Blackstone's AI Infrastructure Bet: Strategic Foresight or a Debt-Fueled Gamble?
AI-generated image · US National Wire
As the private equity giant pours billions into neoclouds and GPUs, rising interest rates and cratering valuations suggest the AI buildout may be hitting a wall.
OPINION: Blackstone is positioning itself as the indispensable bank for the AI revolution, but the math looks precarious. As first reported by TechCrunch, the firm is leveraging its $1.3 trillion in assets under management to fund a massive expansion of compute through Blackstone N1 (BXN1), a San Francisco-based hub led by Jas Khaira. This includes a $5 billion investment in Crux AI, a neocloud partnered with Google, and backing for chip startup Etched.
The most concerning aspect is the financing model Blackstone pioneered for neoclouds—providers that rent out AI GPU infrastructure. TechCrunch reports that Blackstone began lending massive sums to these firms by using GPUs as collateral. This was tested in 2023 with CoreWeave; despite having only $30 million in revenue and minimal profitability at the time, Blackstone provided a $2.3 billion loan. This blueprint expanded to include a $10 billion credit facility for Australian provider Firmus, co-led with Coatue.
Now, the cracks are appearing. CoreWeave’s debt has ballooned to approximately $50 billion, leading Altimeter Capital founder Brad Gerstner to tell CNBC that GPU collateral is no longer sufficient for securing cheap debt. Consequently, CoreWeave shares dropped over 20%, and Firmus scrapped its planned IPO, which had a target valuation of roughly $30 billion.
Khaira acknowledged to TechCrunch that market jitters are rising due to higher credit spreads and September's interest rate hike. While Khaira dismissed fears of a 2008-style credit crisis, noting that debt is backed by the most creditworthy companies, he conceded that ROI across Blackstone's 280 portfolio companies—supported by the "Ode" joint venture with Anthropic and Hellman & Friedman—remains "uneven."