Blackstone Stands Firm on Data Center Strategy Despite Industry Shifts
Blackstone, the world’s largest data center owner with $80 billion in leased assets, addressed concerns over its data center investments during its latest earnings call. The conversation, prompted by China’s AI company DeepSeek, highlighted the potential implications of evolving AI models on the future of data center demand.
DeepSeek’s Disruption Raises Questions on Data Center Growth
DeepSeek has gained attention for its innovative AI model, which uses significantly less computational power to deliver results. This advancement has sparked a broader debate about the continued need for massive data centers designed for training increasingly complex AI models.
Morgan Stanley raised the issue during the earnings call, asking Blackstone to address how DeepSeek’s efficiencies might impact the company’s data center buildout strategy.
Blackstone: Long-Term Leases Provide Stability
“We’ve obviously been spending a lot of time the last week looking at the impact of DeepSeek,” Blackstone COO Jon Gray said. He emphasized that the company’s data center portfolio is rooted in long-term leases with major global tenants.
Unlike speculative builds, Blackstone’s approach focuses on demand-driven expansions. Gray highlighted the stability provided by these leases, noting that the company’s $70 billion portfolio in October 2024 has grown to $80 billion and includes a prospective pipeline of $100 billion in new data centers.
Compute Costs Decline, But Usage Evolves
Gray acknowledged that the cost of computing power is decreasing rapidly, a trend exemplified by DeepSeek’s technology. However, he argued that reduced costs are likely to drive broader adoption and increased usage of AI and cloud services.
“Maybe there’s a little less training that’s done as a result of less intensity, but at the same time, there’s more inference, maybe there’s more cloud, maybe there’s more to do with enterprise,” Gray said.
Data Center Demand Remains Critical, but Usage May Shift
While the nature of data center usage might change, Blackstone remains committed to the sector. The company plans to continue investing in new facilities through its QTS subsidiary and other ventures, but only in response to clear demand signals from tenants.
“We still think it’s a very important segment, and there’s a way to run,” Gray stated. “But obviously, we’re watching what’s happening very closely.”
FAQ Section
1. How is DeepSeek impacting the data center industry?
DeepSeek’s AI model uses less computational power, raising questions about the need for massive data centers for AI training. However, it may drive increased adoption in other areas like inference and cloud computing.
2. What is Blackstone’s approach to data center investments?
Blackstone focuses on demand-driven expansions and long-term leases with major companies, avoiding speculative builds.
3. How large is Blackstone’s data center portfolio?
Blackstone owns $80 billion in leased data centers, with a prospective pipeline of $100 billion in additional projects.
4. Could data center usage change in the future?
Yes, while AI training may require fewer resources, other use cases like inference, cloud services, and enterprise applications could grow.
5. Why is Blackstone confident in its data center strategy?
The company’s reliance on long-term leases with stable tenants and demand-based investments provides resilience against market shifts.