Overview of What's News in Earnings
This Wall Street Journal earnings-season episode examines whether private investment giants like Blackstone, Blue Owl, Apollo, and KKR can rebound after a rough stretch marked by slowing private credit fundraising, weaker stock performance, and losses tied to software companies vulnerable to AI disruption. The discussion centers on a key question: can AI-related investments and infrastructure deals offset the pressure in private credit and help revive the sector?
Private Credit Is Still Under Pressure
Fundraising slowdown, not a full recovery
- Blackstone and Blue Owl said redemption pressure is easing, but new money flowing into private credit has slowed.
- Blackstone saw new private credit inflows slow for a second straight quarter, while inflows into private equity and real estate improved.
- Blue Owl’s private credit fundraising fell sharply to $1.8 billion from $5.8 billion a year earlier.
Stock performance has been weak
- Major private investment firms have seen their shares fall this year:
- Blackstone, Apollo: down around 15%
- Blue Owl: down 30%+
- The sector has also been hurt by gridlock in private equity dealmaking and investor caution around credit funds.
Software Bets Are Still a Problem
AI is pressuring older software investments
- A major drag on these firms has been losses tied to software companies that may be displaced by AI.
- Examples mentioned:
- Medallia: Blackstone took a big loss after the company was handed back by its private equity owner.
- Cornerstone OnDemand: a private credit loan was marked down to about 63 cents on the dollar.
The unwind could take years
- The speakers suggested the damage from these software bets is not over yet.
- Even if investor withdrawals slow, it may take a long time for private credit to return to its prior boom period.
AI Could Be the Growth Engine
Blackstone is leaning into AI infrastructure
- Blackstone’s stronger quarter was helped by AI-related opportunities across its businesses.
- Its investments include:
- Data centers
- Stakes in Anthropic and OpenAI
- Real estate and infrastructure assets tied to AI buildout
Big partnership deals are emerging
- Blackstone’s credit business is partnering with Broadcom on a platform backed by an initial $35 billion to finance AI infrastructure.
- Apollo is also part of that effort.
- Blackstone and Google are planning an AI cloud company that would compete with CoreWeave, with Blackstone contributing $5 billion in equity capital.
Economic Risk Could Change the Picture
Strong underwriting matters if growth weakens
- The episode emphasized that many loans in private credit were made with relatively loose terms, including to borrowers that didn’t need to show profitability.
- That risk looked manageable while the economy stayed strong.
- If economic fundamentals weaken, the quality of those loans could become a much bigger concern.
Key Takeaways
- Private credit is stabilizing, but not rebounding sharply.
- AI is a major opportunity for firms like Blackstone, especially in data centers and infrastructure financing.
- Legacy software bets remain a drag and may take years to work through.
- A weaker economy would be the biggest threat to the sector’s loan book and stock performance.
- The overall outlook is mixed: AI gives private investment firms a real growth story, but it does not erase the underlying risks in private credit.
Notable Insight
- The core tension in the discussion: the same firms hurt by AI-disrupted software holdings are also among the biggest financiers of AI’s buildout.
- That makes AI both a headwind and a potential спасатель for the private investment industry.