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| The Daily Pitch |
| PE, VC and M&A |
| Your edge on global private capital markets |
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| Good morning. Today's Daily Pitch features a look at Calstrs' pursuit of sustainable credit assets, a healthtech dealmaking rebound and DigitalBridge's $12 billion contribution to a snapback in infrastructure funds. |
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| 5 charts to help decipher the 'AI bubble' debate |
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By Rosie Bradbury, Senior VC Reporter
Nvidia's stock price spiked as much as 6% in after-hours trading on Wednesday, following the semiconductor giant's strong Q3 earnings, which tempered some concerns about an AI bubble.
The company reported better-than-expected quarterly revenue of $57 billion, up 65% year-over-year, a positive signal that is likely to have a trickle-down effect for the tech-heavy Nasdaq.
Nvidia's stock price has been one of the bellwethers of the AI boom, or AI bubble, depending on who you ask. Its data center segment earned $51.2 billion in sales over the quarter, fed by seemingly insatiable demand from the tech sector.
But even as Nvidia beats expectations, the chorus of fund managers voicing concerns that hyperscalers are over-indexing on AI continues to grow.
Bank of America's latest survey of fund managers found that the majority believe companies are over-investing and should improve their balance sheets. Those fears have likely been magnified by the scale of investment in AI data centers, costly infrastructure that depreciates over time.
Consider the magnitude of capital expenditures, which for Big Tech's hyperscalers has more than tripled since the end of 2023. |
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As the AI buildout expands beyond what tech giants can finance from their own pocketbooks, debt and PE players have increased their own investments in the space.
Our series of charts visualizes this trend. |
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| A message from KEY Investment Partners |
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| How fundamentals are shaping the future of cannabis investing |
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The U.S. cannabis industry is a study in contrasts. Mature Western markets have navigated a classic down-cycle marked by price compression, inventory imbalances, and uneven enforcement, while newer adult-use states continue to deliver strong first-year ramps and rising per-store productivity. This divergence has accelerated a necessary reset in operating models. The operators gaining share are tightening pricing, simplifying portfolios, and prioritizing cash conversion and return on invested capital over vanity growth metrics. Meanwhile, federal momentum is reshaping the broader THC landscape. The emerging hemp-derived THC ban removes a structurally advantaged competitor and signals that Washington is moving toward a unified, “one-plant” regulatory framework as rescheduling advances. KEY’s latest white paper highlights where fundamentals, governance, and disciplined capital allocation are creating real value across the next wave of cannabis investing.
Click to download today |
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• VC dealmaking in the healthtech market rebounded in Q3 as investors doubled down on AI-enabled platform providers, according to our latest Emerging Tech Research. Read the report
• Digital infrastructure investor DigitalBridge has raised nearly $12 billion in fresh capital for its third flagship fund, an over 40% step-up from a predecessor vehicle. Find out more
• PE investment in the European legal services industry has hit a record €1.9 billion (about $2.2 billion) as investors target niche, tech-ready firms in a fragmented market. Read more |
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| Calstrs is in the market for sustainable credit assets |
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| California Capitol (PictureLake/Getty Images) |
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By Jessica Hamlin, Senior Funds Columnist
The California State Teachers' Retirement System is in the market for mature, income-generating assets to speed up the return of cash from its sustainable PE portfolio, associate portfolio manager Joshua Kim said onstage at SuperReturn Private Credit.
"Because we're a young portfolio, we're very much in the J-curve and in need of both [net asset value] and yield," said Kim, who leads private credit investing for the pension fund's Sustainable Investment and Stewardship Strategies, a $1.3 billion PE portfolio focused on ESG-positive businesses.
Earlier this year, Calstrs made a commitment to a large asset manager through a separately managed account and bought over $100 million in individual clean energy loans off its insurance balance sheet.
Asset managers often use capital from their insurance affiliates to lend to developers of clean energy projects, which have similarly long time horizons.
Kim's team was tasked with growing NAV and yield-generating investments by around $2 billion over the next seven months.
The new strategy is a means of diversifying the return profile of the $380 billion public pension's SISS portfolio. The pension is putting out as much, or more, in fees than it is receiving in distributions, a typical occurrence in the early days of a PE investment.
At the end of FY 2025, 14 of the 28 vehicles the program has committed to reported an unrealized gain, according to an internal report.
In May, Calstrs overhauled its SISS portfolio, shifting entirely into private markets. The public equity portion of the portfolio was moved under the purview of Calstrs' overall global equity portfolio, in an effort to focus the SISS team exclusively on clean energy investment opportunities in the private markets.
This investment push comes during a period of political hostility toward state entities looking to invest in sustainable and renewable assets. While Calstrs hasn't deviated from its sustainable investment thesis, Kim said it has turned to more defensive asset classes, like private credit as opposed to VC.
"On the equity side, we have a historically large venture book for climate early-stage investments," Kim said. "We are doing more sustainable and climate late-stage buyouts that are mature businesses and cash flowing." |
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Smart reads that caught our eye.
• The Trump administration wants to sue states that pass their own AI regulation laws. A newly drafted executive order seeks to put AI regulation firmly in the federal government's hands and create a task force to challenge state laws. [The Information]
• AI partnerships are everywhere, and they could have a big impact on drug discovery. Eli Lilly and Johnson & Johnson have teamed with Nvidia to speed up the science behind the pharmaceutical industry. [Fortune]
• The US dollar is weakening, and it's driving international investors away. American assets are growing less attractive, Temasek chief executive Dilhan Pillay says. [The Financial Times] |
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