"Blackstone President: Wall Street Underestimates the Disruptive Power of AI, Now Project Investments Are First Assessed for 'Disruption Risk'"

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Wall Street has underestimated the disruptive power of AI to overturn traditional business models and market structures.

Jonathan Gray, President of Blackstone Group, has warned that Wall Street investors are underestimating the potential of artificial intelligence to make whole industries obsolete. The world's largest private equity firm has now placed AI risk assessment at the top of its investment decision priorities, requiring all deal teams to address AI impact at the very beginning of their investment memoranda.

Speaking at the Financial Times Private Capital Summit in London this week, Gray stated that AI technology has already begun to disrupt business models and lead to unemployment. He pointed out that despite concerns in the market that high valuations of AI companies may create a bubble, investors should be even more focused on the massive disruption risks faced by traditional industries.

He especially emphasized that rule-based businesses such as law, accounting, transaction processing, and claims handling will face "profound" impacts. According to informed sources, Blackstone has recently decided not to acquire certain software and call center companies deemed highly susceptible to AI risk. At the same time, the firm is repositioning some of its industrial portfolio companies to capture opportunities brought by AI infrastructure.

AI Disruption Risk Becomes Top Priority

Blackstone has elevated AI risk assessment to the highest priority in investment decision-making. Gray has made it clear that both credit and equity teams are required to spell out the AI impact at the very beginning of their investment memos. He said:

"We are spending a substantial amount of time on both new deals and existing portfolios: what does AI mean for enterprise software, for data-processing service businesses, and for rule-based work?”

As an early investor in data centers used by companies such as OpenAI, Blackstone has been evaluating AI risk for years. The firm is now conducting thorough reviews of both new deals and existing portfolios. Gray warned that investors, while paying attention to the AI bubble, are overlooking the extensive disruptions looming for traditional businesses. He stated:

"People say ‘this smells like a bubble,’ but they’re not asking: ‘What about those traditional businesses that might face large-scale disruption?’”

He particularly pointed out that AI algorithms created by OpenAI, Microsoft, and Google have already begun to disrupt white-collar industries such as accounting, consulting, and law, while also threatening the business models of advertisers, publishers, and software companies. Gray compared such disruption to the fate of New York taxi medallions, whose value grew nearly 500-fold over decades but lost 80% of that value rapidly when ride-hailing apps disrupted the market. Machine learning also threatens manual jobs in industries such as manufacturing.

Two-pronged Adjustment of Investment Strategy

Although Blackstone is assessing AI risks, some of its investments remain exposed to the impact of technological change. Its private credit division has lent billions of dollars to enterprise software firms including Medallia, which risk losing customers to AI-powered competitors.

At the same time, Blackstone is also actively positioning itself to seize AI opportunities. The firm has made large investments in utility companies that power data centers, and has even repositioned industrial portfolio companies such as Copeland and Legence to sell products to AI infrastructure providers.

According to Gray, although AI may cause some negative economic disruption, the technology could also bring underestimated productivity gains to large enterprises and the global economy, creating trillions of dollars of new corporate wealth. As such, he is urging deal teams not to miss out on AI-related opportunities. He stated:

We would not dare to claim that we know exactly how everything will evolve. But if every deal team is required to analyze the impact of AI, then it is indeed the No.1 topic in the boardroom.

Risk Warning and DisclaimerThe market involves risk, and investment should be approached with caution. This article does not constitute personal investment advice, nor does it take into account the particular investment objectives, financial circumstances, or needs of individual users. Users should consider whether any opinions, viewpoints, or conclusions in this article are appropriate to their individual circumstances. Investing accordingly is at one’s own risk. ```