The finance industry might be on vacation, but the news cycle isn’t:

• Private equity is straining under a pile of portfolio companies it can’t sell.

• AI plans to burn through $300B+ a year in capex, but GPT-5’s disappointing launch raises questions.

• Tariff drama continues. Despite reaching numerous agreements, new tariffs are announced daily. The only constant is uncertainty.

Private Equity’s Liquidity Crisis

Private markets, like private equity, private credit and venture capital, promise double-digit returns, which crushes the single-digit yields of most public debt and equity.

But there’s a cost to this return premium: illiquidity.

You can sell a publicly traded stock or bond instantly. But selling a small private company takes months and can be unsuccessful.

Since 2022, higher rates have slammed M&A activity and made it difficult for PE to sell portfolio companies.

Holding periods are at record highs, with more companies stuck in funds for 5+ years.

Longer holds reduce liquidity for investors, as it takes more time to monetize investments.

As a result, distribution rates to PE LPs have fallen ~50% from historical norms, the lowest since the Global Financial Crisis.¹

And now investors are turning to alternative solutions:

• Continuation Funds are unlocking some liquidity for existing LPs

• Secondary Sales are increasing as LPs sell their stakes to third parties, often at a discount

• Retail 401(k)s can now invest in PE funds, via Trump executive order, a new source of cash for existing investors

But these solutions only provide relief. A rebound will only come with lower interest rates and a stronger economy, whenever that comes…

And while PE wrestles with liquidity, Big Tech faces the opposite problem, a tsunami of investment:

AI’s $300B Spending Spree

Big Tech (Microsoft, Alphabet, Meta) and AI upstarts (OpenAI, Anthropic) are shoveling hundreds of billions into data centers and infrastructure as the AI race heats up.

It’s a boom for the US economy and could drive significant demand across sectors, from steel and concrete to chips and energy.

But OpenAI’s underwhelming GPT-5 release is raising doubts on AI’s potential. Critics call GPT-5 an incremental upgrade that doesn’t move the needle on AI development.

If GPT-5 represents larger AI development, and progress is stalling, the market’s biggest driver could start dragging stocks back down to earth.

The market’s other favorite topic, tariffs, continues to drive news:

Trump’s Tariff Picture

Based on the most recent tariff arrangements with trading partners, a picture of the president’s tariff framework is emerging:

• Friendly Rate: 10-20%

• Unfriendly Rate: 20%-30%+

But regardless of the specific tariff rates, the most harmful aspect of these trade policies is uncertainty.

Constant shifts in trade policy risk slowing business activity and freezing investment.

Something Cool I’ve Been Reading

Alchemy: The Dark Art and Curious Science of Creating Magic in Brands, Business, and Life by Rory Sutherland

Sutherland explores the magic of great marketing and its outsized impact in business and everyday life.

A fun read for finance and business minds who want to learn more about the marketing side of things.

4.0 / 5.0 ⭐️ 

P.S. Anything I missed? Any Questions? Just hit reply and send me a note. I read every email.

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1  https://www.msci.com/research-and-insights/blog-post/private-capital-in-focus-2025-trends-to-watch