The Unseen Risks in AI’s Disruptive Path
While much of Wall Street remains focused on AI’s growth potential, Blackstone’s leadership is sounding alarms about what they’re missing. According to Blackstone President Jonathan Gray, the financial community is dangerously underestimating how artificial intelligence could render entire industries obsolete. In recent comments at the Financial Times Private Capital Summit, Gray revealed that AI risk assessment has become the “top of our list” when evaluating investment opportunities.
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“We’ve told our credit and equity teams: address AI on the first pages of your investment memos,” Gray emphasized, highlighting the seriousness with which Blackstone now treats technological disruption. This warning comes amid what many are calling an AI bubble, with high valuations of lossmaking AI companies raising concerns about market trends reminiscent of previous technology booms.
Beyond the Bubble: The Real Threat to Legacy Businesses
Gray drew a crucial distinction between typical market exuberance and genuine industry disruption. “People say, ‘This smells like a bubble,’ but they’re not asking: ‘What about legacy businesses that could be massively disrupted?’” he noted. This perspective suggests that while some AI investments may fail, the bigger risk lies in failing to recognize which established industries face existential threats.
The Blackstone president specifically highlighted rules-based businesses as particularly vulnerable. “If you think about rules-based businesses — legal, accounting, transaction and claims processing — this is going to be profound,” Gray stated. This assessment aligns with related innovations in automation that are already transforming how businesses operate.
Historical Precedent: Learning from Past Disruptions
Gray offered a powerful analogy to illustrate his point, comparing AI’s potential impact to what happened to New York City taxi licenses. These licenses grew almost 500-fold in value over decades, only to lose 80% of their value when ride-hailing apps like Uber and Lyft entered the market. The speed of this collapse caught many investors by surprise, despite the technology being visible for years.
This pattern of gradual buildup followed by rapid disruption is particularly relevant given industry developments in other sectors. The question isn’t whether AI will create value, but which existing business models it will destroy in the process.
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Blackstone’s Practical Response to AI Threats
Blackstone isn’t just talking about AI risks—they’re actively restructuring their investment approach around them. The firm has recently decided against purchasing software and call-center companies considered vulnerable to AI disruption, according to people familiar with the matter. Simultaneously, they’re repositioning industrial portfolio companies like Copeland and Legence to serve the growing AI infrastructure market.
This dual strategy reflects the complex nature of technological disruption, where threats and opportunities often emerge simultaneously. The firm’s experience with recent technology investments has informed their approach to balancing risk and opportunity in the AI space.
The Productivity Paradox: Disruption Versus Growth
Despite the risks, Gray acknowledges AI’s tremendous upside potential. “While AI would create some negative economic disruptions, the technology could also yield underestimated productivity benefits for large corporations and the global economy, creating trillions of dollars in new corporate wealth,” he noted. This creates a challenging environment for investors who must navigate both the destructive and creative aspects of technological change.
The scale of this transformation becomes clearer when considering related innovations across multiple scientific and industrial fields. Like previous technological revolutions, AI’s impact will likely be both broader and deeper than most observers anticipate.
Implementation Challenges: From Theory to Practice
Blackstone’s approach involves forcing AI conversations in every investment decision. “We’re forcing the conversation. We don’t claim to know exactly how it all plays out. But if every deal team has to analyse AI impact then it’s the number-one topic in the room,” Gray explained. This systematic approach helps ensure that AI considerations aren’t relegated to specialized teams or afterthoughts.
The firm’s experience with industry developments in semiconductor manufacturing has provided valuable insights into the infrastructure requirements of the AI revolution. This hands-on knowledge informs their assessment of which companies are positioned to benefit from AI adoption versus those likely to be disrupted by it.
Looking Ahead: Navigating the AI Investment Landscape
Gray’s warning comes at a critical moment for investors. As industry experts note, the gap between AI hype and realistic assessment has never been wider. The challenge for investors lies in distinguishing between temporary market exuberance and genuine structural change.
“Acting like it’s business as usual would be a mistake,” Gray concluded, summarizing the fundamental shift in investment thinking that AI requires. For firms like Blackstone, this means constantly reevaluating both new opportunities and existing portfolio companies through the lens of technological disruption. The firms that succeed will be those that recognize both the threats and opportunities presented by AI, rather than treating it as just another investment trend.
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