Why Private Equity Asset Raising Has Stalled?

 

In the last two years leading private equity, private credit, real estate asset management firms like Blackstone, KKR, Apollo, Carlyle, Ares, CVC, etc. have encountered certain difficulties in raising new capital.

They have either raised lower than planned new funds or stopped raising capital for some funds, whatsoever.

The reason is twofold, according to Wolfteam Ltd.'s analysis.

The leading private equity, private credit, real estate asset management firms like Blackstone, KKR, Apollo, Carlyle, Ares, CVC, etc have invested large part of their assets under management in artificial intelligence, AI related investment themes like data centers, infrastructure, energy production and online merchandise assets like distribution centers. Many market analysts and investors seem to think that the AI trade is satiated and we may be at or close to a bubble, which stalls any new investments to AI, which hurts the private equity firms.

In addition, many investors in private equity funds like pension funds, endowments and insurance companies have hit their limits to the sector. This also suppresses new investments to private equity firms.

That said, private equity, real estate and private credit asset management firms remain a hot investment sector.

 

 

What Could Derail The Stock Market Rally?

 

The US stock market rally could be stopped in its tracks by a policy error on the part of the Federal Reserve, sudden realization of investors that stocks are way overvalued or regulations that could force banks to account for some assets in a different way.

A fourth reason is trouble in the shadow banking sector, in private equity, private credit and real estate that is, according to Wolfteam Ltd.'s projections and estimates.

All these reasons for a stock market crash seem far away, but the probability of them happening is non-negligible at about 10 % to 20 %. With sudden geopolitical events able to raise this probability markedly.

Why Private Equity Companies Are Underperforming The Market?

 

The main reason private equity stocks are under-performing the S&P 500 in the last 5-7 months is the high concentration of private equity firms' investments in artificial intelligence, AI data centers, delivery centers and other infrastructure, according to Wolfteam Ltd.'s projections and estimates.

The leading private equity firms like Blackstone, KKR, Apollo, Carlyle, Ares, CVC etc. have invested via their private equity, real estate, private credit assets under management heavily and also often in a leveraged way in artificial intelligence, AI.

And the recent AI stock market correction caused a disproportionate fall in the leading private equity firms' stocks, which have not recovered as the AI firms' stocks did.

The main reason for this development is the leveraged nature of  Blackstone, KKR, Apollo, Carlyle, Ares, CVC etc.'s investments.

Most probably, however in time the private equity firms' stocks could recover more strongly than the market due again to their leveraged nature.

 

 

 

Private Equity Assets Under Management Growth

 

The growth of private equity firms' assets under management has stalled in the recent months, prompting poor performance of the leading private equity firms' stocks like Blackstone, KKR, Apollo, Carlyle, Ares, CVC etc. compared to the general indices Dow Jones Industrial Average, S&P 500, Nasdaq Composite.

The slowing pace of asset gathering of the leading Blackstone, KKR, Apollo, Carlyle, Ares, CVC etc. private equity, private credit, real estate firms could be due to two factors mainly, according to Wolfteam Ltd.'s projections and estimates.

First, there could be doubts in the further growth of the artificial intelligence, AI technology, which could reflect fears of a stock market bubble. Second, the growth of assets under management of the largest private equity firms Blackstone, KKR, Apollo, Carlyle, Ares, CVC etc. was so steep, that a moderation was in order.

AI is relevant for private equity as large part of private equity firms' investments goes into artificial intelligence, AI data centers, infrastructure and computing power. 

In short, the current slowdown of private equity assets under management is most probably temporary, barring a sudden stop of the AI boom.

 

Are We In An AI Stock Market Bubble?

 

There are publications by Wall Street equity research analysts that the Price/Book ratio of the S&P 500 is 5.3, a bit above the S&P 500's Price/Book ratio during the height of the dot com bubble and the subsequent bust.

No. We are not in an artificial intelligence, AI bubble, yet, according to Wolfteam Ltd.'s projections and estimates.

The current boom can last for 5-7 years more, before a subsequent large fall.

The profits of the technology firms and the investment capital flows could feed the current stock market rise for several years more.

 

Alphabet, Google Owner Is The Most Undervalued Of The Magnificent 7 AI, Technology Companies

 

Alphabet, the owner of the Google search engine is the most undervalued of the so called Magnificent 7 artificial intelligence, AI, technology stocks Apple, Microsoft, Alphabet, Amazon, Meta, Tesla and NVIDIA, according to Wolfteam Ltd.'s projections and estimates.

Alphabet's intrinsic worth is 10.4 trillion USD, according to Wolfteam Ltd.'s projections and estimates. compared to Alphabet's current market capitalization of 2.47 trillion USD.

Alphabet, via Google and its other properties simply possesses arguably the largest amount of data on the planet on which to train its models, Gemini including. And many professors and researchers say data is the new oil. Data feeds the models so they can produce better results.

Alphabet is still yet to monetize fully the gigantic terabytes of data it possesses. The competition from the new competitors in chat based search could be a catalyst for Alphabet to better use its data. Google is still an excellent search engine providing excellent results via which Alphabet gathers even more data.

All the other Magnificent 7 stocks in most cases still have much unlocked value, but not in the multiples Google has.

 

 

Private Equity Firms AI Technology Investments

 

Blackstone, KKR, Apollo, Carlyle, Ares, CVC etc. and other leading private equity firms invest predominantly in mid capitalization technology firms, technology firms with 2 to 10 billion USDs in market capitalization or private market value. Mega capitalization technology firms with market capitalization of above 20 billion USD are too big even for the biggest funds of Blackstone, KKR, Apollo, Carlyle, Ares, CVC etc. and other leading technology firms, it seems.

In 2008 we had an almost 80 billion USDs private equity leveraged buyout deal. Those boom times have not returned fully. The biggest leveraged buyouts now are to the tune of 40 billion USDs.

Technology companies can decline in value quickly, that is why Blackstone, KKR, Apollo, Carlyle, Ares, CVC etc. are wary of investing too large amounts in technology companies with market capitalization above 50 billion USD. When they do a mega deal or above 20 billion USDs, the leading private equity firms do it in consortium with other leading private equity firms to share the risk.

Sooner or later, there will be a 70 billion USDs or higher technology leveraged buyout, according to Wolfteam Ltd.'s projections and estimates.

Blackstone, KKR, Apollo, Carlyle, Ares, CVC etc. are still cautious because they manage foundations, endowments and pension funds' money.

However, there is tremendous value to the tune of tens or even hundreds of billions of USDs of value created in the technology space, related in many cases to artificial intelligence, AI occurring every year since 2014. Such value creation opportunities could prove too tempting for Blackstone, KKR, Apollo, Carlyle, Ares, CVC etc. other leading technology firms in the long run.

 

Are We In An Artificial Intelligence, AI Bubble? Hyperscalers, Magnificent 7 Technology Companies CAPEX Outlays

 

The short answer is yes. We are living in an AI driven stock market and assets bubble. The long answer is the AI bubble could go on inflating for 5-7 years more, according to Wolfteam Ltd.'s projections and estimates.

One of the latest signs of the AI bubble are the 50 mln. USD, 100 mln. USD and even 100 mln. USDs yearly pay packages Mark Zuckerber, Meta's founder and CEO is offering in personal meetings so called leading AI engineers. 

Another sign is the 70 billion USDs capital expenditures in AI data centers Meta and the 100 billion USDs CAPEX in AI related infrastructure Microsoft is planning. On top of that Alphabet, the Google's owner is planning 85 billion USDs in capital expenditures on AI data center infrastructure.

Amazon's expenditure on servers and data centers to support AI could come up to to 118 billion USD in 2025 alone.

The big four so called hyperscalers Microsoft, Alphabet, Amazon and Meta are about to spend 400 billion USDs on capital expenditure related to artificial intelligence, AI in the coming year.

'Microsoft plans to unload about $100 billion on AI in the next fiscal year, CEO Satya Nadella said Wednesday. Meta plans to spend between $66 billion and $72 billion. Alphabet plans to spend $85bn, significantly higher than its previous estimation of $75bn. Amazon estimated that its 2025 expenditure would come to $100 billion as it plows money into Amazon Web Services, which analysts now expect to amount to $118bn'

Apple, on the other hand seems to the most viable investment alternative from the Magnificent 7 technology companies Apple, Microsoft, Alphabet, Amazon, Meta, NVIDIA and Tesla in valuation viewpoint, as Apple has largely avoided large AI CAPEX and generates far more in sales and profits from capital outlays than the four AI technology hyperscalers Microsoft, Alphabet, Amazon and Meta.

 The four hyperscalers AI technology companies want to satisfy Wall Street equity research analysts' desire for higher artificial intelligence, AI spending with the predominant school of thought is that whichever company has the most powerful data crunching infrastructure will win the artificial intelligence, AI race and get to dominate the ever growing technology market.

All the above signs point that we are in an artificial intelligence, AI driven bubble, according to Wolfteam Ltd.'s projections and estimates. True, we may be living in the fourth industrial revolution driven by AI, but the capital expenditures of the four hypercalers and technology companies altogether are unsustainable for sales and profit, which will ultimately drive the long-term results of the technology companies. The artificial intelligence, AI bubble could be 5-7 years away from popping, in Wolfteam Ltd.'s view.

 

 

 

Private Equity And AI Infrastructure Investment

 

The leading alternative asset management firms with large private equity arms like Blackstone, KKR, Apollo, Carlyle, CVC have all invested heavily in data centers, energy firms and other artificial intelligence infrastructure.

Blackstone, KKR, Apollo, Carlyle, CVC do that by buying out via leveraged buyouts mid sized technology firms, giving out credit via private credit to technology firms and investing via their real estate asset management arms in data centers, energy firms and distribution centers which service online merchandise trade.

AI infrastructure takes an ever larger proportion of both the existing and new investments of Blackstone, KKR, Apollo, Carlyle, CVC and other leading private equity firms.

Their hopes are riding on the current fourth industrial revolution driven by artificial intelligence, AI. Blackstone, KKR, Apollo, Carlyle, CVC are investing heavily in artificial intelligence, AI because the AI driven companies, especially the magnificent 7 technology companies namely Apple, Microsoft, Alphabet, Amazon, Meta, NVIDIA and Tesla have outperformed the S&P 500 in the last ten years.

All this AI investment crowding seems much like the dot com boom and subsequent bust, according to Wolfteam Ltd.'s projections and estimates. It is true that we are still not in a state of euphoria, which was the state of mind in 1999. However the artificial intelligence, AI investment crowding out by Blackstone, KKR, Apollo, Carlyle, CVC and the other leading private equity firms which together are managing more than 4 trillion USDs could slowly but steadily build up to market euphoria, which subsequently could lead to a stock market crash, which is defined as a fall in the S&P 500, Dow Jones Industrial Average and the Nasdaq Composite of more than 35 %.

Yes, Blackstone, KKR, Apollo, Carlyle, CVC and the other alternative asset managers are investing in the future, because artificial intelligence, AI will change profoundly the way the world does business, enjoys leisure and builds new things. That said, excesses, signs of which are building could lead to a stock market crash, followed by economic recession bigger than the Great Recession in 2009-2013.

However, the net benefits of AI should be positive. 

Figma IPO Valuation

 

Figma, the design systems and prototyping startup firm listed via Initial Public Offering, IPO this Thursday on the New York Stock Exchange. Figma's stock price increased by an exceptional 300 % in its first day of trading compared to the IPO price.

This is the highest first day increase of a company going public raising more than 1 billion USDs in 30 years, according to Bloomberg. This might just be a precursor of an IPO technology boom driven by artificial intelligence, AI akin or even bigger than the IPO boom and subsequent bust in 1997 - 2001 or the dot com boom and bust otherwise called.

According to Figma's -S-1 IPO filing the web design firm reported revenue of 749.01 million USD with a loss of (732) million in 2024 compared to revenue of 504.9 million USD and profit of 737.8 million driven mainly by other, non operating income items.

On a rolling basis Figma's revenue is 821 million USDs with 18 % non-GAAP operating margin.

Figma's current market capitalization is 56 billion USD. 

Figma's intrinsic valuation is 110 billion USDs according to Wolfteam Ltd.'s  projections and estimates.

Wolfteam Ltd.'s projections reflect the assumption that Figma's revenue will continue to grow by close to the last 46 % trailing year on year revenue growth and Figma will achieve substantial, around 17 % net profit margin.

All in all, Figma's giant price rise on the first Initial Public Offering, IPO day bodes great for both Figma's prospects and could signal a new era of fast, hectic technology mergers and acquisitions deals and IPO deal activity that could rival or even surpass the dot com boom and bust. All this driven by artificial intelligence, AI. 

How Big Is The AI Opportunity?

 

Some Wall Street equity research analysts estimate that artificial intelligence, AI could increase work, productivity and the economy as a whole more than the internet or the mobile phone or by about 40 trillion USDs, which is approximately 40 % of the world's GDP.

The artificial intelligence, AI opportunity is about 8.2 trillion, USDs according to Wolfteam Ltd.'s projections and estimates. Most of the mathematical models incorporated in artificial intelligence, AI have been known for decades. It is just that their creative application and the newly found great computing power increases the potential of artificial intelligence, AI or machine learning.

8.2 trillion USDs is the global annual revenue estimate from artificial intelligence, AI in Wolfteam Ltd.'s view.

This would still make the current artificial intelligence, AI hyperscalers companies Alphabet, Meta, Microsoft, Amazon, Apple, NVIDIA potentially much more valuable. 

Will There Be a 100 billion USD Private Equity Buyout

 

In the last private equity boom between 2003 - 2008, there was talk and expectations of a 100 billion USD private equity buyout.

This never materialized.

In the current private equity boom there are again prerequisites for a 100 billion USD private equity buyout.

Private equity firms manage 4.4 trillion USDs globally. Blackstone, the biggest alternative asset manager for example manages 1.1 trillion USD in alternative assets.

For a 100 billion USD private equity to happen many things have to come in place. Several private equity managers have to unite, because the individual funds they manage are not big enough, the largest private equity fund is CVC's 23 billion USD in raised capital. In addition a net cash flow positive company with good growth prospects from an established industry like energy, materials, industrials, consumer staples,  etc. has to be on offer. The particular company should also be able to tolerate high debt levels, which are the way private equity firms create leverage in private equity buyouts.

A 100 billion USD private equity buyout has around 70 % chance of happening in the current private markets boom, according to Wolfteam Ltd.'s projections and estimates.

An interesting candidate would be a large capitalization technology company. However, private equity firms are risk averse in investing in large capitalization technology companies due to the ever changing and dynamic nature of technology. There is always the chance that a new technological wave or nimble competitor could erode the business of even large capitalization, established technology companies. and since private equity alternative investment companies manage money for pension funds, university endowments, insurance companies and other institutions the prospects of a 100 billion USD technology investment loosing large part of its value relatively fast is not an appealing prospect.

The private markets boom, however is in full swing and alternative asset managers could and are making large capitalization investments. 

Private Equity Firms And Long-Term Horizon Investing

One of the main advantages of investing in private equity is the longer-term horizon offered by nonpublic investments compared to public equities investing.

Accordingly private equity returns have beaten the S&P 500 returns in the last 10 years, but lagged the S&P 500 in the last 20 years and performed worse than the Nasdaq Composite both in the last ten years with around 2 % less in the last ten years in yearly return for private equity and by wide 7 % returns less in the last 20 years per year for private equity compared to the Nasdaq Composite, measured by the Internal Rate of Return or the rate that equates to 0 the initial outlay and the final returns.

It seems that the direct management style of private equity companies of non public companies has yielded better results than the general S&P 500 sectors.

However, due to private equity propensity to acquire net cash flow positive companies from established sectors as energy, industrials, financials, materials, consumer staples etc, private equity misses out on the chance to invest in mid capitalization and large capitalization innovative technology companies, according to Wolfteam Ltd.'s view. The main reason is that technology companies are notoriously unprofitable, especially in the initial growth stages.

And the capital managed by private equity firms comes mainly from pension funds, university endowments and other institutions, which by default and by statute invest for the long-term. However, pension funds, university endowments and other institutions require mature investments in relatively safe companies, which have an economic moat, that is. Thus, they can tolerate long-term investment holdings from 5 years onward. In this way, however, private equity firms miss the chance to invest en masse in leading technology companies, because private equity companies do have technology companies in their portfolio. Private equity companies invest indirectly in technology companies by buying up energy companies, investing in data center infrastructure and online merchandise distribution centers.

Thus, private equity companies utilize their long-term investment horizon.

 

Private Equity Firms And Long-Term Capital

 

Most of Blackstone, KKR, Apollo, Carlyle, Ares, CVC etc. and other leading private equity firms or alternative asset management firms have invested in life insurance companies, pension companies and other annuities businesses.

The main goal is to access long-term capital via the annuity payments insurance and pension insurance companies receive as part of their regular business.  Blackstone, KKR, Apollo, Carlyle, Ares, CVC etc. and other alternative asset management firms call this kind of long-term capital perpetual capital. And perpetual capital constitutes between 30 % to 40 % of Blackstone, KKR, Apollo and Carlyle's total assets under management according to the analysis of Blackstone, KKR, Apollo and Carlyle's financial statements by Wolfteam Ltd.

Via the long-term perpetual capital Blackstone, KKR, Apollo and Carlyle and other alternative asset managers are not constrained so much by funds' maturities and they can invest the perpetual capital for the long-term - above 7 years. In this way Blackstone, KKR, Apollo and Carlyle have more time for operational improvements and the private equity buyouts and also the real estate assets and private credit lending and thus they can achieve even higher S&P 500 beating returns and thus maximize their value.

Due to large part of the high share of perpetual long-term capital in Blackstone, KKR, Apollo and Carlyle's assets under management Blackstone, KKR, Apollo and Carlyle are all undervalued. Blackstone, KKR, Apollo and Carlyle's intrinsic value is 3 times higher on average, according to Wolfteam Ltd.'s projections and estimates. Thus if managed right Blackstone, KKR, Apollo and Carlyle can increase their market capitalization by more than threefold and unlock hundreds of billions of USD of value for their shareholders, employees and other stakeholders.

Artificial Intelligence, AI And Private Equity Firms

 

Blackstone, KKR, Apollo, Carlyle, Ares, CVC and other leading private equity, real estate and private credit or alternative asset managements' firms main investment theme is artificial intelligence, AI, according to public data and Wolfteam Ltd.'s estimates.

Via private equity buyouts the leading alternative asset managers buy out, invest in mid sized and smaller technology firms active in artificial intelligence, AI, which they reform and sell down the road in 7-10 years to achieve usually S&P 500 market beating returns. Via their real estate business leading alternative asset managers invest in artificial intelligence, AI data centers and also online merchandise distribution centers, which utilize heavily artificial intelligence, AI. Via their private credit investment management business the alternative asset managers give out credits with lending rates from 7 % to 14 %, where traditional money center banks and regional lenders do not thread due to either regulatory rules or risky business perspectives.

Artificial intelligence, AI is the fourth industrial revolution we are living currently. Alphabet, Microsoft, Meta, Amazon, Apple, Tesla and NVIDIA or the largest artificial intelligence, AI hyperscaler companies are undervalued and by extension artificial intelligence, AI is undervalued, according to Wolfteam Ltd.'s projections and estimates. Artificial intelligence, AI still remains to transcend, penetrate more deeply many sectors of the economy and unlock tens of trillions of USDs of addition value in the next 10 years.

By extension the leading private equity firms Blackstone, KKR, Apollo, Carlyle, Ares, CVC etc. and many mid sized and smaller alternative asset managers are undervalued, in Wolfteam Ltd.'s view.

NVIDIA's Market Capitalization Could Reach 10 trillion USD By End 2027

NVIDIA, the computer chips and Graphical Processing Units, GPUs producer is sill undervalued, according to Wolfteam Ltd.'s projections and estimates. NVIDIA's intrinsic value is 10 trillion USDs, according to Wolfteam Ltd.'s projections and estimates. That value can be realized by end 2025.

The fourth industrial revolution or the artificial intelligence, AI is in full motion, even in its beginning stage and NVIDIA is the poster company of the AI revolution.

AI will penetrate every sector of the economy and the demand for NVIDIA's GPU chips will only grow from here.

A risk to the above Wolfteam  Ltd.'s NVIDIA valuation is the emergence of technologically superior competitor that produces more powerful GPU computer chips that power personal computers and data centers. In the short-term this risk is not large.

So NVIDIA remains undervalued. 

 

Apollo Buys Pension Insurance Corporation For 7.78 Billion USD. An Analysis

Athora, backed by the alternative asset manager Apollo Global Management agreed to buy the defined benefit pension schemes UK provider Pension Insurance Corporation.

https://www.reuters.com/markets/europe/luxembourgs-reinet-advanced-talks-sale-uk-insurer-stake-athora-2025-07-03/ 

PIC had a portfolio worth nearly 60 billion pounds as of December, with over 390,000 policyholders. Upon deal close, it will constitute 45% of Athora's total AuM.

Athora has 54 billion USDs of assets owned by Apollo Global Management.

With the deal Apollo aims to increase its insurance assets which constitute long-term capital. Apollo's total long-term or so called perpetual capital currently stands at 470 billion USDs from the total 785 billion USDs of assets Apollo manages.

The Pension Insurance Corporation deal will add nearly 60 billion GBPs of new long-term asset under management for Apollo.

Long-term assets can be invested for longer periods and thus allowing for alternative asset managers to compound investments for longer and achieve higher returns on invested capital.

The Pension Insurance Corporation deals is accretive by 15 % increase for Apollo Global Management's earnings per share, according to Wolfteam Ltd.'s projections and estimates.

Apollo Global Management's intrinsic value is 250 billion USDs, according to Wolfteam Ltd.'s projections and estimates.