Marc Lipschultz, founder and co-CEO of Blue Owl (OWL), said Thursday that the firm has no plans of slowing its efforts to finance Big Tech’s AI spending.
Shares of the private credit heavyweight surged as much as 13% Thursday after the firm reported asset management growth during the quarter, driven by a 6% increase in the division that houses its data center financing and leasing business.
“We saw overnight, obviously, all the tech announcements … most notably, just about every single company talked about increasing their capex even more. Well, that just flows directly to our digital infrastructure business and our triple net lease business,” Lipschultz said.
On Wednesday, Microsoft (MSFT), Amazon (AMZN), Meta Platforms (META), and Alphabet (GOOG, GOOGL) each reported quarterly results showing their range for AI spending this year collectively rising from around $670 billion to above $700 billion.
“The pipelines are just so compelling, as are, fortunately, the risk [and] return,” Lipschultz added.
Lipschultz’s comments came after Blue Owl reported earnings largely in line with analyst expectations despite a volatile quarter where its private credit returns soured.
Its total assets under management climbed 15% to $315 billion compared to the year-ago period. Distributable earnings rose 11% to $293 million or $0.19 per share, while fee-related revenue climbed 13% to $700 million.
Analysts were expecting the firm to post $316 billion in AUM, along with $287 million in distributable earnings and $688 million in fee revenue.
Meanwhile, Blue Owl reported a net loss of 1.1% in its direct lending business, which accounts for over a third of its total assets. By comparison, this core private credit strategy posted a net return of 2.3% in the first quarter of last year.
In an earnings presentation, the company showed fundraising from its wealth channel fell from a year ago as institutional flows offset this slowdown from financial advisors.
“I think institutions are actually seeing that this is an appealing time to look at credit. In fact, some who perhaps had paused credit, it might be very well coming back,” Lipschultz said of the dynamic.
Blue Owl found itself at the center of private credit drama beginning last November when it called off a planned merger between one of its non-traded private credit funds and another larger publicly traded vehicle, citing “market volatility.”
Since then, many of the private credit industry’s largest non-traded funds have reported surging investor redemption requests. Even after Thursday’s boost, Blue Owl’s stock remains down 35% year to date.
Its biggest risk ahead of the print was that the quarter’s drama in private credit would indicate worsening credit quality or significantly stall the firm’s fundraising.
Lipschultz also emphasized how the firm is “working down” its exposure to software firms potentially at risk AI-disruption ahead of a major refinancing moment in 2028. He highlighted that in worst case scenarios for disrupted portfolio companies, Blue Owl also carries more protections and capital cushion than private equity investors.
“The sky didn’t fall,” Oppenheimer analyst Chris Kotowski, who has an Outperform rating on Blue Owl, said of the firm’s earnings report in a Thursday note. “We think there is considerable upside potential.”
Blue Owl’s data center push comes with risks of its own. The firm is one among several pioneering creative financing arrangements to accommodate Big Tech’s debt binge.
Lipschultz isn’t the first private manager executive pointing to the AI boom as a big opportunity following a turbulent period for its debt business.
Last week, Blackstone’s COO Jon Gray called his firm’s decision to move into AI infrastructure years ago “the single most important thing” for its long-term growth during an analyst call. Earlier this week, Blackstone announced the formation of a unit dedicated to pouring billions more into data centers and AI-related infrastructure.
Blackstone (BX), too, reported that returns fell in its private credit business over the first quarter versus the year-ago quarter.
David Hollerith covers the financial sector, ranging from the country’s biggest banks to regional lenders, private equity firms, and the cryptocurrency space.
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