AI boom strains profits: BlackRock, Blackstone ask if returns will follow

During a panel at the National Economic Conference moderated by Sophie Shulman, Anath Levin (Managing Director, Country Manager, Israel at BlackRock) and Yifat Oron (Senior Managing Director at Blackstone, Head of Tel Aviv office) examined whether the extraordinary capital flowing into artificial intelligence will generate returns to justify the investment.

Levin opened with a stark observation: "AI overshadows everything." She noted that the incredible profitability in American markets is highly concentrated, especially around AI companies, and the central question is what underlying demand this reflects and how long it will be sustainable. BlackRock's research identified a significant problem: a gap between current company profitability and the level of investment being deployed. Levin cited expectations that investments in AI infrastructure and technologies will reach $6-8 trillion by 2030, but questioned whether companies can generate returns to justify such enormous spending. She drew a historical parallel: over 150 years, despite multiple revolutions that changed humanity, the average growth rate remained around 2% annually. To close the investment gap, growth would need to accelerate to around 3.5%—and Levin posed the question of whether that is possible. She framed the investor's role as identifying "the companies that can translate innovation into long-term profitability."

Oron presented Blackstone's perspective as a major investor in AI infrastructure. She highlighted the firm's roughly $10 billion（約1.6兆円） acquisition in the data center sector, along with additional investments in data center companies in Japan and other markets. She emphasized that demand for AI infrastructure significantly outpaces supply: "The market today represents around 100 gigawatts of data centers, while demand is double that, reaching 200 gigawatts." Oron stressed that the AI value chain extends far beyond data centers to include energy infrastructure, electricity networks, semiconductor capabilities, and software companies. She pointed to electricity supply and transmission as one of the industry's biggest challenges: "The energy world is becoming a bottleneck, particularly around electricity transmission. Whoever opens that bottleneck will win." On adoption, Oron noted that AI adoption in software remains at an early stage, and Blackstone prefers to invest after identifying repeated and sustainable customer adoption rather than responding to initial hype.

Both executives addressed the challenge of separating winners from speculation. Oron observed that rapid technological change has made traditional investment models less effective and predicting the future more difficult, noting that "companies growing from zero to 100 at unprecedented speed, sometimes in less than a year" creates situations where some are valued above fundamentals while others trade below. Levin agreed that identifying the AI trend itself is no longer a challenge; the difficulty is determining which companies will emerge as long-term winners. She stated: "Today's profitability is highly concentrated and is being generated at very high levels. The investor is left with the question of whether they can identify the companies that will continue growing and distinguish them from those that will not."

The two also discussed Israel's continued appeal to global investors despite geopolitical uncertainty. Oron acknowledged that geopolitics cannot be ignored but cited recent transactions as evidence of continued confidence. She highlighted Israel's advantages—demographic growth, a strong technology sector, and leadership in chips, cybersecurity, and defense technologies. Levin emphasized BlackRock's ongoing commitment to Israel, noting that the company has invested approximately $41 billion（約6.6兆円） in the Israeli economy and that this level "has not slowed down at all in recent years," citing the presence of stable, large companies that compare favorably internationally.

The AI investment boom has become the dominant force reshaping global capital markets, but the panel discussion reveals a critical disconnect at the heart of the rally. BlackRock's analysis found that current company profitability lags far behind the scale of capital being deployed—a gap that can only be closed if economic growth accelerates to around 3.5% annually, compared with the historical average of 2% over 150 years. This is not a minor concern; it suggests that either valuations must contract sharply or productivity and economic output must reach levels not previously achieved in modern history.

Blackstone's infrastructure perspective adds a second layer of urgency: the physical world may not support unlimited AI expansion. With demand for data center capacity already double the current global supply, energy and electricity transmission have become the real bottleneck. Oron's emphasis on the "entire ecosystem"—spanning data centers, energy infrastructure, networks, semiconductors, and software—underscores that the AI value chain is capital-intensive across every layer, not just in computing hardware. This constraint suggests that returns will be unevenly distributed: companies or investors who unlock energy and transmission capacity may capture outsized gains, while others face constrained growth.

For business investors, the executives' core message is clear: identifying the AI trend itself is no longer valuable. The hard work lies in distinguishing companies with sustainable customer adoption and genuine profitability from those whose valuations rest on speculation. In a market where Levin observes that profitability is "very concentrated" in a narrow band of AI-exposed firms, the risk of capital misallocation—chasing winners after they have already moved—is acute.

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