Analyst reviews BlackRock rating after AI partnership with Microsoft

Nvidia Chief Executive (NVDA) Jensen Huang recently said that AI became more of an infrastructure than a group of chips.

Now, Microsoft (MSFT) and BlackRock are partnering to fund AI infrastructure the total way all through the U.S. On Sept. 17 the software stalwart and the asset-management titan said they'd join the Global Artificial Intelligence Infrastructure Investment Partnership, with plans to lift $30 billion in private equity and an overall target of $100 billion in investments, in accordance with an announcement.

The initiative makes a speciality of two things: building more data centers to do something in regards to the growing demand for AI computing power, and improving energy infrastructure to power these centers.

Related: Nvidia CEO Jensen Huang just told investors what’s next for the AI chipmaker

Other participants include Global Infrastructure Partners, which BlackRock is the total way all through the approach to acquiring, and UAE-based tech investor MGX, which makes a speciality of building data centers and energy projects.

“Mobilizing private capital to build AI infrastructure like data centers and power will release a multitrillion-dollar long-term investment opportunity,” said Larry Fink, BlackRock’s (BLK) CEO. “Data centers are the bedrock of the digital economy, and these investments will lend a hand power economic growth, create jobs, and drive AI technology innovation.”

Nvidia, the leading producer of synthetic-intelligence-related chips, will support the AI investment partnership with its expertise. “Accelerated computing and generative AI are driving a growing need for AI infrastructure for the next industrial revolution,” said Huang.

The announcement came together with the Federal Reserve's decision to cut rates of interest by Zero.5 percentage point. A rate cut in general benefits fundraising efforts by lowering borrowing costs and driving investor demand toward higher-risk assets.

“The timing, as the Fed enters a rate-cutting cycle that should support project hurdle rates and borrowing costs, is yet another sweetener,” said TheStreet Pro’s veteran analyst Chris Versace.

What it means for tech companies

Major tech companies are sharply boosting their spending on data center infrastructure to remain competitive in AI, putting U.S. energy producers below pressure to fulfill soaring demand. In keeping with Bloomberg Intelligence, electricity usage may perhaps expand up to 10 times by 2030.

Microsoft said in July’s earnings call that it planned to scale its spending on AI infrastructure to fulfill demand.

Related: Analyst revisits Microsoft stock price target amid AI spending ramp

“Cloud and AI-related spend represents nearly all of our total capital expenditures,” said Microsoft Chief Financial Officer Amy Hood. “Within that, roughly 0.5 is for infrastructure needs where we continue to build and lease data centers on the way to support monetization over the next 15 years and beyond.”

Microsoft’s most modern quarterly revenue growth from Azure and other cloud services missed analysts’ forecast. The company reported 29% growth for the fiscal fourth quarter, while analysts had expected 31%.

Tech companies are also taking a look to maintain away from increasing energy costs. The Washington Post reported that Google, Amazon, Microsoft, and Meta are opposing American Electric Power Ohio's proposal, which states that a tariff hike is required to avoid new infrastructure costs from shifting to households and businesses if the tech industry would no longer meet its energy-intensive plans.

AEP Ohio's proposed rate expand aims to push data centers into making long-term financial commitments, getting them to “have more skin the total way all through the sport," in accordance with AEP Vice President Matthew McKenzie.

Modest financial accretion yet significant strategic accretion, analyst says

Morgan Stanley analyst Michael Cyprys calls this partnership an "impressive" first-time AI fund for BlackRock and one in the total largest ever all through this field.

He affirmed an overweight rating on the stock, citing the strength of BlackRock's brand, connections and platform.

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Morgan Stanley expects the fund to feature 60 to eighty cents to BlackRock's earnings per share, about 1%-2% of its 2025 EPS estimate of $forty nine.34.

The analyst calls that the "financial accretion modest, but strategic accretion significant," in accordance with thefly.com.

Related: Veteran fund manager sees world of pain coming for stocks