Blackstone's $1.75B Data Center REIT Is Down 16% Amid Political Backlash

By James Calloway

Blackstone's data center REIT has lost roughly 16% since its mid-May debut, even as Wall Street pitches AI infrastructure as a diversifying real estate bet. The fund, Blackstone Digital Infrastructure Trust (BXDC), sold 87.5 million shares at $20 apiece on the NYSE and closed under $17 on Thursday. The drawdown lands at a moment when 70% of Americans, according to Gallup's national polling, oppose a data center being built in their area.

The gap between investor enthusiasm and public hostility defines this market. Facilities that power Google's Gemini, Meta's Muse, Anthropic's Claude and OpenAI's ChatGPT are spreading across the U.S., and alternative investment firms want to sell shares in that physical buildout as part of a real estate allocation. Most of these vehicles remain the province of institutional investors such as pension funds, though the trend has started to touch retail markets. That shift matters because SEC Chair Paul Atkins unveiled proposals last week to widen retail access to private investments, meaning more of this asset class could soon reach ordinary portfolios.

What is Blackstone actually selling?

BXDC focuses on data centers in mature markets such as Northern Virginia and Dallas, where sprawling facilities predate the AI boom. That strategy sidesteps, at least partially, the moratoriums on new projects in New York and Texas.

"We saw this as an opportunity to capture the whole market of stabilized data centers and build a home in the public market where we think it belongs," CEO Nick Pell said in a CNBC "Squawk on the Street" interview in May.

Pell called mature assets "the lowest risk way to play," and said Blackstone can hand-select properties from what it says is a $300 billion market. On the company's most recent earnings call, he described the opportunity as "massive, with a total addressable market for our business expected to eclipse $1 trillion over the next several years." Blackstone declined to offer further comment.

Two caveats temper that pitch. First, BXDC has not yet deployed any capital into investments, according to the source reporting. Second, its short track record is negative — though established data center REITs Equinix and Digital Realty Trust have fared better long-term, their shares have also stalled since BXDC launched. Stated size, in other words, is not yet realized performance.

Who else is racing to market?

Blue Owl, which already runs a private digital infrastructure fund for sophisticated investors, is reportedly considering a public REIT valued as high as $6.5 billion that would roll up existing data center investments. The company says it owns over 130 data centers in 32 global markets representing more than $18 billion in assets. Blue Owl declined to comment to CNBC.

Co-CEO Marc Lipschultz made the sector's case in a recent LinkedIn post, calling data centers one of the strongest long-term investment opportunities in decades. "These projects have delivered consistent results with reduced credit risk. Contracts are structured with protections that make us whole even if a tenant exits early," Lipschultz said. That contractual protection is a claim about lease terms; it does not shield the assets from the political and physical risks below.

Brookfield Asset Management, meanwhile, listed its data center services provider Csquare as a stand-alone NYSE vehicle in July. Its shares have declined close to 16% since debuting. Construction spending data reinforces why the sector attracts capital: AI-related construction has propped up national construction spending while spending in many other sectors declines.

How serious is the political backlash?

Serious enough to move timelines and stock prices. New York became the first state to pass a moratorium on new hyperscale data center approvals in July. Texas followed in August, when Gov. Greg Abbott — who called the state the AI "epicenter" just a year earlier — ordered a halt on new approvals after calling for a grid-connection audit. The Times/Siena poll this fall found roughly two-thirds of voters opposed local data centers regardless of party.

The concrete financial damage has already appeared. Oracle's stock fell 4% in late September after the company sent a force majeure notice tied to Project Jupiter, a New Mexico data center campus that is part of the broader Stargate buildout developed by Blue Owl. Oracle is seeking to delay payment if the campus is not operational by 2028, citing regulatory hurdles and local opposition, though it says the project remains on track. An Nvidia- and Blackstone-backed Australian data center company just pulled its planned IPO on underwhelming investor interest.

For fund investors, the risk is not only whether a data center gets built, but whether local and state politics slow or derail projects already baked into a fund's return assumptions. Moratorium risk, in plain words, can invalidate the model before the concrete is poured.

What do the skeptics flag?

Sabur Mollah, professor of finance at Gettysburg College, said data centers can be attractive long-term investments thanks to growing demand for cloud computing, AI, digital services and data storage. "High-quality facilities may generate relatively stable rental income through long-term lease agreements with large technology companies," Mollah said.

But Mollah's risk list is long: "The key risks include overvaluation driven by excessive enthusiasm surrounding AI, substantial development and maintenance costs, dependence on a limited number of major technology tenants, and constraints on power availability." He added technological obsolescence, refinancing risk, construction delays and continuing capital expenditure to the ledger. The sector is highly capital intensive and depends critically on electricity, cooling and network connectivity — dependencies that become liabilities when any one of them fails.

Patrick Datz, digital risk practice leader at insurance brokerage IMA, pointed to natural disasters as a non-market danger. He noted data centers historically clustered in "Data Center Alley" in Virginia because of low disaster frequency, but the current push to build everywhere spreads geographic risk. "There is always that danger of the asset being taken off line," Datz said.

Rachel Nixon, co-lead of IMA's data center practice, flagged contractual uptime guarantees: "If the uptime goes down, just not having the uptime they have promised, whoever their contract is with can create other problems down the line." Both nonetheless called the space a safe bet, noting that assets held out for investors are usually vetted and underwritten by $3 to $5 billion in insurance. Insurance coverage mitigates physical risk; it does not remove it.

Can retail investors get their money out?

Liquidity is the structural problem. Roughly 94% of BXDC ownership is institutional, according to market data, and the plumbing beneath these products was never designed for retail flows.

"The infrastructure behind these investments was built for a relatively small number of institutional investors making large commitments and not for millions of retail investors investing smaller amounts," said Andrew Tarver, president of Altic (Private Markets) at InvestCloud, a wealth management technology platform. He describes it as a "post office" model — slower, manual transactions rather than continuous trading.

The warning has recent precedent. In 2026, investors rushed for the exits over fears of the "SaaSpocalypse," triggering battles between private credit fund managers — many of whom also manage data center investments — and shareholders over redemptions. Access to a fund does not guarantee access to your cash; investors should understand redemption windows, liquidity limits and underlying assets before committing outside a daily-liquidity exchange-traded REIT.

Jake Falcon, CEO of Falcon Wealth Advisors, said a public REIT is an appropriate vehicle for many individuals — "Since they offer liquidity, I'm not as opposed to them versus private funds" — but cautioned against impulse allocation. "The individual investor needs to triple their understanding before investing in alternative funds. ... One should look at their overall portfolio and ask themselves if the investment they are considering is necessary for them to hit whatever goal they have for the money," Falcon said. His advice for the uncertain: research more or find a fiduciary advisor.

The macro backdrop adds one more variable. On Thursday, many AI-themed stocks sank on a report that an OpenAI revenue forecast came in close to $20 billion below a prior projection. A fund built on AI infrastructure inherits the volatility of the AI trade itself — and with SEC proposals pending to widen retail access, more individual investors will soon face exactly that exposure, minus the institutional buffers.