Founded in 1993 by brothers Tom and David Gardner, The Motley Fool aims to make the world smarter, happier, and richer. Through our website, podcasts, books, newspaper columns, radio show, and premium investing services, we help millions of people achieve financial freedom. While reading this free article, please note that the opinions expressed may differ from The Motley Fool's Premium Investing Services. To access our top analyst recommendations, in-depth research, investing resources, and more, become a Motley Fool member today. Learn More Artificial Intelligence (AI) holds great potential to revolutionize various industries in the upcoming years, acting as a significant driver of productivity and profitability. While most investors prioritize tech giants that develop AI software and hardware, there are many other companies working to capitalize on the AI revolution that often go unnoticed. One such company is Blackstone (BX 0. 30%), which has a strong focus on AI and should not be overlooked by investors. Here's how this leading alternative asset manager is harnessing the power of AI. Blackstone utilizes AI to enhance its investment capabilities Blackstone has built a remarkable track record as an investor. It recently reached a milestone of managing $1 trillion in assets, making it the first alternative asset manager to achieve such a feat. Clients trust Blackstone with their capital due to its ability to generate differentiated returns. Over the past 30 years, Blackstone's corporate private equity and opportunistic real estate funds have delivered an average annual return of 15% net of fees, outperforming the S&P 500's average annual return of roughly 10% during the same period. A key factor contributing to Blackstone's success lies in its data-driven thematic investment approach. CEO Steve Schwarzman highlighted the company's expertise in producing and analyzing massive amounts of data, enabling them to identify trends ahead of others and strategically allocate client capital. Blackstone recognized the importance of data early on and established a data science group in 2015 to take advantage of the AI revolution. Schwarzman emphasized their commitment to expanding AI capabilities and using it to optimize operational efficiency and portfolio performance. He stated that the new generation of AI has the potential to transform companies and industries, with timeliness and effectiveness being crucial factors in determining winners and losers. Blackstone's early investments in AI have already given the company a competitive edge, allowing it to leverage data more effectively and deliver enhanced returns to investors in its funds. These higher returns translate into increased fee-based earnings and performance revenues, which are shared with investors through dividends and share repurchases. Blackstone has achieved a 20% annual growth in distributable earnings over the past decade, double the market rate.

Additionally, the company's annual dividend payments have grown over 300% during the same period. These rapidly expanding earnings and dividends have driven robust total returns for investors, averaging nearly 23% annually over the past decade, almost double the return of the S&P 500. Driving demand through strategic investments A key aspect of Blackstone's success in delivering differentiated returns and generating total shareholder returns lies in its ability to identify compelling investment opportunities. Blackstone foresees AI driving new investment opportunities in the future. COO Jon Gray discussed a significant AI-driven investment opportunity during the second-quarter call, emphasizing the massive funding needs expected for infrastructure projects globally, particularly in digital infrastructure and energy transition. Gray noted that major tech companies are projected to invest $1 trillion in the next five years, primarily in data centers due to the ongoing AI arms race. Blackstone is well-positioned to benefit from this trend, having acquired data center REIT QTS Realty for $10 billion in 2021. This acquisition provided Blackstone with a platform to capitalize on the rapid growth in data proliferation, proving to be a well-timed move. Gray highlighted QTS Realty's extraordinary momentum, with more capacity leased in the last two years than in the previous 17. Blackstone expects its investors to benefit significantly from the strong tailwinds in this rapidly expanding sector. Investments like QTS Realty align with Blackstone's strategy of thematically investing in high-quality assets driven by strong tailwinds and displaying outsize growth potential. The company has a remarkable track record of identifying such investments across various sectors, exemplified by its successful ventures with hotel operator Hilton and casino property The Cosmopolitan of Las Vegas. AI has the potential to further enhance Blackstone's returns, making it a stock that AI-focused investors shouldn't overlook. Given Blackstone's history of successful investments, its optimism about the future of AI should attract attention. Not only can AI improve portfolio company operations, but it can also drive higher investment returns, particularly for funds that own data centers. These improved returns have the potential to accelerate earnings growth for Blackstone's shareholders, which could lead to strong total returns. The upside potential offered by AI makes Blackstone a stock that AI-focused investors won't want to miss. Matthew DiLallo holds positions in Blackstone, and The Motley Fool has positions in and recommends Blackstone. The Motley Fool has a disclosure policy.