Q3’26 Pulse of Private Equity

PE investment in the US keeps on steady course as PE investors embrace value creation model

Within the US, PE investment followed a steady course, with $793.4 billion invested across 6,223 deals by the end of Q3’26; this put investment just shy of the pace needed to match 2025’s $1.1 trillion despite a much slower pace of deals. On a rolling twelve-month basis, PE investment also fell — from $1.2 trillion to $1.1 trillion — although it remained strong compared to historical norms.

The resilient investment value demonstrates that financing continues to be available for some deals. This was evident in the number of large megadeals completed or announced in Q3’26, including the buyout of the Seattle Seahawks for $9.6 billion, the take private of Baldwin Insurance Group for $7.7 billion, and the secondary buyout of Aypa Power for $7 billion. However, given economic and financing uncertainties and the significant backlog in exits, the PE market has remained bifurcated, with a continued flight to quality. Sponsors have continued to prioritize high-quality assets and larger, more resilient businesses with predictable cash flows. Meanwhile, activity across portions of the middle and lower-middle market has remained more subdued.

Liquidity becoming the central challenge for the PE ecosystem in the US

For the PE market in the US, capital availability hasn’t been the critical challenge in 2026, but rather the ability to recycle that capital. The constrained exit environment and the resulting extension of holding periods has reduced distributions to LPs, limiting their ability to make new commitments. This has created a real pressure within the market for alternative liquidity solutions.

While continuation vehicles and secondaries have been used in the past, they have increasingly become a core component of the PE market, in combination with traditional exits and other liquidity solutions.

Interest in AI rapidly moving beyond the technology space; energy sector sees benefit

AI continued to garner significant attention from PE investors in Q3’26, both as an opportunity and as a source of disruption. Some looked to AI as a means to enhance the value of existing businesses, while others continued to focus on assessing AI’s impact on long-held investment assumptions, the competitive advantages of incumbent businesses, and their ability to value future earnings.

But AI also demonstrably moved beyond being a technology investment theme. Skyrocketing demand for AI capacity in the US has spurred an enormous buildout in physical infrastructure and the surrounding development ecosystem, including data centers, power generation and transmission, electrical equipment, water management solutions, engineering and construction, and more. That’s why PE investors have increasingly looked at AI from three different angles: investing in AI businesses, investing in the infrastructure that enables AI growth, and using AI as a lever for transforming the performance for their portfolio companies.

The energy sector continued to be a major beneficiary of the increasing focus on AI infrastructure; at the end of Q3’26, investment in energy and natural resources was at $138.1 billion, already an eight-year high and well within reach of setting a new investment record.

Trends to watch for in Q4’26

Heading into Q4’26 and into 2027, there is some concern around the medium-term cost of capital given the possibility of further interest rate increases which could affect investor confidence and dealmaking. The exit environment will also be important to watch, given the intensifying pressure on sponsors to provide LPs with liquidity.
AI is expected to remain a focus for PE investors for the foreseeable future. On the tech side, driving measurable ROI will likely be a priority; for example, by applying AI to portfolio company functional activities like finance, customer service, and procurement. PE investment in the AI ecosystem could grow significantly, with the intersection of AI technology energy, and infrastructure poised to become one of the most significant PE investment themes over the next few years.

The theme for private equity heading into Q4’26 is adaptation. The industry has already adapted to higher financing costs and longer holding periods. Now it has to adapt to uncertainty around rates, rapidly accelerating AI disruption, and an LP base that increasingly wants distributions. The firms that can generate liquidity while using AI and operational transformation to create real earnings growth will be well positioned for the next phase of the cycle.

Donald Zambarano

Americas Private Capital Leader

KPMG in the US