WSJ What’s News - What’s News in Earnings: Can AI Investments Help Private Credit’s Recovery?

Episode Date: July 31, 2026

Bonus Episode for July 31. Investment firms like Blackstone, KKR and Blue Owl have been battered over the past year by a client exodus from private-credit funds. WSJ lead financial reporter AnnaMaria Andriotis discusses the state of the industry’s recovery from a surge in redemption requests from rattled investors and whether these firms’ investments in AI can help them recover from blows to the software sector. WSJ reporter Matt Wirz, who covers credit, hosts this special bonus episode of What's News in Earnings, where we dig into companies’ earnings reports and analyst calls to find out what’s going on under the hood of the American economy. Sign up for the WSJ's free Markets A.M. newsletter. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Hello listeners. It is July 31st. I'm Matt Wirtz reporter for the Wall Street Journal, and this is what's news in earnings. Our look at some of the biggest themes standing out this earning season. It's been a tough year for private investment firms like Blackstone, Blue Owl, KKR. Seven of the largest of these firms now manage over $5 trillion. They use that to bankroll everything from credit cards to corporate loans to construction of data centers that are popping up all over the country. But their once high-flying stocks have been battered of late by a client exodus from their private credit funds. Share price declines this year range from 15% for the likes of Blackstone and Apollo to more than 30% for Blue Owl. Ouch. There's also been gridlock in private equity dealmaking.

There's been big losses from bets they made on software companies that risk being replaced by AI. Now, these companies are trying to flip the script. Blackstone showed a surge in deal activity, while KKR has reported a record quarter for sales of assets in its private equity funds. Blue Owl, though, a big player in private credit reported a 37% drop in new fundraising from a year ago. Will these fund managers rebound or stay stuck in the doldrums? Here with me to dissect the recent earnings is Anna Maria Andriotis, the journal's lead financial reporter and my colleague in covering the industry. All right, Blue Owl and Blackstone say the giant sucking sound coming out of private credit is quieting as client redemption request decline. Is the worst over Anna Maria?

Okay, so one key thing here, Matt. have been a big headline in terms of individual investors trying to pull their money out of credit funds. What Blackstone's earnings showed was that new money going into private credit slowed for the second straight quarter. Simultaneously, the inflows into other private investment categories like private equity and real estate increased. The company attributed what occurred to the retail channel, essentially individual investors, who have now slowed putting more new money into its private credit business. And similarly, yesterday, Blue Owl also showed a slowdown in money raised for its credit business, $1.8 billion into Q of this year versus $5.8 billion a year prior.

Pretty meaningful slowdown. But Matt, you reported yesterday on the latest earnings from Blue Owl and KKR. the concerns about software companies. I mean, is this still a big issue? I would say it ain't over yet. That's my takeaway. The software issue is going to take years to play out. Blackstone, which you mentioned, they took a big loss on medallia, which is this customer services software company that the private equity owner said, you know what, I'm done. I don't want this company anymore. You take it off my hands and the private credit lender is to take it over. There's another company called Cornerstone on Demand. They make HR software.

There's a private credit fund that just marked down a loan that they hold to that company to around 63 cents on the dollar, not a sign that they think this business is booming. So even if the withdrawals are slowing down, it's going to take a really long time for them to return to the heyday that we saw when there was kind of a private credit gravy train going from like COVID all the way through to the end of last year. Silver lining, though, a lot of these firms that are invested in these software companies that are suffering from competition from AI, they are also big investors in AI, right? So that is potentially a springboard for them to rebound.

What do you think? Is that going to turbocharge these stocks again? Okay, so Blackstone had a strong second quarter despite the private credit pullback that we talked about with individual investors. And the main reason for that, to your point, is AI. So when we talk about things like the building out of data centers, owning stakes in companies like Anthropic, OpenAI, all of these different AI-related investments are found throughout its major divisions, whether it's private equity or private credit and real estate, infrastructure. And we're seeing the company is signing deal after deal in recent weeks. Blackstone's credit business announced that it's

partnering with Broadcom to launch a platform that's backed by an initial $35 billion to finance AI infrastructure. Apollo is also in that deal. And then Blackstone and Google plan to create an AI cloud company to rival the likes of Corweave using Google's specialized chips. And this involves a $5 billion investment in equity capital from Blackstone. So that's the upside. But I'm with you, Matt.

things seem mixed at best, considering the various challenges that this sector continues to face. Okay, Anna Maria, the artificial intelligence boom is fueling a lot of the U.S. economy. But we got a kind of ho-hum number on GDP this week. What if the economy slows down? What does that do to the investments that these firms make and to their stocks? One of the things that is maybe easy to forget about is the quality of the underwriting that played out with these loans, where the companies that were borrowing didn't even need to show that they were profitable. There were a lot of lucent terms, and a lot of these loans are still out there, outstanding. All of this has occurred in an economy that has been strong.

So if we get to a place where the underlying economic fundamentals start to deteriorate, then it does raise significant questions about the future of these outstanding loans. And that was What's News and Earnings. Today's show was produced by Danny Lewis with supervising producer Tali Arbell. Later today, we'll have the PM edition of What's News out for you as usual. And we'll be back later this earnings season, diving into another industry. Until then, I'm Matt Wirtz. Have a great day.

Thank you.