Artificial intelligence has become one of the biggest investment stories in the market, helping drive a surge of assets into thematic exchange-traded funds that let retail investors bet on major technology trends. But experts warn that these funds can fall as quickly as they rise. It’s a simple yet important point for investors to keep in mind as tech stocks look more vulnerable, and are leading the market lower in recent days. The Nasdaq has been flirting with a fall below its 50-day moving average for the first time since the April downturn and posted its third-straight losing session on Thursday.
“We have nearly 400 ETFs at ETF Action that we classify as thematic,” Mike Akins, founding partner at research firm ETF Action, said on CNBC’s “ETF Edge” on Monday. “The top performer is up over 150% year to date … there’s several negative 10%,” he said.
Investors are drawn to thematic ETFs covering trends from AI to quantum computing, clean energy and defense technology, but they often overlook the risks, including how volatile the portfolios can be. Because thematic ETFs focus on specific sectors or technologies rather than just tracking broad indexes, they can deliver strong gains when a theme is in favor, but momentum may fade.
ETF Action divides the thematic ETF universe into 12 major categories with many subgroups. Within the disruptive technology category alone, which includes artificial intelligence, flows have been enormous this year. “AI disruptive tech has seen almost $20 billion in flows year to date,” Akins said. Roughly $15 billion of that, he said, has “AI” in the ETF name.
Thematic ETFs do require more research than traditional funds. Case in point: among the 18 ETFs that ETF Action classifies as AI-focused, Akins said there is a performance spread of 60% this year.
“Every time you see a new ETF come to market, it introduces significant tracking error from just investing in the market,” he said.
Through the first nine months of 2025, close to 800 ETFs were launched, besting a record for ETF launches set just last year, according to Reuters. Morningstar data indicates there are now more ETFs (over 4,300 U.S. listed ETFs) than individual stocks traded in the U.S.
Akins described the growth of the ETF market as “overwhelmingly positive” to the investor experience, but added that the growing number of opportunities also implies more risk.
Some of the themes that led the early wave of thematic investing can lose momentum as stand-alone investment stories even as the trends remain fundamental to the technology sector and market, Akins said. ETFs constructed around the themes of cloud computing and next-generation connectivity, for example, have seen billions of dollars in outflows over the past few years as the companies that were top holdings matured and became part of broad-based stock market indexes already held by investors. But he added that the timeline for each trend’s momentum is hard to pin down.
“I think every theme is unique to itself, so some are going to play out longer than others,” Akins said. “That’s part of the story with this space … there’s definitely the idea I’m going to invest in this because I believe it’s going to play out over the next three to seven years.”
Despite the recent jitters in the stock market and tech stocks specifically, it is important to note that the Nasdaq is less than 5% off an all-time record level and has gained close to 250% since its Covid low point. Akins said thematic investing is worthwhile for investors who understand what they are buying and can tolerate short-term volatility.
Seizing moments of opportunity in the market can also be key with thematic strategies. “Themes can run very, very quickly, so you should be taking advantage,” Akins said. Significant gains in a short period of time may lead investors to consider taking some profits. “You still want to have an allocation to the theme, but maybe take some off the top,” he added.
The global private credit market has solidified its role as a fundamental pillar of enterprise finance, expanding rapidly across middle-market lending, asset-backed finance, and infrastructure financing. As non-bank financial institutions capture a larger share of corporate debt origination, global regulatory bodies are increasing oversight to evaluate market transparency and systemic risk interconnections.
Growth Drivers in Direct Lending
Direct lending platforms have continued to attract substantial institutional allocations from pension funds, sovereign wealth entities, and insurance companies seeking attractive risk-adjusted yields. Private debt funds offer corporate borrowers customized financing structures, faster execution timelines, and confidentiality compared to syndicated loan markets.
In 2026, private credit managers are increasingly financing larger corporate transactions, providing multi-billion-dollar credit facilities for buyout deals and corporate restructurings. The flexibility of private debt contracts—featuring unitranche pricing and tailored covenant packages—has made direct lending the preferred capital source for middle-market enterprise sponsors.
Regulatory Scrutiny and Systemic Risk Assessment
The rapid growth of non-bank intermediation has drawn heightened scrutiny from financial regulators in North America and Europe. Because private debt agreements are negotiated privately without public exchange disclosures, central banks are evaluating potential vulnerabilities related to asset valuation consistency and fund liquidity profiles.
Regulatory agencies are introducing guidelines aimed at improving reporting standards for private investment vehicles managing institutional assets. Key focus areas include monitoring leverage ratios within private credit funds and evaluating indirect credit exposures between commercial banking institutions and private debt funds.
Navigating Elevated Refinancing Costs
With benchmark interest rates remaining elevated, private debt borrowers face higher debt service obligations on floating-rate credit facilities. Financial advisory firms report an increase in proactive liability management strategies, including payment-in-kind (PIK) interest options, equity infusions from sponsors, and covenant modifications.
Private credit managers with deep operational capabilities are actively working alongside portfolio companies to optimize working capital and maintain cash flow coverage ratios during periods of higher borrowing costs.
Key Financial Takeaways
1. Mainstream Asset Class: Private credit has expanded beyond niche alternative asset status into a core corporate finance solution.
2. Enhanced Transparency Standards: Regulatory frameworks are evolving toward greater disclosure requirements for private debt managers.
3. Proactive Risk Management: Lenders and sponsors must prioritize debt sustainability and active portfolio monitoring amid high benchmark rates.
The global venture capital (VC) ecosystem is operating under a disciplined investment framework in 2026. Following years of valuation adjustments and shifting liquidity environments, venture capital firms and private equity investors are prioritizing proven unit economics, positive cash flow pathways, and capital efficiency over rapid, unconstrained user acquisition.
The Shift Toward Disciplined Startup Valuations
Early-stage and growth-stage startup valuations have stabilized at sustainable historical averages. Venture capital partners are conducting rigorous due diligence processes before deploying capital, scrutinizing gross margins, customer acquisition costs (CAC), net revenue retention (NRR), and lifetime value (LTV) metrics.
While total capital deployed remains robust, seed and Series A funding rounds are taking longer to finalize. Founders are expected to demonstrate clear product-market fit and defensible intellectual property rather than relying on top-line revenue projections unsupported by strong underlying economics.
M&A Activity and Liquidity Solutions
The market for venture-backed exits is seeing renewed momentum through strategic mergers and acquisitions (M&A) and secondary market liquidity facilities. Established corporate enterprises are acquiring high-performing technology startups to integrate proprietary artificial intelligence models and specialized software solutions into their product ecosystems.
Simultaneously, secondary market transactions have become an essential liquidity mechanism for early employees and institutional investors. Specialized secondary funds are purchasing pre-IPO shares at discounted valuations, providing liquidity opportunities while companies remain private for longer durations.
Sector Allocation: Deep Tech, Clean Energy, and Enterprise Automation
Venture capital investment is heavily concentrated in deep technology and capital-intensive engineering sectors. High-growth investment themes include:
– Next-Generation Semiconductors: Hardware startups designing specialized AI processors and energy-efficient microchip architectures.
– Clean Technology: Battery chemistry innovations, carbon capture solutions, and grid-scale energy storage startups.
– Enterprise Process Automation: Software platforms that automate complex workflows in healthcare, financial services, and industrial logistics.
Key Insights for Entrepreneurs and Investors
1. Prioritize Capital Efficiency: Startups focused on achieving operational profitability receive higher valuation premiums from institutional investors.
2. Strategic Exit Planning: Corporate M&A is serving as a primary exit route for venture-backed startups navigating prolonged IPO windows.
3. Focus on High-Moat Technologies: Deep tech and proprietary software architectures are securing the majority of growth-stage capital allocations.
The infrastructure supporting global commerce is undergoing a major technological upgrade as real-time digital payment rails, cross-border settlement solutions, and Central Bank Digital Currency (CBDC) pilot programs achieve widespread commercial adoption. Financial institutions and fintech developers are reimagining payment processing to eliminate friction, lower transaction fees, and accelerate settlement speed.
Transforming Cross-Border Settlement Infrastructure
For decades, international corporate payments relied on legacy correspondent banking networks characterized by multi-day settlement delays, opaque fee structures, and high foreign exchange markups. In 2026, modern cross-border payment networks are enabling near-instantaneous settlement for international trade transactions.
Financial technology platforms are leveraging distributed ledger technology and real-time gross settlement (RTGS) interconnections to settle transactions in seconds. International trade participants benefit from reduced working capital requirements and minimized foreign exchange volatility risks during cross-border transfers.
Commercial Expansion of Central Bank Digital Currencies
Central banks representing major global economies are advancing CBDC initiatives from research phases into active commercial deployment. Wholesale CBDCs—designed specifically for interbank settlement and financial institution clearing—are demonstrating substantial efficiency gains in domestic and international transactions.
At the retail level, several nations have introduced public digital currency options alongside existing commercial banking networks. These sovereign digital payment channels aim to expand financial inclusion, lower consumer transaction fees, and improve the efficiency of government-to-citizen financial disbursements.
Open Banking and Embedded Finance Ecosystems
Alongside settlement infrastructure upgrades, open banking regulations and embedded finance frameworks are transforming merchant-consumer interactions. Commercial businesses across retail, travel, and business-to-business (B2B) services are integrating seamless payment APIs directly into their customer software interfaces.
Through open banking frameworks, consumers can initiate secure bank-to-bank payments without relying on traditional credit card networks, significantly reducing merchant processing fees. Integrated Buy-Now-Pay-Later (BNPL) options and point-of-sale credit facilities continue to expand, driving higher conversion rates for digital commerce platforms.
Strategic Financial Takeaways
1. Treasury Optimization: Corporate treasurers should leverage instant cross-border payment platforms to minimize liquidity buffers and foreign exchange exposure.
2. CBDC Integration: Financial institutions must prepare internal core banking systems to interface with emerging wholesale CBDC payment rails.
3. Merchant Fee Reduction: Enterprise merchants can lower payment processing overhead by adopting account-to-account (A2A) open banking checkout solutions.
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