Blackstone president Jon Gray is pushing back against rising claims that the artificial intelligence sector is in bubble territory.
In a new video, Gray says talk of widespread excess in private credit, AI and the stock market may be overstated.
He notes that it has become too easy for investors to lump several fast-growing sectors into bubble conversations without examining what is actually driving the investment wave.
“They say there’s a private credit bubble, there’s an AI bubble, there’s a stock market bubble. And I think it’s too easy to just fall into the trap and say, ‘Oh yeah, all those bubbles, they exist. So I might gently pop each one of these three bubbles.’”
Focusing on AI, Gray says critics are overlooking the breadth of investment required to support the technology’s expansion.
“In AI, it’s underestimating the power of the transformation of this technology and the rationale for enormous investment to power this productivity revolution. We’ve got to build a bunch of chips, a bunch of data centers, and a ton of power. And that requires enormous amounts of capital.”
To manage risks, Gray says that the technology-driven disruption could reshape entire industries, comparing the shift to the collapse of a legacy directory business.
“If you think about the Yellow Pages business, which we all used to love. Some of the younger viewers may not even know what Yellow Pages is. For 75 years, they were amongst the best businesses in the world, and then they disappeared. I think we’re gonna see more of that in a bunch of rules-based businesses. Keep your eyes on disruption.”
Addressing stock market valuations, Gray notes that today’s environment is fundamentally different from the dot-com era.
“And then finally in the stock market, yes, valuations are full, but this isn’t what we experienced in 2000 when the biggest market cap company Cisco traded at 130 times versus Nvidia today at 30 times. I don’t want to be ‘Everything’s great. Trees grow to the sky.’ There will be mistakes. There will be challenges.”
But he also says the combination of rising productivity and major capital commitments may justify elevated valuations.
“But if you think fundamentally a productivity revolution and investment boom are happening, maybe we should pay a little more for the stock market in that context… I think on a human level, what it’s going to do on the healthcare side to really move us towards precision medicine and much better choices about how you should exactly do health care, I think that’s going to be powerful. I think we’re at the very, very beginning of this game.”
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