Wall Street investors are underestimating the potential of artificial intelligence to make entire industries obsolete, Blackstone's chairman said, adding that the technology's impact is now «high on our list» when evaluating deals, the FT writes. Jonathan Gray said understanding the risks of AI has become a priority for the private equity group in evaluating investments, with the technology already changing business models and causing job losses. «We've said to our credit and equities teams: put AI right on the front pages of your investment notes,» Gray told the Financial Times Private Capital Summit in London this week. The high valuations of loss-making AI companies and the circular financial relationships between many of the major players have fueled concerns about a possible bubble in the sector. Gray said that investor enthusiasm makes some misallocation of capital to AI companies inevitable — «think Pets.com in the year 2000.» However, he added that the scale of this technology's impact means investors may still underestimate its potential to disrupt entire industries. «People are saying, 'This smells like a bubble,' but they're not asking, 'What's going to happen to traditional businesses that could be massively disrupted?'» Gray said. «If we think about rules-based business — legal, accounting, transaction processing and claims — the impact will be profound,» he added. Gray compared the impending disruption to New York's taxi licenses, which increased in value nearly 500 times over the decades, only to quickly lose 80 percent of their value when ride-hailing apps like Uber and Lyft entered the market. Gray said Blackstone put AI risks «high on the list» when assessing potential investment losses. “We're spending an enormous amount of time on both new deals and — very importantly — our existing portfolio: what does AI mean for enterprise software, for data services companies, and for rules-based work?” he added. The rise of artificial intelligence algorithms created by OpenAI, Microsoft and Google are already disrupting office sectors such as accounting, consulting and legal and threatening the business models of advertising, publishing and software companies. Machine learning technology also threatens manual jobs in areas such as industrial production. Blackstone, an early and prolific investor in the data centers used by OpenAI and others to support large-scale language models, has been analyzing AI risks for years. Recently, the company decided not to buy certain software firms and call centers considered vulnerable to AI-related risks, according to people close to the situation. Blackstone has also invested heavily in utilities that provide power to data centers, even repositioning some industrial companies in its portfolio — such as Copeland and Legence — to sell products to AI infrastructure providers.
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