AI Will Need ‘Trillions’ of Dollars of Investment in Infrastructure, Says BlackRock CEO Larry Fink

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On April 12, 2024, BlackRock, Inc., the largest asset manager globally with assets under management (AUM), announced their financial earnings for the quarter ending March 31, 2024.

In Q1 2024, BlackRock announced impressive earnings with a staggering $10.5 trillion in managed assets, boosting its status as a dominant player in the global asset management industry. This figure represents a substantial jump of over $1.4 trillion compared to the previous year. The company’s growth can be attributed to both organic expansion and advantageous market conditions.

In the last three months, BlackRock attracted approximately $76 billion in new investments for their long-term plans, highlighting the allure and robustness of their extensive investment offerings. This consistent inflow transpired across different asset classes and client categories, underlining the firm’s widespread market popularity. Despite typical withdrawals from cash management, the overall net inflows amounted to an impressive $57 billion.

In terms of finance, BlackRock experienced a 11% rise in annual revenue compared to the previous year. The primary causes of this growth were the favorable market conditions that enhanced average assets under management (AUM), as well as organic expansion of base fees and performance fees, and increased technology services revenue. Additionally, operating income for the quarter grew by 18%, with adjusted numbers indicating a 17% increase.

The earnings per share (EPS) surged by an impressive 37%, marking a significant improvement compared to the corresponding period in the previous year. Furthermore, after making certain adjustments, the adjusted EPS rose by 24%. These positive developments can be attributed to higher nonoperating income and a smaller effective tax rate during the quarter.

BlackRock raised an extra $3 billion through issuing debt to help finance its acquisition of Global Infrastructure Partners. At the same time, the company kept rewarding its shareholders by buying back $375 million worth of shares and lifting its quarterly cash dividend by 2%, amounting to $5.10 per share. This action underscores BlackRock’s strong financial position and dedication to returning value to its investors.

According to BlackRock’s Q1 2024 earnings report, Larry Fink, the company’s Chairman and CEO, underlined the confidence clients have in BlackRock to optimize their portfolios, as demonstrated by the record $236 billion in new assets over the past year. This client interaction has driven continuous expansion in both asset management and technology services, with technology services revenue experiencing a significant jump of over 10%.

The CEO highlighted that BlackRock’s expansion is fueled by consistent innovation, investment, and a robust commitment to meeting client requirements. He emphasized the importance of nurturing strong client connections and staying attuned to their changing needs. As a result, BlackRock has built deeper relationships with its clients and engages in more extensive conversations about portfolio management than before.

Moving forward, Fink identifies significant expansion prospects in areas including infrastructure, technology, retirement services, and diverse portfolio solutions. He is confident that BlackRock’s extensive and varied pipeline positions the company advantageously to tackle intricate market complexities and seize opportunities. Fink emphasized the firm’s continued dedication to anticipating client requirements, fostering sustained growth for clients, investors, and team members alike.

Later in the day, during a interview on CNBC’s “Squawk on the Street” program, the BlackRock CEO discussed their company’s impressive earnings report and highlighted the significance of investing in artificial intelligence (AI) technology for upcoming economic expansion and progress.

Larry Fink initiated the conversation by acknowledging the economically uncertain climate, yet BlackRock continued to deliver impressive earnings. He highlighted substantial investments in fixed income, attributable to heightened uncertainty prompting investors to seek safer options. Remarkably, a massive $9 trillion flowed into money market funds, signaling a global trend towards cautious investment strategies. Nevertheless, Fink emphasized that those committed to the equity markets would have enjoyed a substantial 25% return, emphasizing the enduring worth of American capitalism and market-driven gains.

Fink underlined the profound impact Artificial Intelligence (AI) could bring about, yet reminded us of the necessity for sizeable investments in infrastructure to make it happen. The implementation of AI consumes vast amounts of energy, and without a considerable upgrade in power production, the widespread use of AI may remain unrealistic. He foresaw a pressing demand for producing gigawatts, not mere megawatts, of electrical power to facilitate this technological advancement.

Fink discussed the significant investment prospects stemming from the requirement to enhance electricity and power systems. He highlighted that these advancements are crucial not just for addressing the expanding needs of artificial intelligence but also for advancing ongoing global initiatives to reduce carbon emissions. According to him, this twofold necessity opens up substantial economic opportunities, potentially totaling numerous trillions of dollars in fresh investments.

The BlackRock CEO revealed that he’s not just focusing on improving AI capabilities and infrastructure within the US borders. He’s been in talks with world leaders from different countries who are equally enthusiastic about building data centers and advancing AI technology, all while working to decrease carbon emissions. This global initiative highlights a strong international dedication to both technological progress and sustainability, a commitment that Fink believes will keep fueling economic growth across the globe.

Contemplating BlackRock’s business, Fink emphasized its robust and adaptable structure. With an impressive $10.5 trillion in assets under management, over half of which are retirement funds, BlackRock has experienced growth in various parts of its portfolio despite industry-wide withdrawals, especially from active investments. Fink’s confidence in the company’s future is high due to a robust inflow of new funds – the largest he has seen in years – suggesting an increase in business activity.

During BlackRock’s first-quarter earnings call for 2024, its CEO showcased the impressive performance of the company’s newly launched Bitcoin investment product (IBIT).

“Launched in January, our Bitcoin investment fund has experienced remarkable growth, becoming the swiftest expanding ETF ever, with approximately $20 billion in assets under management.”

Bitcoin ETF Flow – 12 April 2024

— BitMEX Research (@BitMEXResearch) April 13, 2024

He also mentioned that BlackRock announced last month the launch of its first tokenized fund:

Last month, we revealed two significant steps in advancing our digital asset strategy: the debut of our first tokenized fund and a minor investment in Securitize, a tokenization platform on the blockchain. These actions extend our current approach, and we’re committed to developing more innovative products and solutions to give our clients expanded access and personalization.

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2024-04-15 04:09