The Federal Reserve meets this week with the S&P 500 sitting just shy of all-time highs. Consensus is for a 25 bps cut, with some probability of 50 bps. Historically, such moves have been powerful tailwinds:
JPMorgan: Since 1958, cuts made within 1% of all-time highs delivered +15% average returns over the next year.
Carson Research: In 20 of 20 cases since 1980, the S&P was higher 12 months later, averaging +13.9%.
Adam Kobeissi: Since 1980, every time the Fed cut near record highs, new records followed within a year.
The near-term picture is less reliable, with equities down roughly half the time in the first month. But the historical lesson is clear: short-term volatility, long-term upside.
Valuations, Liquidity, and Capital Flows
Equity valuations remain elevated. The Shiller CAPE ratio near 40 is well above average, leaving limited room for pure multiple expansion. Still, lower rates support valuations and activity across credit markets, M&A, and IPOs.
Rate relief matters most in refinancing and liquidity:
Corporate debt: Roughly $6.3T in maturities through 2029.
Commercial real estate: $1.5T+ due by 2026.
Mortgages: 30-year rates near 6.35% could unlock $200â300B of refinancing.
Current Venture Market Snapshot
Venture capital has entered a period of recalibration after the exuberance of 2021, but activity remains significant:
Global VC investment (2024): ~$270B across more than 30,000 companies.
U.S. VC fundraising (2024): Over $70B raised, leaving substantial dry powder.
Deal activity: Seed and earlyâstage rounds still dominate in volume, while lateâstage deals are more concentrated in AI, defense, and vertical SaaS.
Leading Companies and Valuations (2025 overview)
AI now soaks up ~half of global VC dollars. In Q2â25, funding to private AI companies reached ~$47.3B across ~1.4k deals, marking the third straight quarter above $40B. The quarter was highly concentrated: the top 10 rounds captured ~60% of AI dollars. With global VC at ~$91B in Q2, AI absorbed roughly half of total funding.
Capital concentration is extreme. Across venture, dollars keep tilting to the biggest checks: Q2â25 was the third consecutive quarter >$90B even as deal counts fell to multi-year lows; analysts note a clear shift toward fewer, larger financings.
Unicorn creation has re-accelerated. June 2025 alone saw 20 new unicornsâthe most in three years. Year-to-date, ~77 new unicorns have been added, and the global unicorn roster is ~1,600 companies (methodologies vary by provider). The U.S. leads new additions, with China and India also active.
Valuations: late-stage up, seed softer. PitchBook data show median pre-money valuations rose across stages, with venture-growth jumping sharply year-over-year, while pre-seed/seed medians fell ~20% versus 2024. Big checks remain pivotal: $100M+ deals represented ~41% of totals at the start of 2025 (down from 49% in 2024 but still elevated).
Secondaries are the pressure valveâand pricing is bifurcated. Secondary volumes surged to ~$102B in H1â25, on pace for another record year (~$175â200B). Pricing has narrowed meaningfully: companies that raised recent primary rounds are trading near par (â0â8.5% median discount), while pandemic-era names still clear at sizable markdowns; across the market, a median ~-27% discount is a reasonable guidepost, improved from ~-39% a year ago.
What to take away: 2025âs âleadersâ are less about individual names and more about where capital is poolingâAI, mega-rounds, and late-stage vehicles. Valuation strength is uneven but improving at growth stage, unicorn formation has restarted, and the secondary market is providing real liquidity with tighter discountsâespecially for companies with fresh marks.
AI Infrastructure: The New Internet
The real story is the buildâout of AI infrastructure. The Magnificent 7 are investing more than $100B per quarter in CapEx:
Microsoft: $80B+ annually.
Amazon: $100B+ projected for 2025.
Alphabet: $75â85B guidance.
Meta: $66â72B spend.
In total, 2025 AI/dataâcenter CapEx will surpass $350â400B, creating the backbone for AI training, inference, power, and connectivity. This spend is structural, not cyclicalâit will happen regardless of Fed policy.
Beyond Chatbots: Unlocking Enterprise Value
ChatGPT introduced AI to the public, but the larger opportunity is in enterprise adoption. Corporations sit on trillions of dollars in latent value locked in proprietary datasets. Unlocking it requires:
Guardrails: Governance, compliance, and safety frameworks.
Foundations: Infrastructure for training, inference, and secure data integration.
Integrations: Embedding AI into workflows, leveraging proprietary datasets to create defensible moats.
This is far more complex than the SaaS wave of the last decade, which delivered dashboards and analytics. AI involves piping, interconnectivity, and massive data engineering. The costsâhundreds of billions, if not trillionsâare difficult for even seasoned investors to fully quantify, but they are necessary to realize AIâs potential.
Implications for Venture Capital
Valuations: Some are frothy, but multiple support from public comps and easing rates will help stabilize the market.
Liquidity: IPOs and M&A will gradually reopen, while secondaries provide interim exits.
Capital flows: LPs will reallocate from cash and credit into venture, chasing innovation.
Vertical AI: Startups will dominate industryâspecific applications, from healthcare to finance to defense, building on hyperscale infrastructure.
Winners and losers: There will be failures, but history shows that venture returns are defined by outliers. Microsoft, Amazon, Alphabet, and Metaâonce risky startupsâwere all VCâbacked. Outliers will again outweigh losses.
The Broader Thesis
We are in the early innings of building the new internet. Rate cuts support capital markets, but the AI superâcycle is what drives the transformation. This requires building the guardrails, the foundations, and the integrations that allow enterprises to adopt AI at scale.
Yes, valuations are high, and yes, there is some frenzy. But this is what it takes to finance foundational infrastructure. The money on the sidelinesâhundreds of billions in dry powderâwill flow. Winners will emerge, losers will be absorbed, and the outcome will be a new layer of the economy built on AI.
Venture capital is in the business of exits! And in this cycle, the exits will be defined by the companies that build and harness the infrastructure of intelligence itself.
startup insights, stories, and vibes sent to your inbox every Tuesday
mail.bigdeskenergy.com/subscribe?_bhba=a912eba6-7a35-4c1b-a9cb-9721b5c72389
The future of AI customer service is at Pioneer
Pioneer is a summit for AI customer service leaders to come together and discuss the trends and trajectory of AI and customer service. Youâll hear from innovators at Anthropic, Toast, Rocket Money, Boston Consulting Group, and moreâplus a special guest keynote delivered by Gary Vaynerchuk.
Click to Share
Terms of Service