Source: SNBC and Bloomberg — Total return in based currency as at 31 July 2026 · For internal use
Source: SNBC and Bloomberg · Total return in based currency as at 31 July 2026
Source: SNBC and Bloomberg · Total return in based currency as at 31 July 2026
Source: SNBC and Bloomberg · Total return in based currency as at 31 July 2026
Saudi Arabia's budget deficit shrank to a 7-quarter low as conflict driven oil price rises pushed revenue to its highest since 2024. Expenditure rose 11% to SAR 373bn as spending on social support, subsidies and economic diversification were maintained. Overall the data shows that the Kingdom is navigating the geopolitical environment better than initially suggested by the large deficit incurred in Q1 2026.
Saudi Arabia saw an overall contraction of -4.8% YoY in Q2 2026 as oil activities reduced GDP growth by -5.4%. Government activities slowed to 0.9% YoY compared with 1.5% for the previous quarter. However growth in non-oil activities was positive, showing ongoing resilience from diversification efforts despite the conflict that has persisted through most of H1 2026
Markets took a hawkish view of the latest inflation print in the US – Core PCE hit 3.3%, well above the 2% target for the Fed. However the inflation picture is less clear, with Core PCE far higher than its 2019 level while other measures of inflation are less worrying and closer to historic levels. This ties in with comments from Chair Warsh about taking a “broader” view and implies that the outlook for rates should be lower than currently priced in by markets.
All eyes remain on conflict in the Middle East for its impact on oil prices, inflation, energy supplies, bond yields and risk assets. In the meantime we quietly drift closer and closer to the US Mid Term elections in early November which are likely to have a large market impact themselves. Current forecasts have the Democrats winning the House and a coin toss on the Senate – the noise around the election and impact on both domestic and foreign policy is likely to build in the coming months.
Yields on US government bonds have quietly moved higher, with 30 Year US Treasury yields now at levels last seen 20 years ago. This reflects the backdrop of high inflation, strong economic growth and also worries about the path for interest rates with the new communication style from the FOMC. While high yields are not themselves a problem, they do have (generally negative) implications for the outlook for growth and risk asset returns over the medium term.
Historically, Saudi equities have traded on the same forward Price/Earnings multiple as global equities. However this relationship has broken over the past two years as local equities have derated (become cheaper) while global equities have become more expensive. This dynamic suggests that Saudi equities are starting to offer attractive value in relative and absolute terms to long term investors.
Venture Capital (VC) provides financing to privately held companies at an early stage of development, typically through minority equity investments. Target companies are generally seeking to establish product-market fit, commercialize a new technology or scale an emerging business model. Many remain unprofitable and require several successive financing rounds before reaching maturity.
The strategy differs from traditional Private Equity (PE) in several respects: VC investments are generally made without financial leverage, company valuations are less dependent on current cash flows, and investment outcomes are driven primarily by future growth potential. Holding periods commonly range from five to ten years, while fund lives can extend to twelve or thirteen years.
Return distributions differ too: A relatively small number of highly successful companies must generate sufficient gains to offset losses across the remainder of the portfolio. Historically, approximately 60% of individual venture investments have returned less than the original invested capital.
Artificial intelligence (AI) has become the most significant source of growth within global VC. AI companies attracted approximately USD 258.7bn in venture funding in 2025, compared with USD 8.3bn in 2012. AI represented 61% of total global venture investment in 2025, compared with 30% in 2022.
Generative AI has been an important contributor. Funding increased from approximately USD 2.8bn in 2022 to USD 15.3bn in 2023 and USD 35.3nn in 2025. Infrastructure and hosting have attracted particularly large amounts of capital, reaching USD 109.3bn in 2025. This reflects the significant funding requirements associated with computing capacity, data infrastructure, model development and deployment.
The market is also becoming more concentrated. Transactions above USD 100m accounted for approximately 73% of total AI venture investment value in 2025, while deals above USD 1bn represented almost half of total value. The five largest transactions alone accounted for nearly USD 63bn, or approximately one quarter of AI venture investment during the year. At the same time, the underlying opportunity set remains broad. Early-stage investments represented more than 75% of AI venture deal count in 2025, although only around one quarter of investment value.
AI venture investing is no longer funded principally by specialist venture managers and angel investors. The investor base increasingly includes large technology companies, semiconductor manufacturers, cloud providers, sovereign wealth funds, pension funds and other institutional pools of capital.
Corporate and corporate-venture investors participated in approximately 68% of total AI deal value in 2025. Large technology companies invest to secure access to intellectual property, computing demand, distribution relationships, technical talent and emerging applications. Investments may also support broader strategic objectives, including the development of cloud ecosystems, semiconductor demand and standards around model deployment.
This strategic participation can improve the development prospects of portfolio companies by providing commercial validation, technical infrastructure and access to customers. It may also create more credible exit pathways through partnerships or acquisitions.
The growing strategic importance of AI also introduces considerations beyond commercial execution. Access to computing infrastructure, data, models and technology providers can be affected by regulation, export controls and geopolitical policy. AI companies therefore need to manage dependencies across infrastructure providers, jurisdictions and technical architectures. For investors, this places greater importance on operational resilience, intellectual-property ownership, governance and the portability of technology platforms.
The key portfolio rationale for VC is access to companies and technologies that are not represented in public markets. Early-stage AI companies may create substantial value before an IPO or acquisition makes them accessible to conventional equity investors. Public technology markets provide exposure to established platforms and existing revenue pools, but less direct participation in the formation of new business models.
AI VC can therefore serve as a long-term growth and alpha component within a diversified portfolio. Public equities and fixed income remain the primary sources of liquid market exposure and portfolio beta. Traditional PE provides exposure to operational improvement, leverage and ownership change in more mature businesses. VC occupies a different role: financing technological development and commercial formation before earnings and market leadership are established.
This role supports a barbell structure in which liquid public assets provide diversification and liquidity, while a measured allocation to VC provides access to higher-risk, potentially higher-return innovation. The allocation should be sized in recognition of long holding periods, uncertain cash flows and the possibility of substantial capital loss.
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