Private Markets Sector

The biggest tech companies—Microsoft, Amazon, Alphabet, Meta, Oracle, and CoreWeave—are spending enormous amounts of money on artificial intelligence equipment and infrastructure, and this is raising red flags about their financial health. Credit rating agency Moody's warned that these six companies will need to borrow more money and sell stock to pay for this AI buildout in 2026 and 2027, which is unusual for companies known for having very strong balance sheets. Bond investors are already nervous: they're demanding higher interest rates to lend to Google, Amazon, and Meta, and Oracle's credit risk has become a major concern. The real worry is that these companies are spending so much on AI equipment that their free cash flow is shrinking—Alphabet even reported negative cash flow for a quarter, something it hasn't done since going public over 20 years ago. When Alphabet announced bigger AI spending plans, its stock dropped, and Meta and Microsoft fell too, as investors realized these tech giants are now capital-intensive businesses rather than money-printing machines. The higher costs are also showing up in power markets, where data centers are driving up electricity prices and forcing regular customers to pay higher bills. Treasury yields and stock market volatility are rising as bond investors expect a major shift: tech companies will no longer generate huge cash reserves and buy back stock, but instead will be constrained by capital needs and refinancing risk. The key question now is whether Moody's will downgrade these companies' credit ratings and whether their cost of borrowing money will keep rising.

Shein, a Chinese fast-fashion retailer, swung from a profit to a $99 million loss in the first quarter, even though its sales grew slightly to $9.05 billion. The loss was largely caused by a $328 million accounting write-down on company shares ahead of its planned public listing. More importantly, a new U.S. tariff policy introduced in May 2025 removed a tax break that had allowed Shein to ship packages under $800 to America without import fees. Now those same packages face tariffs ranging from 10% to 87.5%, which cuts deeply into Shein's profit margins and makes its products more expensive for American customers—the company's biggest market. Even though Shein kept its business running at full speed, sales growth nearly stopped, a sign that U.S. shoppers may resist higher prices or switch to competitors rather than pay the tariff costs passed on to them. Shein has failed previous attempts to go public in New York and London, and is now trying to list in Hong Kong with help from major banks like Goldman Sachs and Morgan Stanley, though it has not yet announced the size or timing of the offering. The filing shows that Shein's core business model—buying cheaply in China and shipping quickly to the U.S. with low duties—has been damaged by policy change, and investors should watch closely whether the company can survive as a public company when its main cost advantage has disappeared.

Kevin Warsh became Federal Reserve chair with a plan to say less and let data speak for itself—a shift from his predecessor's frequent public comments. But the opposite has happened. Rising prices for oil, computer chips, and other supplies, combined with Warsh's silence, have made investors extremely uncertain about what the Fed will do next. This uncertainty has pushed up the cost of borrowing: 10-year Treasury bonds now yield 4.71% (the highest since January 2025), and longer-term real yields hit 2.98% (the highest since 2008). The real problem is that traders are now guessing the Fed might keep interest rates high for much longer than expected, not that rates will climb further. A major Fed meeting starts Tuesday and at least two officials are expected to push for higher rates—breaking from June's unified stance. The odds of a rate hike have jumped from 12.8% to 34.2% in just one week. Warsh's strategy of communicating less was supposed to reduce shocks and surprises, but instead it's created the opposite: investors are reading every signal as a potential warning, and one piece of bad news (like Middle East tensions) can swing expectations dramatically. The approach that worked for the previous Fed leader no longer works at all, leaving investors scrambling to adjust their portfolios in real time. Watch for the Fed's next official forecast and any signals about how much rising oil prices will push up overall inflation—sustained volatility like this could force major shifts in how investors position their investments.