The Wall Street Journal reports that the private equity (PE) industry was already headed for a significant correction in 2026 due to structural and macroeconomic imbalances, and not solely because of artificial-intelligence-related market fears. Shares of major private-asset managers like Blackstone, KKR, and Apollo have fallen sharply — more than 30 % since early 2025 — as market sentiment shifted and valuation multiples compressed from above 35 times fee earnings down toward around 20 times. This downturn reflects deeper issues in the industry’s fundamentals and liquidity dynamics.
According to the article, one core problem is that private equity’s rebound in 2025 was highly concentrated among mega-deals and record deal values, but distribution of cash back to investors lagged significantly, with average fund distributions near 25-year lows. At the same time, fundraising declined and a backlog of middle-market portfolio companies struggled to find buyers at expected prices. These conditions set up a structural mismatch between capital deployment and return generation that was likely to pressure the sector regardless of external tech sentiments.
The WSJ analysis suggests that much of the market’s recent focus on AI’s potential to undermine software companies — which are an important slice of both public markets and private-credit portfolios — distracted attention from the internal stresses already building in private equity. While concerns about AI disruption may have amplified volatility, the article argues that the sector’s vulnerability stems from low distributions, concentrated exit activity, and subdued fundraising, which were already signaling correction risks before AI fears intensified.
Looking ahead, the piece highlights key “watchpoints” for the industry’s next chapter: whether exit liquidity broadens beyond top-tier megadeals, how private credit refinancing pressures evolve, and whether capital can be converted efficiently into realized returns for investors. If these structural challenges remain unresolved, analysts see the market’s optimism as priced for perfection and the sector’s trajectory tilting toward a broader adjustment — with AI-related narratives only one part of a much larger story.
