Market Views: Compute Scarcity, Higher Rates, and Where We're Investing

Higher rates and geopolitical volatility favor investments in scarce infrastructure, faster-growing sectors, and physical assets tied to constrained supply or unique human experiences.

• Energy prices rose 30% during the quarter and the 10-year Treasury yield increased by 80 basis points, raising the cost of capital and pressuring asset values and multiples.
• Blackstone argues that AI infrastructure is not in a classic supply-driven bubble: demand is accelerating, portfolio companies are spending 20 times more on models, and supply is constrained by permitting, community opposition, turbine and chip shortages, power-plant construction, and the need to raise tens of billions of dollars.
• The preferred sectors and regions include life sciences, logistics, defense, energy, and India, where faster growth can better absorb higher financing costs; Blackstone also points to a cricket-team investment and other scarce human experiences as attractive assets.
• Real estate faces higher-rate headwinds but benefits from limited new supply, reasonable debt spreads, and strong fundamentals, including record logistics leasing and hotel same-store sales up 6% in 2026 versus flat growth in 2025.
• Private credit fundamentals have remained healthy despite an earlier sector scare, while floating-rate lending and asset-based credit against aircraft, railroads, and other infrastructure become more attractive as yields rise.

Takeaway: Investors should emphasize long-term, disciplined exposure to supply-constrained infrastructure, faster-growing sectors, selected real estate, and credit rather than react to short-term market volatility, while recognizing that higher rates still weigh on valuations and deal activity.