SKN | HSBC Signals Near-Term Private Market Optimism Amid Rising AI Investment Risks

Key Takeaways:

• HSBC’s Funding the Future Survey found that 48% of private investors expect venture capital and private equity activity to increase over the next quarter, up from 44% in July.
• Longer-term confidence weakened: 54% expect activity to grow over the next 12 months, down from 64%, with much of the deterioration concentrated in Asia Pacific.
• AI remains the leading investment theme, but 56% of respondents anticipate a meaningful slowdown in AI infrastructure investment within six to 12 months.

HSBC Finds Deal Activity Improving, but Confidence Is Uneven

HSBC is reporting a cautiously constructive outlook for private markets, according to its latest Funding the Future Survey. The proportion of private investors expecting venture capital (VC) and private equity (PE) activity to rise over the coming quarter increased to 48% from 44% in July.

That improvement, however, contrasts with a weaker longer-term outlook. Expectations for increased activity over the next 12 months fell to 54% from 64%, with the decline concentrated in Asia Pacific. HSBC’s findings therefore suggest that investors are more comfortable with near-term dealmaking than with the durability of the recovery.

For investors and wealth holders, this distinction matters. Improving transaction activity can create opportunities for deploying capital, but weaker forward confidence argues against treating a short-term rebound as evidence of a broad, sustained recovery.

Valuations Show Signs of Adjustment

The HSBC survey also indicates that private-market financing valuations have improved. Some 51% of respondents said recent financing rounds were predominantly up rounds, the highest reading in the survey’s history. Just 3% reported mostly down rounds.

These findings suggest that the valuation corrections experienced during 2022 and 2023 may have worked through much of the market represented by the survey. Nevertheless, stronger financing valuations do not automatically translate into successful exits or attractive returns for every investor. Entry price, company performance and the eventual route to liquidity remain decisive.

HSBC Highlights AI Concentration and Infrastructure Risk

Artificial intelligence remains the dominant investment theme, with 85% of respondents identifying AI as the sector most likely to attract private capital in the coming quarter. Yet HSBC’s results also reveal rising concern about the scale and sustainability of AI infrastructure spending.

Some 56% expect a meaningful slowdown in AI infrastructure investment within six to 12 months, compared with 51% previously. The proportion considering a slowdown very likely nearly doubled, rising to 20% from 11%.

Data-centre real estate and colocation providers were identified as the most vulnerable segment by 55% of respondents, up from 24% in July. Furthermore, 29% said they would reduce AI exposure by a quarter if their identified downside scenario materialised, compared with 7% previously.

For private investors, HSBC’s findings reinforce the importance of distinguishing the long-term potential of AI from the financing and infrastructure assumptions supporting individual investments.

Exit Planning Becomes More Important

The survey found that 85% of investors intend to exit at least one portfolio company within 12 months. Trade sales remain the preferred route at 73%, while interest in initial public offerings rose to 35% and mergers increased to 31%, from 17%. Buyout preferences declined to 35% from 46%, reflecting concerns about borrowing costs.

HSBC’s overall message is one of selective opportunity rather than unqualified optimism. For high-net-worth investors, disciplined valuations, realistic exit assumptions and scrutiny of concentrated AI exposure remain essential to capital preservation and long-term returns.

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