Private Markets Poised for Transformation as Rates Normalize in 2025, J.P. Morgan Outlook
- Editor
- Jan 26
- 2 min read
What's New
According to J.P. Morgan's latest Alternative Investments report, the normalization of interest rates combined with new growth drivers is reshaping private market opportunities, with an unprecedented 5x-7x increase in power demand expected over the next three to five years due to AI infrastructure needs.
Why It Matters
This transformation creates significant investment opportunities across multiple sectors, from real estate development addressing the U.S. housing shortage to infrastructure supporting the AI revolution, marking a potential shift in how private capital is deployed in 2025.
Big Picture Drivers
Housing Crisis: U.S. faces 2-3 million home shortage, creating structural opportunities for real estate investors
Technology: AI adoption driving unprecedented demand for power infrastructure and data centers
Policy Shift: First Fed rate cut since 2019 occurred in September 2024, signaling new cycle
Market Evolution: Private equity industry growth driving record secondary transaction volumes
Credit Reset: Higher settled interest rates creating opportunities in private credit markets
By The Numbers
25% annual growth in U.S. data center development
63% decline in median growth equity valuations from 2021 peak
9-10% of primary private equity commitments now trade in secondary market
84% projected compound annual growth rate in enterprise AI spending over next five years
Key Trends to Watch
Infrastructure Bottleneck: Power generation and distribution projects becoming critical as AI adoption strains existing capacity.
Real Estate Recovery: Commercial real estate showing early signs of valuation recovery, particularly in industrial and specialized workspaces.
Deal Activity: Lower interest rates and deregulation expected to drive increased private equity dealmaking and exits.
Innovation Funding: Record number of "unicorns" seeking additional financing amid lower valuations creates opportunity for investors.
The Wrap While risks remain present, 2025 marks the beginning of a new era in private markets, characterized by strategic opportunities in housing development, AI infrastructure, and innovation funding. Success will depend on careful risk assessment and partner selection in this evolving landscape.
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