Blackstone’s AI chief says neocloud debt risks are manageable amid market jitters

Blackstone’s AI initiatives are centered on financing and deploying compute infrastructure, with the firm’s $1.3 trillion in assets under management providing a unique position to support large-scale AI projects. Jas Khaira, who relocated from New York to lead Blackstone’s AI efforts, emphasized the firm’s focus on compute financing and flexible capital structures, ranging from debt to equity.

The firm’s AI hub, Blackstone N1 (BXN1), has played a key role in several compute-related deals, including a $5 billion investment in Crux AI, a neocloud launched in partnership with Google to commercialize custom TPUs. BXN1 also backed Etched, a four-year-old chip startup, reflecting Blackstone’s broader strategy to invest across the AI stack.

Blackstone pioneered a financing model for neoclouds, lending massive sums against committed customer contracts and GPUs pledged as collateral. The firm’s first such deal was a $2.3 billion loan to CoreWeave in 2023, when CoreWeave had only $30 million in revenue and minimal profitability. The loan was secured by CoreWeave’s Nvidia GPU collection and backed by contracts with Microsoft, a blue-chip customer.

This financing model became the template for follow-on debt to CoreWeave and rival neoclouds, including a $10 billion credit facility co-led with Coatue for Australian GPU provider Firmus earlier this year. Khaira noted that lenders assess risk based on the creditworthiness of neoclouds’ customers, such as Microsoft or Meta, which helps mitigate concerns about the borrowers’ own financial profiles.

Despite the scale of neocloud debt—CoreWeave’s debt has ballooned to about $50 billion—Khaira argued that the risks are contained. He pointed out that most AI data centers are built for hyperscalers, meaning the debt is ultimately backed by the most creditworthy companies in the world. He compared the current environment to the 2008 financial crisis, stating, “This doesn’t feel like something where you’ve got 2008 banks that are shaky credits.”

Blackstone is also expanding its role beyond financing, forming a $1.5 billion joint venture called “Ode” with Anthropic and Hellman & Friedman to supply forward-deployed engineers to help companies adopt AI. The venture initially focuses on Blackstone’s 280 portfolio companies, with Khaira acknowledging that while there is “definitely ROI,” adoption gains are uneven and may appear as oversupply before scaling.

Market jitters over neocloud debt have intensified amid rising interest rates and credit spreads, with CoreWeave’s shares dropping over 20% and Firmus canceling its planned IPO at a $30 billion valuation. Khaira attributed the market skepticism to broader concerns about the cost of capital, noting that even tech giants like Microsoft and Meta are paying more to borrow.