①Blackstone President Jonathan Gray has warned that Wall Street underestimates the potential risks of artificial intelligence (AI) destroying entire industrial chains and has elevated it to the top of the 'investment blacklist'; ②Gray pointed out that the market is overly focused on bubble concerns, while ignoring the devastating scenarios of AI’s 'dimensionality reduction attack' on traditional businesses.
Cailian Press, October 19th, by Editor Niu Zhanlin — Blackstone President Jonathan Gray recently issued a rare warning that Wall Street broadly underestimates the potential risks of artificial intelligence (AI) wiping out entire industrial chains and rendering some industries 'overnight obsolete.' The issue has been raised internally at Blackstone to the top of the 'investment blacklist.'
Gray noted that understanding AI’s impact on the industry has become a key focus for the world's largest private capital group in its investment evaluation process because AI is disrupting traditional business models and leading to large-scale job losses.
“We have explicitly instructed our credit and equity teams: any investment memorandum must address 'AI risk' within the first few pages.” Gray stated that AI’s disruption of business models is no longer a distant hypothesis but an ongoing reality that has already resulted in some jobs being replaced by machines.
Although currently unprofitable AI companies are seeing inflated valuations, and capital games involving major players 'shifting assets between hands' have sparked bubble concerns, Gray cautioned that the market is overly fixated on fears of a bubble, overlooking the catastrophic scenarios of AI’s 'dimensionality reduction attack' on traditional businesses.
“People always say this looks like a bubble, but no one asks: Could those traditional companies be completely disrupted? For instance, could they collapse like New York taxi medallions?” Gray cited the example where the value of New York taxi medallions surged nearly 500-fold over several decades but plummeted by 80% within less than five years after Uber and Lyft emerged. “The impact of AI on rule-driven industries—law, accounting, deal-making, claims processing—will only be more thorough.”
Internally, Blackstone has required a ‘page-by-page review’ of all new projects and existing assets: How exactly is AI rewriting the survival logic of enterprise software, data service providers, and rule-based occupations? According to sources, Blackstone has recently abandoned acquisitions of several software and call center enterprises deemed 'high-risk from AI,' despite these targets appearing to have stable cash flows.
Currently, by OpenAI,$Microsoft (MSFT.US)$and $Alphabet-C (GOOG.US)$ AI large models developed by companies such as [relevant company names] have already made waves in white-collar industries like accounting, consulting, and law, while also posing a threat to the business models of advertising, publishing, and software enterprises.
As one of the earliest and largest investors in data centers, Blackstone has made substantial investments in computing power infrastructure and supporting power stations over the past few years. It has also repositioned its industrial assets Copeland and Legence as 'AI infrastructure suppliers.'
However, Gray admitted that although Blackstone is carefully assessing AI-related risks, some investments remain inevitably exposed to the impacts of technological change. Its private credit division has extended billions of dollars in loans to multiple enterprise software companies, including Medallia, which may lose customers due to new AI-driven competitors.
"We are forcing the AI issue onto the table not because we have a clear vision of the endgame, but because we fear that pretending everything is fine could lead to fatal mistakes," emphasized Gray. He noted that while AI disrupts the old order, it will also unlock underestimated productivity dividends, creating trillions of dollars in new wealth for large enterprises and the global economy. Therefore, he urged the trading team not to miss the opportunities brought by AI.
