --> 0:11:32.400
<v Speaker 2>there is a huge prize here at the end, and

0:11:32.559 --> 0:11:35.400
<v Speaker 2>to date their numbers have been really strong.

0:11:35.480 --> 0:11:38.040
<v Speaker 3>They continue to deliver real earnings growth.

0:11:38.800 --> 0:11:41.559
<v Speaker 2>I look through some of the Google summaries and what

0:11:41.679 --> 0:11:46.200
<v Speaker 2>was powerful is how much growth in agents in AI.

0:11:46.360 --> 0:11:50.280
<v Speaker 2>They're seeing uptick and usage as a result of AI.

0:11:50.640 --> 0:11:53.120
<v Speaker 2>And I think as long as these companies continue to

0:11:53.120 --> 0:11:56.080
<v Speaker 2>see their revenue and earnings grow, they're going to continue

0:11:56.120 --> 0:11:59.439
<v Speaker 2>to invest, and so I think this is a critically

0:11:59.440 --> 0:12:03.400
<v Speaker 2>important part of this AI revolution. Yes, we need these

0:12:03.480 --> 0:12:06.440
<v Speaker 2>large language models like a Gemini or an Open AI.

0:12:06.800 --> 0:12:09.760
<v Speaker 2>We need the chips that the videos of the world create.

0:12:10.160 --> 0:12:13.439
<v Speaker 2>But we need this physical infrastructure. We need the data

0:12:13.440 --> 0:12:16.000
<v Speaker 2>centers where we've been the biggest investor in the world.

0:12:16.280 --> 0:12:18.800
<v Speaker 2>We need the energy where we're also been a huge

0:12:18.840 --> 0:12:23.280
<v Speaker 2>investor in generation and transmission and utilities. Both of these

0:12:23.280 --> 0:12:26.880
<v Speaker 2>things in the physical world are hugely important. Ultimately, it's

0:12:26.880 --> 0:12:29.440
<v Speaker 2>going to be about the prize, but I think it's

0:12:29.440 --> 0:12:34.160
<v Speaker 2>pretty substantial. Bringing super intelligence at scale to the world

0:12:34.440 --> 0:12:37.760
<v Speaker 2>is going to lead to a huge shift in productivity,

0:12:38.160 --> 0:12:40.600
<v Speaker 2>and therefore I think the investment makes sense.

0:12:40.880 --> 0:12:41.080
<v Speaker 3>Now.

0:12:41.160 --> 0:12:44.240
<v Speaker 2>There will be, as often there is companies who lose

0:12:44.240 --> 0:12:47.880
<v Speaker 2>out investments that don't work out, But in aggregate, this

0:12:48.040 --> 0:12:52.800
<v Speaker 2>movement towards AI, the movement towards greater efficiency. What's going

0:12:52.840 --> 0:12:56.439
<v Speaker 2>to happen with autonomous vehicles with robots. I still think

0:12:56.520 --> 0:12:59.199
<v Speaker 2>we're in the early stage. And six months ago when

0:12:59.240 --> 0:13:01.920
<v Speaker 2>everyone was talking about deep seek and was the Capex

0:13:01.960 --> 0:13:04.840
<v Speaker 2>boom coming to an end, we were pretty consistent in

0:13:04.880 --> 0:13:07.840
<v Speaker 2>our view then that that wasn't the case. We continue

0:13:07.880 --> 0:13:09.480
<v Speaker 2>to feel that way today.

0:13:09.520 --> 0:13:13.120
<v Speaker 1>So, and I should clarify for Alphabet itself, the initial

0:13:13.160 --> 0:13:16.000
<v Speaker 1>reaction was negative. It later turned around, so clearly investors

0:13:16.000 --> 0:13:18.960
<v Speaker 1>still making up their minds on how to assess out

0:13:19.120 --> 0:13:21.920
<v Speaker 1>what all of the spending means. Last question for you,

0:13:22.000 --> 0:13:25.720
<v Speaker 1>is there something that investors are not seeing about the

0:13:25.920 --> 0:13:30.400
<v Speaker 1>move into data centers and more spending in AI that

0:13:30.920 --> 0:13:33.440
<v Speaker 1>you would point to would be the biggest payoff in

0:13:33.480 --> 0:13:35.360
<v Speaker 1>the next twelve to eighteen months.

0:13:37.559 --> 0:13:40.000
<v Speaker 2>You know, I think that in the physical world, it's

0:13:40.160 --> 0:13:42.800
<v Speaker 2>just the demand. You mentioned this conference we were at at

0:13:42.840 --> 0:13:46.280
<v Speaker 2>Pittsburgh that Dave McCormick hosted. It was a terrific event.

0:13:46.400 --> 0:13:49.640
<v Speaker 2>It was bipartisan in nature with Governor Shapiro there as well.

0:13:50.120 --> 0:13:53.320
<v Speaker 2>Just the amount of capital that's needed I think is

0:13:53.480 --> 0:13:59.600
<v Speaker 2>really really important. I think that investment spend will continue.

0:13:59.600 --> 0:14:02.720
<v Speaker 2>It a pay that is quite significant. And then I

0:14:02.760 --> 0:14:05.520
<v Speaker 2>think on the payoff side, it's what's going to happen

0:14:05.600 --> 0:14:10.280
<v Speaker 2>to make consumer lives better, make companies more efficient, the coding,

0:14:11.720 --> 0:14:14.440
<v Speaker 2>the customer engagement, the content creation.

0:14:15.200 --> 0:14:17.360
<v Speaker 3>I think that is really going to be.

0:14:17.400 --> 0:14:21.360
<v Speaker 2>Transformative to business to potential earnings. And again, as we

0:14:21.400 --> 0:14:25.000
<v Speaker 2>get through this tariff diplomacy. I think the world's going

0:14:25.080 --> 0:14:28.960
<v Speaker 2>to shift to focusing on AI and its impact and

0:14:29.000 --> 0:14:31.760
<v Speaker 2>the investment that needs to happen to make it a reality.

0:14:31.960 --> 0:14:34.880
<v Speaker 3>And I think for investors globally that's exciting.

0:14:35.360 --> 0:14:36.880
<v Speaker 1>John, thank you so very much. I know you have

0:14:36.880 --> 0:14:39.320
<v Speaker 1>a conference call to head off too. We appreciate your time.

0:14:39.320 --> 0:14:42.240
<v Speaker 1>Blackstone shares now up more than three point five percent

0:14:42.280 --> 0:14:43.840
<v Speaker 1>pre market after those results.

0:14:43.920 --> 0:14:44.520
<v Speaker 2>Appreciate it.