AI Is the Real Deal for Investors—if You Understand It. Our Roundtable Is Here to Help.
21 min
It has been less than a year since OpenAI changed the world overnight with the release of ChatGPT. Since its November launch, the chatbot’s display of generative artificial-intelligence software has triggered a reshuffling of investment priorities in Silicon Valley, on Sand Hill Road, and on Wall Street. Almost every company—and this goes well beyond tech—has prioritised the development and adoption of generative AI.
The notion of artificial intelligence, or computers that can “think,” has been around since the Cold War. What makes generative AI so fresh is the ability to answer questions posed as simple natural-language requests—and respond with rich, creative content in the form of text, music, video, images, or even poetry.
Generative AI promises to democratise the power of large data sets, making it dramatically easier for people and businesses to find information, create content, and analyse data. And yet, AI isn’t magic, despite all appearances to the contrary. The technology is creating widespread worries about the misappropriation of personal information, the misuse of copyright-protected content, and the creation of false and misleading data. Some people even see AI as an existential risk to the future of life on Earth—a recent Time magazine cover asked whether AI will eventually lead to “The End of Humanity.”
To consider the outlook for AI, how it works, where the risks lie, and who will lead the way, Barron’s assembled a panel of five experts who approach AI from divergent angles. Our AI roundtable panelists included Dario Gill, director of research at IBM, which has spent decades working on artificial-intelligence software and hardware; Irene Solaiman, policy director at Hugging Face, a marketplace for AI models, data sets, and software; Cathy Gao, a partner at Sapphire Ventures, which has committed to investing at least $1 billion in AI-focused start-ups; Mark Moerdler, a software analyst at Bernstein Research who completed a doctorate in computer science and artificial intelligence in 1990; and Brook Dane, a portfolio manager at Goldman Sachs who lately has revamped his investment strategy to focus on AI stock plays.
The conversation took place in early August on Zoom. An edited version follows.
Barron’s:Let’s start by framing just how big a deal generative AI is. The biggest thing since the Web? The iPhone? Electricity? The wheel? Dario, IBM has been working on AI for decades—it has been 12 years since Watson’s famous appearance on Jeopardy. So, what has changed?
Dario Gil: IBM has actually been involved in AI since 1956, the year of a famous conference we co-sponsored called the Dartmouth Summer Project on Artificial Intelligence. Arthur Samuel, an IBM computer scientist who did pioneering work in AI, coined the term “machine learning” in 1959. So, yes, the idea of AI has been around for a long, long time. The past decade or so has been the era of deep learning and neural networks, where we discovered that if you could label enough data, you could achieve superhuman levels of accuracy.
But that turned out to be extremely expensive.
Gil: Right. There were only a handful of institutions that could actually amass enough labeled data—say, hand-tagged photographs—to generate good value and a reasonable return on investment. The fundamental reason why there’s so much excitement around AI now is this transition toward “self-supervision.”
Explain that for us.
Gil: The advent of foundational models—the basis of generative AI—allows us to take large amounts of unlabelled data and create very powerful representations of language, code, chemistry, and materials, or even images. And as a consequence of that, once you train these models, the downstream use cases allow you to fine-tune or prompt or engineer them with a fraction of the energy, effort, and resources that historically would have been required to create those use cases. It’s what is unlocking this productivity moment in AI.
Bill Gates has said that ChatGPT was the most impressive technology he’d experienced since he first saw a graphical user interface in 1980—that it was as fundamental as the creation of the microprocessor, the PC, the internet, or the mobile phone. Nvidia [ticker: NVDA] CEO Jensun Huang says AI is having an iPhone moment. Cathy, Sapphire just announced a commitment to invest $1 billion in AI start-ups. Does this moment really feel that big? What is the opportunity that Sapphire sees?
Cathy Gao: In AI, we invest end to end, in everything from the plumbing to how data move through the stack to the application layer. With AI, we are definitely seeing a similar arc to other platform shifts. We believe that this is a significant platform shift. We’re in the early stages of that explosion, headed ultimately to ubiquity.
But why now? What makes this the moment?
Gao: It’s being driven by many things. One of the keys is that the consumer imagination has been captured. ChatGPT reached 100 million users in a groundbreaking two months. You can see a future where AI becomes so ubiquitous that companies no longer market themselves as “AI companies” because they’ve all become AI companies. In part, this is about ease of use, the ability to leverage foundational models via API [application program interface, a protocol for software programs to connect], so you’re not having to rebuild them every time. You’re not having to build these LLMs [large language models] from scratch. And the other element is the end-user experience, which will take us to the next phase of ubiquity.
Mark, you earned a doctorate in artificial intelligence a few decades back. What’s different now?
Mark Moerdler: It feels like 100 years ago. We were learning how to do very basic things with AI. Since then, we’ve seen massive improvements in technology. Underlying computing capabilities have massively expanded. You couldn’t run the types of learning models that you can do today, because the computers couldn’t deal with that capacity. We were using far smaller computers, with less memory, storage, and bandwidth.
And I would agree with Cathy that this is all about conversational AI. Until now, it’s all been under the hood. Now, you can hold a conversation with software in the same way you might talk to a person, and the system will respond to you, maybe with a report, or by creating an image, or simply with an ongoing conversation.
This was all sparked by ChatGPT and a consumer experience, natural-language chat. Will consumers—and advertising—ultimately be the revenue source for this business, or will it be more about a growing market for enterprise applications?
Moerdler: Some of the largest companies in the world—including Microsoft [MSFT] and Alphabet [GOOGL]—are involved in both consumer and enterprise AI software. There will be disruption on the consumer side, in terms of where you search for information. But arguably, the bigger value creation is going to be unlocking the data within enterprises, to leverage that data to drive efficiencies within organizations, make leaps of intuition in coming up with answers, or make decisions faster, or in some cases reach conclusions you couldn’t previously reach because you didn’t have easy access to the data.
Gao: What’s happening in Gen AI on the consumer side and the B2B—or business-to-business—side are highly symbiotic. They’re feeding into each other. There is a huge opportunity for enterprise software companies today, and that’s why you’re seeing a lot of investment. Gen AI is the ultimate double-edged sword. On the one hand, it represents tremendous potential to be transformative, and the key to future growth. But it can also create new competition that could be hard to beat, in some cases creating existential risk for the incumbents.
Gen AI can increase the addressable market for many companies and industries. Take a core system of record like ERP, or electronic medical records, or a payroll service like ADP, which stores a lot of valuable data. Often, the existing customer interface layer limits many potential use cases. Gen AI can be used to reimagine and reinvent workflows, and to open up the addressable markets in a significant way.
Irene Solaiman: It’s important to step back and think about what systems we are discussing, because there are so many language models out there. When we’re talking about generative AI, the way you would do research on or adapt them to a given application is going to different by modality. There’s a lot of chatter around chatbots, but there’s a lot happening with imagery and audio and even video that isn’t the subject of as much research or literature as there is for language. There’s so much opportunity.
Remember, also, that these base systems often aren’t developed for a specific use case. They may be optimized for tasks like code generation. But generally, they can be applied to many different fields, which is exciting. There are also risks; we need to figure out what safeguards we need.
Irene, I was visiting the Hugging Face website and was struck by the number of models and data sets your site offers. This isn’t just about Microsoft, Meta Platforms [META], or Alphabet.
Solaiman: We have almost 300,000 different models, over 100,000 applications, and more than 50,000 data sets. Not all of the models are focused on natural-language processing. There are models for more-specific fields, like biomedical AI. There’s a lot of discussion around advanced models like OpenAI’s GPT4. But that’s not what everyone is going to use. Large language models are computationally expensive to run. At Hugging Face, we’re seeing a lot of researchers use much smaller models that are cheaper to adapt and fine-tune.
That raises questions about where the value lies—and who the winners will be. Brook, it’s your job to identify AI winners. Do you see the value going to those that have the data, or the application vendors, or someone else? How do you approach that when looking for AI-related companies in which to invest?
Brook Dane: It’s incredibly early in this journey, especially when you look beyond the providers of semiconductor and networking infrastructure, like Nvidia, which has a near-monopoly on graphics processors used to train models. When you think about the software layer, it is TBD—to be determined—on some of these things. Early on, though, it appears that this idea that data have gravity and will be the source of competitive advantage appears to be true. We’re focused on that.
Beyond infrastructure, we are spending the bulk of our time on data, and which players can drive value and capture value over time. The other issue is that, unlike some other big tech transitions of the past, you don’t have to rewrite the entire software stack. In other words, I wonder whether there will be as much disruption to the leaders in the marketplace as in previous shifts. The shift to mobile and the internet created a whole new class of companies that rose up and displaced the incumbents. I wonder if this time the incumbents will actually reinforce their power, because they already have the data.
Moerdler: I agree. The speed of building models is very high. We’re talking months, not years. It’s just a matter of money. Differentiation is going to create sustainable value where you can create something trained on unique data and capabilities—and where the uniqueness is sustainable. In traditional software, the moat was created because it took so much time to create the technology. For a competitor to catch up took a really long time. Here, everyone is building capabilities. If you can’t differentiate, you aren’t going to be able to monetise it.
We’ve talked a lot about models and data sets. What differentiates the two?
Moerdler: When people talk about models, there are several types. There are generic models trained on very large data sets, for the purposes of answering more generalised queries, like ChatGPT and Bing. There are specialised models for very specific problems—say, in chemistry or materials sciences. And there’s an enormous amount of data sitting inside companies. Companies may choose to use a more generic model and ground it with their corporate data.
Gao: Let me give you an example to illustrate what Mark is saying. One of our portfolio companies, MoveWorks, is an AI chatbot that cuts across enterprise applications like information technology, service management, and human resources, and adds company-specific data. If a customer has a conference room called Taylor Swift, for instance, and you ask a public chatbot if Taylor Swift is available at 9 a.m., the model is going to get confused. But if the chatbot is infused with information about the company’s conference-room names, it can produce an accurate answer.
Gil: The pattern of consumption is essential for how AI is used in the real world. So, you start with your base model, and then you load your records of, say, past customer exchanges and service documents around that—you’re fine-tuning the model so it incorporates your local data. Productivity gains are linked to that idea. Once you have base models for solving IT problems, all of a sudden your internal team can do 50 or 100 projects a year. In the era of just deep learning, having to label everything by hand, where every model was custom, you could do just four or five projects.
Solaiman: I always use the term “system” instead of model. But I’m so glad to hear all this talk about data. And when we’re thinking about system life cycles, there’s a lot of work, as Dario was saying, that goes into data collation, curation, and governance. An organization is going to train on an open data set that may have been collated and curated by somebody else.
This brings us to the question of why this is all happening now. We have much more impressive systems than we did just a few years ago. We have better techniques and better infrastructure, including more efficient computing, more computing, and more data. And we have better safety research, better fine-tuning of the information, and better accessibility, not just via APIs, but with models that are more compute-efficient, that can run even on local hardware.
In an interview with Barron’s after the latest Palantir [PLTR] earnings call, CEO Alex Karp said that this technological revolution favors the incumbents—unlike previous tech disruption that advantaged new companies. He thinks the winners will be familiar players, not new ones. Brook, you already touched on this idea. Cathy, as an investor in new companies, do you find that discouraging?
Gao: That’s the No. 1 question. Look, the incumbents have scale and capital. They have the computing resources, which are scarce these days. And they have tremendous data. They have key ingredients to be very, very successful around Gen AI. The incumbents are certainly going to be playing an outsize role in this era. I’m talking about hyperscalers, such as Google, Amazon.com [AMZN], Microsoft, and others, that are aggressively investing in this technology. On its latest call, Microsoft mentioned AI 59 times.
That’s even more times than the 53 times that Microsoft said the word “cloud.”
Gao: For an investor like me who is looking for the disrupters, the biggest question—and the biggest risk—when you look at most Gen AI application software companies is, what if Microsoft, or Google, or Adobe [ADBE] does this in the future? Is this new company going to be wiped out? The differentiators will be the same as with any software-as-a-service application. It will be about customer and product experience being deeply embedded into workflows, and that data moat that we talked about earlier.
A lot of the founders I’ve been speaking to over the past couple of months, when asked about Gen AI suddenly blowing up in the past two quarters, always say the same thing. They say, on the one hand, that it has been amazing for the market, with inbound queries just flooding in. But at the same time, it has lowered the barrier to entry for new players. Plus, the hyperscalers like Amazon, Meta, Alphabet, and Microsoft are now paying more attention to this opportunity.
Dane: I agree with everything Cathy just said. In every transition, new companies emerge, and some become large. But there really is a power of incumbency here, because of the need for data, and because you can develop these tools and techniques relatively quickly, the way Microsoft has announced AI software across its software stack. The incumbents do have a huge advantage. It’s going to come down to leadership and execution, as it always does, and especially in a time like this when the market has been through a period in which it has been focused on margin expansion. There’s a level of investment required to do this, and some of the incumbents are going to hesitate to spend what they need to spend to be relevant players. But the advantage starts with incumbency on this transition.
Mark, do you agree?
Moerdler: Yes, but let me add to that. AI is a data-driven learning experience. The more you have access to data, theoretically, the better your product becomes. And therefore, the quicker you can get to market, the more you can absorb in terms of information, the broader the reach—it has somewhat of a self-fulfilling prophecy effect. But as Brook rightly said, it comes down to execution, and there are many companies now that are giving lip service to generative AI rather than the significant focus and investment that may be necessary to create a moated solution.
Dane: As I think about my models and forecasts across the software ecosystem, the ones that execute well in this are going to see a lower churn rate, higher customer retention, and higher upsell and cross-sell into their installed base. You’re starting to see companies for which your degree of confidence in the two-, three-, four-year-out free-cash-flow outlook is structurally higher now. All of this is still super-early, and I’m not sure that it impacts the next 12 months’ cash flows in any material way. But as I think beyond that horizon, I get increased confidence in their ability to be bigger, stronger, faster businesses.
It seems clear that we’re not talking just about the importance of data held by tech companies. Legacy companies in areas such as financial services, pharmaceuticals, and materials have tons of data, too.
Gil: Understanding the moment as a shift in data representation is really important. It may sound a little bit abstract, but it is profound. When the relational database was invented, there was a form of data representation that we’re all accustomed to, of rows and columns. Databases were invented to do that well, transaction processing systems do that well, and it had huge implications for payroll and finance and accounting. Now, imagine instead a graphical data representation. It turns out that graphical representation is essential to do things like search, social media, and so on. You’re going to take the data that you have today, relational databases, graphs, and so on, and map them to this new way to encode information.
So, who gets to be a value creator? Enterprises and governments the world over have the most data. It looks at the moment like all of this is concentrated in about five American companies, but that isn’t how the future is going to evolve, because contrary to popular opinion, and thanks to open-source initiatives, the democratisation of AI is perhaps the most important force at present. Understanding how much simpler it will become to take advantage of these large language models, to adapt them, to create them, will turn out to be the defining trend as it gets internationalised and democratised, and value creation gets more distributed.
Solaiman: That’s one of the reasons I do this work. What we’re building has a lot of potential, but potential for whom? For instance, what are most keyboards optimised for? Latin character alphabets, like English. When I worked at OpenAI, I used to test a lot of the models, not just in English but also in the only non-Latin character language I understand, which is Bangla, the national language of Bangladesh. I got to see Bangla-speaking researchers working in a language deeply underrepresented in natural-language processing. When you make systems work for many different groups of people, opportunities open up. The question from a governance point of view is, how do we make sure data collection isn’t exploitative and appropriately represents every community.
That brings us to an important topic, which is regulation, and mitigating risks and potential harms. There are questions around job loss, intellectual property protection, and deep fakes. Congress has held hearings. Do we need a new regulator? New rules? And how do we do that without reducing the competitive position of U.S. companies relative to those in China or elsewhere?
Moerdler: We’re in a new era. Regulators don’t necessarily have the experience in this area. They are learning as the rest of us are learning exactly how to deal with it. Regulation, like everything, can be a two-edged sword. It can be used to limit bad actions. It could also limit development. There needs to be control to assure governance, privacy, and security, that the systems aren’t misused by bad actors. There needs to be some level of standardization of requirements, of control, and maybe even regulation. But it has to be done in a thoughtful way, or what will end up happening is that you will create an opportunity for companies outside the U.S. to take market share and take advantage.
Irene, what is your sense of this?
Solaiman: Good regulation is hard to do. Regulators wear so many hats. They can’t be experts in AI. But what they are experts in is the public interest. I want to learn from policy makers in which direction they think AI should be going. But it is immensely difficult to regulate. And what systems are we actually talking about? There’s not one single piece of legislation that is going to affect every aspect of AI. Regulators in the U.S., the European Union, the United Kingdom, and Canada are trying. There is an unprecedented level of attention in Congress. Hugging Face is pro regulation, but we want that to be in a way that guides innovation in the right direction. There needs to be better standards, but that means working together closely. There are incredible experts throughout all of these regulatory bodies on what that would look like and how that can be extrapolated to non generative AI systems, as well.
Gil: A framework of precision regulation would serve the industry well. Look at the work the EU did in the past few years. They developed a very thoughtful approach on use cases and risk-adjusted regulatory frameworks. There’s a huge difference between applying AI in a nuclear reactor and applying AI for a pizza-recommendation system. Right? And so risk-adjust, where you categorise how much harm this is likely to cause, or how much risk this is going to induce in society, and use the appropriate regulatory bodies to beef up the expertise.
Enable every agency to become an AI agency, an additional element that they incorporate. This is in contrast to having a single AI regulator that is going to figure out the whole thing. Regulating the technology itself, regulating mathematics, is a really bad idea. And there are people talking about registering the models—that’s the wrong way to go.
Focus on the use cases. Focus on the harm and the impact around that, and regulate using existing bodies against those by beefing up their AI knowledge and expertise and sophistication. Sometimes, the hyperbolic rhetoric that has come even from the tech industry is causing more harm than good. Lowering the tone and focusing around the harm and the damages and the impact, and on those regulatory bodies and the people who are doing that, would be the right way forward for precision regulation.
Cathy, how does the risk of added regulation affect your thinking about where to put Sapphire’s money?
Gao: It’s something we consider closely. We’re still in the very early innings—there are a lot of unknowns. Venture capital is a high-beta asset class by definition. But we want to be smart about the risks we take. When it comes to AI, many of the use cases we’re looking at right now are less likely to be a target of regulatory scrutiny. We’re not looking at companies that affect life or death, like in healthcare. Still, we’re following it very closely. We definitely take that into consideration, but we also accept that some of the unknowns will remain when we make an investment.
Moedler: These systems could be problematic from a privacy point of view, from a bias point of view, from an intellectual-property point of view. Investors need to think through where they could be exposed. It may not be regulators. It may be the fact that, you know what, you trained up these solutions, and the responses they’re giving impinge on other people’s IP, and therefore your clients—and you—are going to get sued. That becomes part of the math you need to do when determining whether these systems are going to become good, sustainable businesses that will generate not just revenue, but also profits, over a long period. Investors need to think carefully about where the exposure can be, whether they’re going to cross a line or create some legal, regulatory, or economic exposure.
One other risk that has been widely discussed is the potential that AI will cost people jobs. Is AI going to be a net job creator—or destroyer?
Gil: We have a couple of hundred years of evidence that the nature of jobs changes over time. A hundred years ago, half of the U.S. population was working in the fields. So, first of all, this phenomenon isn’t new. Whenever really disruptive technology emerges, people think this time will be different. The evidence suggests that won’t be the case. There’s a lot of good analysis that jobs are composed of many, many diverse tasks, and some will be subject to automation while many others won’t. The key metric that people are focused on is whether we can deliver on the productivity promise. With better productivity, we can generate more wealth, and invest in things we care deeply about to create better institutions, a better society, and so on.
I’m more worried about whether we can deliver solutions fast enough to reach the productivity gains we need, and discover solutions to the problems that we face. When I talk to people about advances in AI, semiconductors, and quantum computing, and they are stressed out about the rate of technological evolution, I like to say, look around. I don’t think we’ve run out of problems to solve. And if we can use these technologies to accelerate how quickly we can discover some of these solutions, we are all going to be very well served. One of my fears is definitely not that people won’t have jobs because of the advances in AI. History tells us that.
Solaiman: Just five years ago, one conversation was around how autonomous vehicles would replace drivers and cost the jobs of truck drivers and others. But it turns out, the most adversarial environment is the real world. I’d like to see more research on how we augment and not automate. What will be the impact on the wage distribution? Should people’s wages be reduced if they’re being helped by AI? There are important economic questions.
OK, we have to discuss the notion that generative AI is an existential threat to humanity, as some have warned. It’s worth mentioning here that there’s a difference between generative AI—what chatbots do—and artificial general intelligence, or AGI, the idea that software can be sentient and act on its own, like HAL in the movie 2001: A Space Odyssey.
Gil: I’m very opposed to that language of existential threats because it distorts things in a significant way. First of all, it freaks out our fellow citizens. To some degree, some of the people who espouse that language are behind the scenes aiming at regulatory capture.
Solaiman: A fun fact about me that’s not very public is that I worked on AGI for a while. When I was working on that, a lot of what I was thinking about through my research was, if we’re building these incredibly powerful systems, whose values do they represent? My primary motivator now is to make AI systems work better for underrepresented people in the technical world. A lot of the harms to marginalized people truly are existential to those communities.
But we’re not going to be serving robot masters soon, right?
Moerdler: The more immediate issue is how the AI is used and misused, not whether the AI itself is going to decide to cause damage. That’s the crux of the issue. Worry about how it’s going to be used or misused, because it’s a long time horizon before you have to worry about AI making decisions. People are trying, as Dario said, to blow this out of proportion for other purposes.
Let’s take a few minutes to talk about AI stocks. Brook, when we last talked a few months ago, you walked me through a bunch of non obvious ideas for AI investments. Are you still finding attractive things to buy, despite a big rally in the stocks?
Dane: First, as I’ve said, it’s very early. We’re in the emergence of this technology right now. The landscape is going to change dramatically over the next one, three, five years. Investors have to pay attention to how these things are changing and where opportunities emerge. The second thing is that, in general, there’s going to be considerable differentiation between winners and losers. Right now, the obvious plays are the ones getting revenue today, the picks-and-shovels players, semiconductor components, and networking, and then the big cloud vendors.
We’re at a funny moment, though, where the market has realised that there is going to be a boom in applications, and that there will be a bunch of infrastructure software that gets pulled along with this. There are exciting opportunities, but that isn’t going to move numbers for calendar-year 2023. So, as long as your investment horizon is long enough, you’re likely to see the payoff from this. If you’re trying to manage a portfolio from now to the end of the calendar year, the companies that are seeing the benefit are the very obvious choices that have already moved, like Nvidia and Microsoft and Alphabet.
When Microsoft reported June-quarter earnings a few weeks ago, the market’s reaction was a little tepid. The results didn’t really reflect all of the things they have been saying are coming on the AI front.
Dane: As we’ve moved through this latest earnings period, you saw a lot of companies produce results that have been ahead of expectations or right in line with expectations. Nobody has particularly gotten aggressive about raising guidance, and stocks have sold off into that, because they had large moves into the end of the quarter through June and July. People were expecting some excitement. The excitement is coming in a lot of these names, but just not in the next 90 days.
Microsoft seems incredibly well positioned from our perspective, given what the company is doing with Copilot and Azure. For us, that seems like a compelling opportunity.
Give us a couple of other picks.
Dane: I’m bullish on Marvell Technology [MRVL], which makes chips used in data-centre networking. It will grow right alongside Nvidia. Its AI-related business is around $200 million in revenue, and should double in each of the next couple of years. The stock has moved up, but so have estimates. This is a picks-and-shovels play, where the numbers are going higher.
Another company we like is Adobe, which dominates the creative software market. We’ve been hearing good things about the beta test for its corporate version of Firefly, Adobe’s collection of generative-AI tools. From what we hear from the sales channel, the beta version is doing exceptionally well. One of the biggest advantages that Adobe software offers is that customers will be protected from copyright infringement for their text-to-image software. There’s a little bit of TBD around how big this is—we still don’t have pricing information—but this is one of those situations where the incumbent has an advantage.
And what about Nvidia?
Dane: We have owned it and continue to own it in our large-cap and tech-focused funds. But we’re always managing risk and reward with position sizing; you want to make sure you stay in balance. As the leader in graphics processors, they are in a unique position—they are really benefiting from this wave. The business will do exceptionally well, but valuation has a range of outcomes.
Mark, you wrote a piece recently that asked if we are in an AI bubble. Are we?
Moerdler: We’ve been in an expectation or optimism bubble. The investor community has gotten enthusiastic about the near-term revenue that’s going to be generated by the technology. Again, this technology exploded on the market. Investors looked at it and went, OK, it’s going to generate meaningful revenue in a relatively short period. Expectations moved up, and valuations moved up accordingly. Many management teams started talking about their AI solutions. You could literally watch stock valuations move up the more they talked about AI, even though they weren’t giving you any guidance about when and how much. We’ve seen multiples move up to relatively high ranges, approaching what we’ve seen at peak multiples in recent times, without that line of sight to the revenue-generation possibility.
And so from that perspective, there is a bit of a bubble going on. It’s going to take longer than many people believe for AI to drive meaningful revenue. That doesn’t mean no revenue, but enough to move the needle from a revenue growth perspective or an earnings perspective. It is likely that in most cases, revenue is going to lead earnings here because there’s a lot of investment required to offer AI tools. You’re using them in the cloud. You’re paying for that usage, even if you own it yourself. You’re probably paying a premium right now, because of the GPU [graphics processing unit] shortage. And so, yes, we got a little bit ahead of our skis.
I also don’t think the rising tide will lift all ships equally. It’s going to come down to the companies that are able to create differentiated capabilities, protected against competitive threats—and that have the ability to monetise them. A lot of companies are going to add AI capabilities, and it is going to be, at least in the near term, a cost of doing business. It isn’t going to be monetisable because your competitors are going to add similar capabilities.
As Brook discussed, you need to think about the time horizon. We think of three buckets. There are the companies where you can see differentiation in what they’re offering now. There are companies that are adding AI, but it may just mean a higher cost of doing business, at least for the near term. Longer term, years from now, it could become real. And then there are the companies that will be disrupted. Most companies are in that middle bucket today.
Which companies would be in the first bucket? And the last?
Moerdler: Two of the companies that I put in the winners bucket were just mentioned by Brook—Microsoft and Adobe. I put in the losers list companies offering no-code and low-code software solutions; they are going to face new competition from AI-written code. For the losers, we see a combination of increased customer attrition and pricing pressure. Almost everything else is the middle bucket. For most companies, generative AI won’t be a major differentiator but will be necessary from a competitive positioning perspective. Most of these are jumping on the AI bandwagon, and while they should be able to get functionality to market quickly, it won’t be differentiated and, in many cases, really valuable to customers.
Dane: One thing to note: The opportunities in tech companies are compelling right now, with AI as an option in front of them. Business fundamentals are largely stable. The economy is in better shape than we all thought it would be six or nine months ago. These companies have largely pivoted to driving cash flow and operating income instead of chasing growth for growth’s sake. And then you have this optionality around AI.
Moerdler: Agreed. If your focus is on the value of the business, and the upside from AI, you’re going to get better a risk-reward in terms of your investment profile than if you jump on the all-about-AI ship, because it may just take longer until that revenue comes to fruition.
While tech stocks have had a big year, and everyone is talking about AI, there haven’t been any AI initial public offerings, or really any IPOs in tech. Cathy, what does that say about where we are in the development of the AI sector?
Gao: When the general IPO markets will unfreeze for tech is the million dollar question. I have no idea. In any case, it’s going to take a while before we see pure-play AI companies come public. The speed of adoption that we’re seeing in this cycle with AI has outstripped anything that I’ve seen in prior platform shifts. But maybe there’s something we can learn from the internet revolution that could be applied to the current era. In the internet era, the first wave of companies that came out weren’t the ones that ultimately succeeded. It was more the second wave and the third wave that watched their predecessors, learned from their mistakes, refined, rehoned, and went out. My gut is telling me that this is going to take a while.
Everyone, thanks for a fascinating conversation.
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Kuwait has raised $3.25 billion through a dual-tranche bond issuance, attracting combined investor orders of $7.8 billion. The offering comprised $2.25 billion in three-year notes and $1 billion in 10-year notes, with yields of 5.619% and 6.198%, respectively.
Gulf stock markets traded cautiously as escalating Middle East tensions. Saudi Arabia’s index fell 0.3%, Abu Dhabi slipped 0.2%, and Qatar’s benchmark dropped 0.5% to its lowest level in more than six years, while Dubai’s market remained broadly flat. Meanwhile, Brent crude fell 2.08% to $107.57 a barrel.
Jordan will repurchase all bonds tendered under its offer for part of its outstanding $1 billion 5.75% notes due in 2027, after investors submitted $396.2 million in bonds for buyback. Settlement was scheduled for October 16, 2026, with Citigroup Global Markets acting as dealer manager.
Egypt is moving closer to launching short selling as the Financial Regulatory Authority introduces a model agreement governing securities borrowing, collateral requirements and risk management. The centralized lending system operated by MCDR is undergoing live testing ahead of its anticipated launch, with the framework designed to protect market participants and standardize transactions.
4 min
The Financial Regulatory Authority (FRA), chaired by Islam Azzam, has issued a model agreement governing the relationship between brokerage firms and clients borrowing securities for sale, marking another step towards the anticipated official launch of short selling in Egypt.
The move follows the introduction of a new regulatory framework under FRA Board Decision No. 155 of 2026.
The agreement establishes a clear contractual framework for clients seeking to borrow securities for sale through the centralised securities lending system operated by Misr for Central Clearing, Depository and Registry (MCDR), and brokerage firms licensed to execute such transactions on their behalf.
Short selling involves a lending client making securities they own available to borrow and a borrowing client borrowing those securities, selling them and subsequently repurchasing and returning them to the lender.
If the borrower expects the share price to decline, they can profit from the difference between the selling and repurchase prices, depending on market movements and changes in the security’s price. Transactions are conducted through a brokerage firm licensed to undertake such activities.
The model agreement was issued under FRA Chairperson Decision No. 3350 of 2026 following consultations with market participants to draw on the experience of companies operating in the sector and identify practical implementation requirements.
The move reflects the FRA’s approach of maintaining constructive dialogue with stakeholders to develop enforceable regulations that facilitate the mechanism’s operation while managing its risks and protecting market participants’ rights.
Agreement sets rules for collateral, fees and risk management
The model agreement defines the rights and obligations of brokerage firms and borrowing clients, their respective procedural responsibilities, and the arrangements governing expenses, commissions, returns generated from investing cash collateral margins and the distribution of those returns.
These provisions are intended to support effective implementation, improve participants’ understanding of the mechanism and its associated risks, facilitate the monitoring of collateral margins, and establish procedures for closing positions when circumstances specified in the contract or regulations arise.
The agreement also establishes risk management requirements, particularly regarding collateral provided by borrowing clients.
Borrowers must provide collateral margins at the rates specified in the agreement’s annex before executing a borrowing transaction, subject to the minimum ratios stipulated in the FRA’s decision.
Brokerage firms must deposit cash collateral into a separate account designated for securities borrowing for the purpose of selling.
To mitigate transaction-related risks and protect market participants’ rights, the model agreement requires brokerage firms to revalue borrowed securities using the latest closing price during the trading session.
Firms must also monitor the ratio of total collateral to the value of borrowed securities in accordance with the ratios specified in the agreement’s annex, subject to regulatory minimums.
The agreement also governs cases in which borrowed securities are not returned by the specified deadline. In such circumstances, the brokerage firm must purchase the securities required to fulfil the return obligation, taking the relevant settlement dates into account.
It also addresses circumstances requiring positions to be closed, including the removal of a security from the list of securities eligible for short selling and the issuance of regulatory decisions or approvals relating to acquisitions, mergers, tender offers, demergers, liquidations or other transactions specified by the FRA.
Brokerage firms must also provide clients with a detailed guide explaining securities borrowing for the purpose of selling, including its fundamental rules, procedures, benefits and associated risks.
The guide must be updated whenever amendments are made to the governing regulations and provided to clients at least once a year and whenever it is revised.
The agreement stipulates that cash collateral margins must be invested in instruments specified by the FRA throughout the lending period.
Brokerage firms are required to inform clients of the investment instruments used and the actual returns generated, and to credit those returns to clients’ accounts immediately upon receipt or in accordance with the agreed terms.
Regarding borrowing costs, the model agreement requires brokerage firms to disclose all expenses, commissions and other monetary amounts deducted from clients, specifying the basis on which each is calculated.
Any subsequent amendment to commissions or expenses is prohibited without the client’s explicit consent.
The agreement guarantees clients the right to issue orders to sell and purchase borrowed securities and to close their open positions, either fully or partially, during the borrowing period, in accordance with the contractual terms.
MCDR system undergoes live testing ahead of launch
Azzam said the model agreement represents another step towards launching the short-selling mechanism, as the FRA works to finalise the regulatory provisions and practical guidelines for all parties involved.
At the same time, final adjustments are being made to the centralised securities lending system developed and operated by MCDR through live testing.
The aim is to ensure full real-time connectivity between the system and brokerage firms while documenting all stages and procedures of the process.
The system will enable borrowing clients to view all available securities lending offers submitted by lending clients and select those that match their investment objectives. It will also allow lending clients to view other lending offers registered through the system.
Azzam added that the model agreement is intended to facilitate transactions for brokerage firms and borrowing clients, regulate their relationship and establish a standard contractual basis consistent with the mechanism’s regulatory framework.
It also defines responsibilities for managing collateral, monitoring open positions and handling cases involving declines in collateral value or delays in returning borrowed securities, thereby safeguarding the rights of all parties.
He noted that the agreement must include a declaration from the borrowing client confirming that they are the original owner and sole beneficiary of the account being opened and that their funds originate from legitimate sources.
Borrowing clients must also provide the relevant information in accordance with Anti-Money Laundering Law No. 80 of 2002 and the regulatory decisions governing anti-money laundering and counter-terrorist financing measures in non-banking financial activities.
Azzam explained that brokerage firms licensed to conduct these transactions are required to maintain the confidentiality of clients’ data and the privacy of their information and documents.
They are prohibited from disclosing information about clients or their transactions to third parties without prior written consent, and then only within the scope of that consent. Exceptions apply where firms are required to notify the FRA of specified data or information, or where disclosure is required under a judicial order in accordance with relevant legislation.
Short selling offers gains, but…
Under the short-selling mechanism, a borrowing client makes a profit if their expectation of a decline in the price of borrowed securities proves correct. The client repurchases the securities at the lower price, realises a gain and returns them to the lender, with borrowing costs deducted from the profit.
Conversely, if the price of the securities rises and the borrower decides to limit their losses, they must repurchase the securities at the higher price, incur a loss and return them to the lender, with borrowing costs adding to that loss.
In both cases, the lending client receives a return for lending their securities, comprising a return approximating the risk-free rate plus an additional lending premium, while retaining the other benefits associated with share ownership.
BNW Developments has established a Sydney presence, joining Arada and Sobha Realty among the growing number of UAE developers pursuing Australian buyers and development opportunities.
Following the successful launch of its Palais Collection, MAISON de SABRÉ has unveiled a new modular handbag system offering more than 720 styling combinations.
Saudi Awwal Bank (SAB) reported a 3% year-on-year increase in net profit to SAR 6.58 billion for the first nine months of 2026, while net loans and advances grew 11% to SAR 325 billion. The bank also recorded improved quarterly operating performance, reflecting continued strategic execution and disciplined risk management.
3 min
Lubna S. Olayan, Chair of the Board of Directors of Saudi Awwal Bank (SAB), announced today the Bank’s financial results for the nine months ended 30 September 2026.
SAB recorded a net profit after Zakat and Income Tax of SAR 6,582 million for the period, representing an increase of 3% compared with the corresponding period in 2025. Total operating income increased by 1% year-on-year to SAR 11,116 million, while third-quarter revenue rose by 5% to SAR 3,841 million compared with the previous quarter, reflecting improved sequential momentum.
Against a backdrop of evolving market dynamics and regional developments, SAB continued to deliver against its strategic priorities, maintaining balanced growth across its businesses. This performance was supported by disciplined capital deployment, prudent risk management and a continued focus on solid returns. Net loans and advances increased by 11% year-on-year to SAR 325 billion, broadly in line with the Bank’s plans and guidance.
Lubna S. Olayan, Chair of the Board of Directors, commented: “Our performance over the first nine months of 2026 reflects the resilience of SAB’s diversified business model and the strength of our long-term strategy.
We have continued to grow our business, deepen customer relationships and deliver solid returns while navigating an evolving external environment. Our commitment to responsible growth and sound financial management remains central to creating lasting value for our shareholders and supporting the Kingdom’s economic ambitions.”
The Bank’s margin performance improved during the third quarter, supported by disciplined asset repricing and stable funding costs. Quarterly operating income and pre-provision profit also increased compared with the previous quarter, demonstrating positive sequential momentum and the Bank’s continued focus on operating performance. This led to SAB reporting a return on tangible equity of 14.2% for the first nine months of the year, almost double the levels of returns the bank generated at the start of its strategy in 2021.
SAB’s trade business remained firm, underpinned by its strong corporate banking business and longstanding position in trade and cross-border banking. These capabilities continue to reinforce the Bank’s role in facilitating business activity and supporting the Kingdom’s growing international economic connectivity.
Asset quality remained resilient, with credit costs increasing during the nine-month period, as a reflection of heightened pressures. SAB continued to apply its established prudent forward-looking approach to provisioning, considering the evolving regional environment, supported by disciplined risk management and a continued focus on balance sheet strength.
Olayan added: “Our priorities remain clear: to pursue growth responsibly, deploy capital selectively and maintain a strong and resilient balance sheet. The improvement in margins and quarterly operating performance is encouraging and demonstrates the effectiveness of our strategic execution. We remain well positioned to respond to changing market conditions and pursue opportunities that support sustainable growth.
During the third quarter, SAB continued to advance its customer proposition through strategic partnerships and targeted innovation. The Bank introduced the Kingdom’s first Qatar Airways Privilege Club co-branded credit card, launched a dedicated e-commerce credit card in partnership with noon, and enhanced international transfer capabilities through its collaboration with Swift. Together, these initiatives reflect SAB’s commitment to delivering differentiated banking experiences, strengthening its competitive position and responding to the evolving needs of its customers.
SAB also continued to support its customers and employees amid the evolving operating environment, maintaining service continuity, prioritizing the wellbeing of its people and ensuring reliable access to banking services.
Olayan concluded: “As we mark 100 years of banking heritage in the Kingdom, we remain firmly focused on the future and the role SAB will continue to play supporting Saudi Arabia’s economic development. On behalf of the Board, I extend my sincere appreciation to our customers for their continued trust and to our colleagues for their dedication and professionalism. We also thank the Saudi Central Bank, the Capital Market Authority and our strategic partner, HSBC, for their continued support.”
BNW Developments has established a Sydney presence, joining Arada and Sobha Realty among the growing number of UAE developers pursuing Australian buyers and development opportunities.
Two coming 2027 models – the first of the “Neue Klasse” cars coming to the U.S. early next year – have been revealed.
Doha Bank has raised $500 million through a five-year bond issuance, attracting over $1.5 billion in investor orders. The issuance marks the bank’s first debt deal of 2026, with proceeds supporting its funding strategy amid continued activity in the Gulf debt markets.
< 1 min
Doha Bank, rated A (Negative) / Baa1 (Stable) (Fitch / Moody’s), has raised $500 million through its latest debt raise, with the five-year Regulation S senior unsecured notes carrying a fixed rate coupon of 6.250%, payable semi-annual in arrears.
The notes carry a yield of 6.313%, at a re-offer price of 99.733 and a spread set at 140 basis points over US Treasuries. IPTs for the offering in the +170 bps area.
At launch, the orderbook was in excess of $1.5 billion, excluding JLM interest.
Doha Finance Limited is issuing the debt, with the Qatar-listed lender named as guarantor. The expected issue rating is A / Baa1 (Fitch / Moody’s).
Bank ABC, Barclays, BBVA, Deutsche Bank, Emirates NBD Capital, Goldman Sachs International, HSBC, Kamco Invest, KGI Asia, Mashreq, QNB Capital and Standard Chartered Bank are the mandated joint lead managers and bookrunners. Standard Chartered Bank is the billing and delivery bank.
The issuance will come under Doha Bank’s $4.25 billion Euro Medium Term Note Programme, with the notes maturing on October 28, 2031.
A listing will follow on the London Stock Exchange – International Securities Market.
This is Doha Bank’s first debt outing of the year, with the lender last accessing the market in December 2025 when it raised $150 million from a digital bond, with a two-year tenor, along a raise of QAR 500 million through a sustainable bond with a 4.50% coupon.
BNW Developments has established a Sydney presence, joining Arada and Sobha Realty among the growing number of UAE developers pursuing Australian buyers and development opportunities.
New research suggests that bonuses make employees feel more like a mere cog in a wheel.
Kuwait has raised $3.25 billion through a dual-tranche bond issuance, attracting combined investor orders of $7.8 billion. The offering comprised $2.25 billion in three-year notes and $1 billion in 10-year notes, with yields of 5.619% and 6.198%, respectively.
< 1 minKuwait has raised $3.25 billion in its latest debt issuance, a dual-tranche offering with three-year and 10-year tenors that saw a collective orderbook of $7.8 billion.
The three-year offering raised $2.25 billion, priced at par, with a semi-annual coupon of 5.619%. The yield was also set at 5.619%, with the spread tightened to 75 basis points over US Treasuries.
IPTs for this tranche were in the T+105bps area.
The 10-year tenor raised $1 billion, priced at par, with a coupon and yield of 6.198%. The spread was set at T+105bps from IPTs in the T+130bps area.
The final orderbook for the shorter tenor was in excess of $4.6 billion, excluding JLM interest, with the 10-year drawing an orderbook of $3.2 billion, excluding JLM.
The settlement date is October 26.
Kuwait has issued the senior unsecured notes through the Ministry of Finance, with an expected rating of AA- (S&P), AA- (Fitch) (all stable), in line with Kuwait’s own.
Citi, Goldman Sachs International, HSBC, JP Morgan, and SMBC are the joint global coordinators, while Barclays, Citi, Goldman Sachs International, HSBC, ICBC, JP Morgan, Morgan Stanley, and SMBC are the mandated joint lead managers and bookrunners.
HSBC is the billing and delivery bank on the three-year tenor, while JP Morgan has been mandated on the 10-year.
The notes will be listed on the London Stock Exchange’s Main Market.
In July, Kuwait raised $6 billion in debt through a three-tranche bond offering with investor demand driving the combined orderbook to more than $14.75 billion. While the $3 billion three-year issuance drew a marginally tightened spread of T+70bps compared to the October offering, the $1.5 billion 10-year raise drew a much tighter spread at T+85bps from IPTs in the T+110bps area.
BNW Developments has established a Sydney presence, joining Arada and Sobha Realty among the growing number of UAE developers pursuing Australian buyers and development opportunities.
Parts for iPhones to cost more owing to surging demand from AI companies.
Gulf stock markets traded cautiously as escalating Middle East tensions. Saudi Arabia’s index fell 0.3%, Abu Dhabi slipped 0.2%, and Qatar’s benchmark dropped 0.5% to its lowest level in more than six years, while Dubai’s market remained broadly flat. Meanwhile, Brent crude fell 2.08% to $107.57 a barrel.
< 1 minMajor Gulf stock markets were subdued in early trade on Monday as tensions in the Middle East kept investors on edge, with a tanker blast in the Strait of Hormuz and uncertainty over the waterway’s reopening adding to the caution.
An oil tanker caught fire and exploded after striking a naval mine in the southern part of the strait, Iran’s Islamic Revolutionary Guard Corps navy said on Sunday, according to Iranian media.
Separately, Foreign Minister Abbas Araqchi told Iranian media that Tehran’s offer to the United States to reopen the strait within seven days was still on the table.
Brent crude futures fell 2.08% to $107.57 a barrel by 0619 GMT after settling at their highest since May 19 on Friday, as investors took profits after US President Donald Trump waived sanctions and tariffs on Russia, a move that may lead to more Russian fuel exports.
Saudi Arabia’s benchmark index fell 0.3%, hit by a 1.7% drop in Saudi Arabian Mining Co and a 0.8% decline in the country’s biggest lender by assets, Saudi National Bank.
Among other losers, oil behemoth Saudi Aramco was down 0.3%.
Dubai’s main share index was flat, though Dubai Investments advanced 2.4%. The group plans to float a 20% stake in subsidiary DIP Holding, owner of the Dubai Investments Park real estate business, in the UAE’s first initial public offering this year and one of only a few in the Gulf amid the Iran war.
In Abu Dhabi, the index eased 0.2%, while the Qatari index lost 0.5% to trade at its lowest in more than six years.
BNW Developments has established a Sydney presence, joining Arada and Sobha Realty among the growing number of UAE developers pursuing Australian buyers and development opportunities.
Many of the most-important events have slipped from our collective memories. But their impacts live on.
Jordan will repurchase all bonds tendered under its offer for part of its outstanding $1 billion 5.75% notes due in 2027, after investors submitted $396.2 million in bonds for buyback. Settlement was scheduled for October 16, 2026, with Citigroup Global Markets acting as dealer manager.
< 1 minJordan will buy back all bonds submitted under its tender offer for part of its outstanding $1 billion 5.75% notes due in 2027, after investors tendered $396.2 million of the debt.
Citigroup Global Markets acted as dealer manager for the transaction, while Citibank N.A., London Branch served as information and tender agent.
The sovereign said holders submitted $396.235 million in principal amount of the bonds for repurchase.
Settlement is scheduled for October 16, 2026.
BNW Developments has established a Sydney presence, joining Arada and Sobha Realty among the growing number of UAE developers pursuing Australian buyers and development opportunities.
Paine Schwartz joins BERO as a new investor as the year-old company seeks to triple sales.
Egypt’s net international reserves rose by $5.9bn in the first nine months of 2026, reaching $57.35bn in September, supported by stronger foreign currency inflows and banking sector assets.
3 min
The Central Bank of Egypt (CBE) has revealed that its net international reserves increased by $5.896bn during the first nine months of 2026, reaching $57.348bn in September, compared with $51.452bn in December 2025.
According to renowned banking expert Mohamed Abdel Aal, Egypt’s foreign exchange reserves comprise a diversified basket of major international currencies, including the US dollar, euro, pound sterling, Japanese yen, and Chinese yuan. These currencies are allocated in line with the CBE’s strategy for managing liquidity and maintaining a balance between exchange rates and stability in global markets.
He noted that net reserves continued their upward trajectory for the 49th consecutive month, reaching $57.350bn in September 2026, compared with approximately $57.214bn in August, an increase of $136m and monthly growth of around 0.24%.
Although this monthly increase may appear modest in numerical terms, Abdel Aal said a closer examination reveals implications that extend beyond the size of reserves to their quality.
He stressed that the strength of the Egyptian economy’s external position no longer depends solely on the level of reserves, but is increasingly supported by an integrated set of positive indicators.
He explained that improvements in funding sources reflect a structural development in the Egyptian economy’s external position, which international institutions and credit rating agencies monitor as a more accurate measure of economic resilience and the ability to absorb shocks.
Mohamed Abdel Aal
In August 2026, the banking sector’s net foreign assets rose to $31.2bn, their highest level since January 2020, supported by an increase in commercial banks’ net foreign assets to $12.4bn, alongside a rise in the CBE’s net foreign assets to $18.8bn.
According to Abdel Aal, these divs carry significant implications, indicating that the improvement in international reserves is no longer confined to the CBE’s balance sheet, but is also supported by the banking system as a whole, with foreign assets exceeding external liabilities, making the improvement more sustainable.
He added that the recovery was not limited to banking assets, but extended to actual sources of foreign currency.
Remittances from Egyptians working abroad recorded notable growth of 28.1% during the first seven months of 2026, reaching $29.7bn, compared with $23.2bn during the same period last year.
At the same time, the tourism sector maintained its performance, generating revenues of $12bn during the first eight months of the year, an increase of approximately 1.7%.
In foreign trade, Egyptian exports continued to grow, reaching $31.9bn during the first seven months of 2026, exceeding the $29.9bn recorded during the corresponding period last year.
Suez Canal revenues also recorded a noticeable improvement in the second quarter of the year, reaching $1.26bn, compared with around $1.1bn in the first quarter, representing growth of 13%.
Abdel Aal said the continued accumulation of reserves over 49 consecutive months represents more than a financial div. It constitutes a cumulative line of defence that strengthens the economy’s ability to withstand financial and geopolitical shocks and fluctuations in energy markets, gives monetary policymakers greater flexibility, and reinforces the confidence of international institutions.
He noted that a particularly striking development was the growth in reserves despite a decline in the dollar value of their gold component, which stood at $17.46bn in September 2026, down by $1.6bn as global gold prices fell by more than $270 per ounce.
However, the increase in the liquid foreign-currency component fully offset this decline, highlighting the flexibility of the reserve composition as an additional strength in managing the reserve portfolio.
Addressing recurring questions about the adequacy of reserves, Abdel Aal said the modern professional approach goes beyond identifying a safe level of reserves to determining the optimal level, assessed according to import coverage, short-term external debt, and the nature of capital flows.
He noted that the real challenge is not to maximise reserves without limit, but to strike a careful balance between security, liquidity, and investment returns.
Looking ahead to the final quarter of 2026, Abdel Aal said that, with foreign currency inflows continuing and the foreign exchange market remaining stable, there appeared to be scope for reserves to maintain their upward trend, although the pace of growth would remain dependent on geopolitical developments and global energy prices.
Abdel Aal stressed that foreign exchange reserves are more than divs recorded on the Central Bank’s books. They serve as a safety valve that is reshaping market confidence in the Egyptian economy.
He said the continued upward trend was undoubtedly the result of carefully considered monetary and fiscal policies that strengthen the country’s economic security.
BNW Developments has established a Sydney presence, joining Arada and Sobha Realty among the growing number of UAE developers pursuing Australian buyers and development opportunities.
The sports-car maker delivered 279,449 cars last year, down from 310,718 in 2024.
Strong family financial planning can help reduce taxes and support younger generations. From intrafamily loans and asset gifts to inheritance disclaimers, strategic cooperation can create meaningful financial benefits—when families have the trust and structure to make it work.
4 min
Happy is the family whose members—parents, grandparents and grown children—trust each other enough to cooperate on shared goals, especially financial ones. When that is truly the case, Uncle Sam’s tax rules can help as well.
This matters especially now that mortgage rates are above 7%, and many families are looking for ways to help younger members. If the elders have resources and are confident younger ones can cooperate, a family loan could make homeownership possible while providing the elders with a useful income stream.
Other strategies can actually lower taxes, such as when funding 529 plans or Roth IRAs, or when someone inherits a traditional IRA with required withdrawals larger than they will need.
Here are three strategies useful for functional families.
Intrafamily loans
It is perfectly legal for families to lend money to a relative for a down payment or even a private mortgage.
But it is important not to cut corners, says Ryan McKeown, a CPA with Modern Wealth Enhancement in Minnesota. If the loan is for a down payment, be honest with the mortgage provider and have a formal agreement. The lender owes tax on the interest payments received.
If the loan is for a private mortgage, both sides should have legal representation with a formal written agreement, including payment terms. The lender owes tax on the interest, and the borrower often can deduct it if he or she itemizes.
To avoid IRS trouble, the interest rate shouldn’t be lower than the agency’s Applicable Federal Rate at the time of the loan. Currently that is about 5% for loans longer than nine years; about 4.5% for loans three to nine years; and about 4% for loans three years or less. Currently, traditional mortgage rates are generally above 7%.
In addition, the lender could use the $19,000 annual gift-tax exemption (described below) to forgive some or all of the interest or principal annually. If both lenders and borrowers are married, that is up to $76,000 a year. There is no tax for the borrower on such forgiveness, because it is from a gift.
If you’re going this route, McKeown advises against having a fixed plan to forgive the debt. Instead, do it in one-off letters specifying the amount—and keep careful records. Otherwise the IRS might try to treat the loan as a taxable gift.
Asset gifts
Powerful tax-saving moves for families often use gift-tax provisions. Under current law, anyone can give anyone else up to $19,000 of assets annually, free of gift tax. That means a married couple with three grandchildren could give them a total of $114,000 in 2026.
The gifts can be cash or other assets, like stock. For noncash gifts, the cost basis—which is the starting point for measuring taxable gain after a sale—“carries over” to the recipient. So if someone buys $1,000 of stock and gives it away when it is worth $5,000, the recipient’s cost basis is $1,000. If the recipient later sells the shares for $8,000, the taxable gain is $7,000.
Here’s an example showing how gifts could save a family taxes. Grandma is a widow of modest means, while her child and spouse have prospered. The couple has two children, and they want to contribute $5,000 to a 529 college-savings plan for each—but they need to sell stock to do it. Their tax rate on the sale would be 18.8%, and they would need to sell about $11,000 of stock.
However, Grandma’s federal tax rate on the stock sale is 0%. If the couple gives $10,000 of shares to Grandma, she could sell them, pay no tax, and fund the grandchildren’s 529 plans. This saves about $1,000 of tax.
These moves are legal, and they could be used in other ways, such as to help a young person fund a Roth IRA.
But trust among family members is essential: Under the law, givers can’t put conditions on a gift. Grandma could use her stock proceeds to take a cruise, but she makes 529 contributions instead.
Mark Sellner, a retired tax attorney and CPA living in Sarasota, Fla., uses this strategy. His children sell stock he gives them and fund 529 plans for his grandchildren.
The family’s tax savings aren’t huge, but he likes other benefits. The sales by his children don’t boost his adjusted gross income, which in turn could raise his Medicare Irmaa premiums or his 3.8% surtax on net investment income.
Sellner doesn’t worry about his children using the funds for another purpose.
“There can’t be any strings attached to gifts. Of course, it is up to us to decide whether to make them in the future,” he says.
Two caveats: The “kiddie tax” applies to most children under age 24, and it is levied at the parents’ rate on investment income above $2,700 in 2026. Consider this before making gifts to a young person.
Investors who give away stock also forgo the step-up, an important provision that exempts assets held at death from capital-gains tax.
Sellner knows he’s losing a step-up, but says, “The children could use a little more now. Why should they wait 20 years to get it?”
Disclaimers
A disclaimer is a highly useful strategy in which one heir renounces an inheritance in favor of another heir. Assuming family members cooperate, this can save taxes.
Here’s one example. Dad died and had a large traditional IRA that he left to Mom. She has enough assets and income to cover her expenses, and she lives in a state with a stiff estate tax. The inherited IRA would put her estate over the threshold.
Also surviving are three young-adult children. If Mom disclaims all or part of Dad’s IRA within nine months of his death, that amount could go directly to the children. They will have 10 years to empty the account, and the family as a whole will likely save estate and income taxes.
Disclaimers have many key details, especially regarding beneficiary documents. Although heirs have great freedom in choosing what assets to disclaim, the rules about who gets disclaimed property are rigid. It is best if the original owner names tiers of heirs so that if one disclaims, the next recipient is clear.
BNW Developments has established a Sydney presence, joining Arada and Sobha Realty among the growing number of UAE developers pursuing Australian buyers and development opportunities.
Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’
QatarEnergy has secured a $3 billion five-year syndicated loan from four major Chinese banks, while exploring an additional $5 billion+ facility to support its LNG shipping operations.
< 1 min
The state-owned QatarEnergy has secured a $3 billion syndicated five-year loan financed by four major Chinese financial institutions, according to Loan Connector. The petroleum and natural gas producer is also in talks with several banks for an additional $5 billion or more to finance its LNG shipping operations.
Agricultural Bank of China, Bank of China, China Construction Bank and Industrial and Commercial Bank of China are the underwriters on the $3 billion facility, the report stated, with funds to be used as QatarEnergy’s working capital.
Meanwhile, the LNG financing has drawn interest from both international and regional banks, LPC added, with a maturity in 2044.
QatarEnergy’s financial push comes at a time when the firm has also bagged seven offshore exploration licenses in Brazil, as part of a consortium with Petrobras. QatarEnergy said the deal will expand its upstream position in the South American state and is expected to be signed in the first half of 2027.
The LNG giant earlier extended its force majeure on liquefied natural gas deliveries through early December 2026, driven by ongoing regional conflict and the closure of the Strait of Hormuz.
BNW Developments has established a Sydney presence, joining Arada and Sobha Realty among the growing number of UAE developers pursuing Australian buyers and development opportunities.
Americans now think they need at least $1.25 million for retirement, a 20% increase from a year ago, according to a survey by Northwestern Mutual
Saudi Aramco CEO Amin Nasser warned that satellite imagery and ship-tracking data are increasingly being used to target infrastructure and oil tankers, highlighting growing security risks linked to technology.
< 1 min
Saudi Aramco CEO Amin Nasser said on Monday that satellite imagery and detailed ship tracking data is increasingly being used to attack infrastructure and oil tankers.
“Satellite imaging and shipping logs are increasingly being weaponised against infrastructure and tankers. Tools of transparency should not become ammunition for aggression,” Nasser told the Energy Intelligence Forum
“Technology offers immense benefit, but also poses serious risks,” Nasser said
Oil markets follow headlines on the US-Israeli war on Iran, including those based on satellite imagery and ship tracking data
The UN shipping agency IMO estimates there have been around 91 incidents involving ships that have been hit and 24 seafarers killed in the Middle East Gulf since the start of the Iran war on February 28.
More and more vessels in the region are switching off their transponders, or AIS systems, to avoid detection or identification to mitigate the threat of missile and drone attacks
Previously, this practice of “going dark” was usually employed by vessels in the so-called shadow fleet used to transport sanctioned Russian, Iranian and Venezuelan crude outside of Western markets and services
BNW Developments has established a Sydney presence, joining Arada and Sobha Realty among the growing number of UAE developers pursuing Australian buyers and development opportunities.
Interior designer Thomas Hamel on where it goes wrong in so many homes.
The UAE’s outward FDI reached $63.353 billion in 2025, strengthening its position as a major global investor. UAE capital now spans six continents, covering sectors from energy and infrastructure to technology, AI, logistics, real estate and healthcare.
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The UAE has consolidated its position as a major international investor, building a broad and diversified portfolio spanning six continents and strategic sectors including energy, infrastructure, ports and logistics, technology, artificial intelligence, industry, real estate, financial services and healthcare.
According to the latest data from UN Trade and Development (UNCTAD), outward foreign direct investment (FDI) flows from the UAE reached US$63.353 billion in 2025, while the country’s outward FDI stock stood at US$402.729 billion at the end of the year, compared with US$55.560 billion in 2010.
Global FDI flows, meanwhile, reached US$1.6 trillion in 2025, according to UNCTAD’s World Investment Report 2026.
UAE investments span both advanced and emerging economies across six continents.
In North America, UAE investments cover technology, energy, industry and other sectors. The region accounts for 44% of Mubadala Investment Company’s portfolio, with more than 80 direct investments and US$170 billion in assets under management.
Across Europe and Asia, UAE investments extend to renewable energy, infrastructure, logistics, technology, industry, real estate, life sciences and healthcare. Europe accounts for 15% of Mubadala’s portfolio and Asia-Pacific for 13%, while Latin America and the Caribbean represent 1%.
The Abu Dhabi Investment Authority’s (ADIA) strategy similarly reflects broad geographic diversification. Its long-term strategic portfolio allocation ranges from 45% to 60% for North America, 15% to 30% for Europe, 10% to 20% for emerging markets and 5% to 10% for developed Asia.
In Africa, UAE investments span sectors including logistics, ports, energy and infrastructure, while investments in Australia and the Pacific include logistics and energy, further demonstrating the global reach of UAE capital.
Ports and logistics provide a prominent example of the international expansion of UAE companies. DP World operates in more than 80 countries through a network of more than 590 business units.
AD Ports Group has also significantly expanded its international footprint. By the end of 2025, the Group operated its own offices in more than 50 countries and had a commercial presence in 158 countries, either directly or through representatives, with 34 ports and terminals in the UAE and internationally.
Officials and experts told the Emirates News Agency (WAM) that the geographic spread of UAE investments, including across Southeast Asia and South and Central America, reflects the country’s growing international investment presence, alongside its continued ability to attract capital from around the world.
Fahad Al Gergawi, Undersecretary of the Ministry of Foreign Trade, said the UAE had built a broad and geographically diversified international investment presence, supported by a clear approach to strengthening cooperation with other countries and developing economic and trade partnerships that open new markets and opportunities for national investments.
He said the UAE’s approach is based on economic openness and creating an enabling environment that allows investors to capitalize on opportunities across different markets.
Al Gergawi noted that UAE investments now extend across South and Central America, Africa and other regions offering favorable investment environments. At the same time, the UAE continues to attract investment from around the world.
He highlighted the strength of UAE investment in Africa, noting that the country had become the largest investor in the continent over the past four years.
Al Gergawi said the UAE’s expanding overseas investment footprint is supported by its network of international economic relationships and Comprehensive Economic Partnership Agreements (CEPAs).
He added that CEPAs support two-way investment flows, both into the UAE and from the UAE into partner economies, as the country continues to conclude further agreements.
The UAE, he said, takes a responsible approach to international investment, seeking not only financial returns but also a positive impact on host economies and mutually beneficial outcomes.
Dawood Al Shezawi, Chairman of AIM Global Foundation, said UAE capital had become increasingly sophisticated, diversified and globally distributed, with sovereign wealth funds and family offices establishing long-term strategic positions in markets including Africa, Southeast Asia and Latin America.
He said UAE investors were increasingly acting as partnership builders rather than simply providers of capital, drawing on governance expertise, regulatory knowledge and institutional networks to support cross-border initiatives.
This role, he added, strengthens the UAE’s position as a global investment hub and its growing role in connecting international capital with high-potential markets and opportunities.
Dr. Khaled Hanafy, Secretary-General of the Union of Arab Chambers, said the UAE represents a leading investment model, supported by its ability to develop systems that attract investment from around the world while successfully directing its own capital into Arab and international markets.
He said the UAE had achieved diversification both within its domestic economy and through the geographic spread of its overseas investments, including in distant markets such as South America, making its investment experience a strong model in the sector.
BNW Developments has established a Sydney presence, joining Arada and Sobha Realty among the growing number of UAE developers pursuing Australian buyers and development opportunities.
Following the devastation of recent flooding, experts are urging government intervention to drive the cessation of building in areas at risk.
RISE Summit 2026 returns to Dubai on 14 October at the Dubai World Trade Centre, under the theme “Recharging Momentum in Global Economies.” Bringing together 300+ investors, government leaders and developers, the summit will explore global capital, real estate, infrastructure, technology and the future of cities.
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RISE Summit 2026 takes place on 14 October 2026 at Dubai World Trade Centre (Hall 5), under the theme “Recharging Momentum in Global Economies”. It is the strategic platform for a top-down view of the global capital and investment landscape, translating shifts in markets, trade and technology into opportunities across infrastructure, cities and real estate, and the future experience economy, from hospitality and education to wellness, longevity and how the world lives. The inaugural one-day event will host 300+ international institutional investors, sovereign funds, government leaders and major developers.
Rather than a conventional real estate event, RISE Summit starts from the macro picture: where global capital is moving, why, and what it means on the ground. Its purpose is to bring decision-makers into one room to align on the forces shaping investment, and to turn those conversations into partnerships, mandates and deals. Every session sits within one of four pillars: Capital, Markets and the Global Order; Trade, Connectivity and Infrastructure; Cities and Real Estate; and Longevity, Living and Experience.
The day opens with an invitation-only breakfast briefing, followed by a Morning Plenary. A series of fireside chats and panels covers where global investment goes next, infrastructure as the true test of a city’s resilience, building intelligent cities at scale, and the new blueprint of luxury living that integrates world-class hospitality into ultra-prime real estate. The plenary also looks at Dubai’s longevity ambition, Abu Dhabi’s next economic horizon, how institutions are navigating a three-speed global economy, geopolitics and energy security, crypto wealth entering real assets, and how Dubai’s regulatory transparency and Strategy 2033 attract institutional capital.
After a networking luncheon, the Afternoon Forum, “Real Estate and the Next Investment Cycle”, goes deeper into where global real estate capital is being redeployed as higher rates, repriced assets and structural change reshape how the world invests in the built environment. Sessions include sovereign wealth fund strategies in premium Class A residential, India’s $1 trillion real estate vision, and the race for data centre, energy and AI capacity. The forum also covers funding the cities of 2040 through infrastructure-led transformation, Asia’s next growth frontier in logistics, data and life sciences, and investment strategies in commercial and industrial real estate. It closes with the next era of destination management across hospitality and entertainment, and a session on how tokenization is rewriting property ownership.
Throughout the day, dedicated networking breaks, a luncheon and a closing evening reception give delegates the opportunity to build relationships and progress discussions directly with the investors, developers and government decision-makers in the room.
Register now.
BNW Developments has established a Sydney presence, joining Arada and Sobha Realty among the growing number of UAE developers pursuing Australian buyers and development opportunities.
Sharjah recorded a 45% increase in foreign direct investment (FDI) projects in 2025, reflecting the emirate’s growing investment appeal and the UAE’s economic competitiveness. Ahead of the ninth Sharjah Investment Forum, Invest in Sharjah CEO Mohamed Juma Al Musharrkh highlighted the UAE’s economic diversification, investor-friendly regulations, talent ecosystem and early positioning in emerging sectors as key drivers of sustainable growth.
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Mohamed Juma Al Musharrkh, CEO of the Sharjah FDI Office (Invest in Sharjah), said the 45% growth in foreign direct investment (FDI) projects in the emirate in 2025 reflects the competitiveness of the UAE economy.
Al Musharrkh made the remarks in an interview with the Emirates News Agency (WAM) on key shifts in the global economy and Sharjah’s economic readiness, as the emirate prepares to host the ninth Sharjah Investment Forum, organised in collaboration with the Ministry of Investment on 14th and 15th October at Al Jawaher Reception and Convention Centre.
Held under the theme “Building Adaptive Economies”, the forum will bring together more than 80 speakers, including ministers, investors, entrepreneurs, experts and decision-makers from around the world, to discuss the transformations reshaping the business and investment landscape and ways to build businesses and economies that are better able to adapt to change and achieve sustainable growth.
Al Musharrkh said global changes have made investors more selective about where they invest, with capital increasingly concentrated in fewer countries and sectors. Investors are looking for countries that offer a clear outlook, stability and flexible legislative and regulatory frameworks, he said, noting that these advantages place the UAE among the leading investment destinations.
The CEO of Invest in Sharjah said the UAE economy’s attractiveness rests on four main pillars. The first is economic diversification and the distribution of growth drivers, with non-oil activities accounting for 79.4% of the economy in the first quarter of 2026, led by financial services, construction, healthcare and telecommunications, providing investors with an economy capable of sustaining growth across different cycles.
He added that the second pillar is a legislative ecosystem that keeps pace with the market. The UAE ranks first globally in both Adaptability of Government Policy and Bureaucracy, and fourth in Legal and Regulatory Framework, he said, noting that these rankings reflect investors’ actual experience in setting up, operating and expanding their businesses.
Al Musharrkh identified people as the third pillar, explaining that talent is the foundation of a knowledge economy and that the UAE has made attracting and empowering talent an official policy.
He noted that the country ranks first globally in employment and international experience and second in the creation of firms. The UAE was also the first country in the world to appoint a Minister of State for Artificial Intelligence in 2017, while more than 70% of its working-age population now uses AI, underscoring the role of talent and technology in advancing the entrepreneurship and investment ecosystem.
He said the fourth pillar is early positioning in emerging sectors, with manufacturing and telecommunications leading greenfield investment into the UAE, placing the country in an advanced position as the investment landscape for the coming years takes shape.
Al Musharrkh stressed that, within the UAE model, Sharjah represents an economy with a clear identity built on production and knowledge, guided by the vision of H.H. Sheikh Dr. Sultan bin Mohammed Al Qasimi, Supreme Council Member and Ruler of Sharjah, which places people at the heart of development and provides investors with a stable environment with clear priorities.
BNW Developments has established a Sydney presence, joining Arada and Sobha Realty among the growing number of UAE developers pursuing Australian buyers and development opportunities.
Saudi Arabia projects a SAR 191 billion ($50.9 billion) budget deficit in 2027, equal to 3.6% of GDP, with spending estimated at SAR 1.39 trillion and revenues at SAR 1.20 trillion. The Kingdom also expects real GDP growth to rebound to 12.8% in 2027 after a projected 3.6% contraction in 2026.
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Saudi Arabia has projected a fiscal deficit equivalent to 191 billion riyals ($50.87 billion) or 3.6% of gross domestic product in 2027, the finance ministry said in a pre-budget statement on Wednesday.
Total expenditure was estimated at 1.39 trillion riyals ($370.21 billion) and revenue projected at 1.20 trillion riyals ($319.61 billion) in 2027, the finance ministry said.
* The ministry estimated the 2026 deficit at 245 billion riyals, exceeding the 165 billion riyals projected in the budget published last year.
* Saudi Arabia forecast real GDP growth of 12.8% in 2027, following an expected decline of 3.6% in 2026.
* The ministry said the expected decline in real GDP in 2026 was due to a projected 21.8% drop in oil activities amid geopolitical developments in the region.
* The Iran war has led to heavy disruptions to energy shipments from the Gulf and in recent weeks Saudi Arabia has faced increasing pressure from the Iran-backed Houthis, who have fired salvos of missiles and drones at the kingdom.
* The ministry said that the 2027 deficit “will be funded through borrowing in accordance with a medium-term debt strategy framework”, with the borrowing plan for the 2027 “disclosed in detail by the end of this year”.
* Saudi Arabia is undertaking a massive economic overhaul known as Vision 2030, aimed at reducing reliance on oil, which requires hundreds of billions of dollars in investment.
BNW Developments has established a Sydney presence, joining Arada and Sobha Realty among the growing number of UAE developers pursuing Australian buyers and development opportunities.
Citi expands its Token Services into the UAE and Japan, enabling 24/7 near-instant liquidity movement and cross-border payments. The UAE will support USD and EUR transactions, while Japan will support USD transactions.
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Citi today announced the expansion of Citi Token Services into UAE and Japan, advancing our strategy to build a more connected, always-on financial ecosystem for corporate and financial institutional clients. The expansion is the latest milestone in Citi Services’ broader digital assets strategy, which is focused on solving real-world client needs by building bank-grade capabilities that connect traditional financial infrastructure with emerging digital networks.
As global commerce and investment strategies increasingly moves toward a 24/7 real-time environment, Citi continues investing in digital asset solutions designed to reduce fragmentation and enable clients to move liquidity more efficiently across geographies, currencies and networks. Citi Token Services is a core part of this strategy, using tokenized deposits and blockchain technology to enable programmable, near-instantaneous movement of liquidity while leveraging the robust security, resilience and global reach of Citi.
The expansion into UAE and Japan further extends these capabilities across Citi’s global network, with Japan supporting USD transactions and UAE supporting both USD and Euro transactions. Citi Token Services continues to process billions of dollars in transactions.
Leveraging a private-permissioned blockchain, the solution enables clients to move funds near instantly across Citi’s global network, supporting more efficient liquidity and collateral management and cross-border payments. By expanding additional regions and currencies, Citi continues to provide clients with always-on liquidity and payment capabilities that help overcome banking cut-off times and time zone limitations. Citi Token Services is live in the United States, Ireland, Hong Kong, Singapore, the United Kingdom, UAE, and Japan.
“Expanding Citi Token Services into the UAE and Japan is an important milestone in scaling the network and bringing 24/7 liquidity solutions to more of the markets where our clients operate,” said Stephen Randall, Global Head of Liquidity Management Services. “These are significant financial centers with substantial cross-border flows and connecting them to Citi Token Services gives clients greater optionality to move and manage liquidity across regions and currencies in real-time.”
Together with Citi’s broader investments in 24/7 USD Clearing and connectivity with emerging multi-bank tokenized networks, the expansions advance the ambition of Citi to deliver increasingly interoperable, multi-currency solutions across liquidity management and payments.
The Middle East is one of the world’s fastest growing real-time payments economies, making the UAE a strategic market for the expansion of Citi Token Services. As a major financial hub and gateway for trade and investment across the Middle East, Africa and South Asia, UAE supports significant cross-border flows and a growing base of multinational treasury operations.
“Expanding Citi Token Services into the UAE with USD and Euro capabilities enables clients to manage cross-currency liquidity 24/7, which is key to connecting the local ambitions of our corporate and financial institutional clients with their global expansion,” said Rizwan Shaikh, Head Services for Middle East & Africa. “This positions Citi to deepen relationships and optimize liquidity in and out of the region.”
As the world’s fourth largest economy, and a significant global liquidity center, Japan is a strategically important market for Citi, with substantial cross-border flows driven by multinational corporations and financial institutions.
“The expansion of Citi Token Services into Japan connects clients in the market to Citi’s growing 24/7 payments, collateral and liquidity solutions, enabling USD transactions to move in and out of Japan in real time and helping corporate and financial institutional treasurers put capital to work more efficiently,” said Kanika Thakur, Head of Services for Japan, Asia North and Australia.
BNW Developments has established a Sydney presence, joining Arada and Sobha Realty among the growing number of UAE developers pursuing Australian buyers and development opportunities.
