AI M&A Boom: Will a 2026 Capital Crunch Derail Deals? | Goldman Sachs

Global M&A Boom Rolls Into 2026 as AI Sparks Deal Frenzy

Despite predictions of a slowdown, mergers and acquisitions (M&A) defied expectations and surged in 2025. Now, with artificial intelligence (AI) driving massive deals, the question is whether a potential capital crunch will keep the M&A boom going in 2026.

AI's Influence on M&A Activity

The global mergers and acquisitions boom that defined 2025 is carrying into 2026, as companies reassess their portfolios and artificial intelligence-led demand fuels large-scale transactions. The rise of AI is not just a trend; it's reshaping industries and driving companies to consolidate to gain a competitive edge.

Capital Spending on AI

Heavy capital spending in AI could constrain M&A activity in the near term, according to analysts at PwC. Companies are increasingly directing their funds toward dividends, buybacks, capital expenditures, and research and development rather than M&A. This shift in capital allocation reflects a strategic pivot towards investing in internal growth and technological advancements.

The Funding Squeeze

While the appetite for deals remains strong, the pool of discretionary capital to fund them is historically thin. A tightening capital pool is forcing executives to be more selective than ever. The proportion of capital allocated to M&A hit a 30-year low in 2025, according to Bain & Company.

Private Equity to the Rescue?

The funding crunch has pushed private capital to the center of dealmaking. Private equity firms are seeking to deploy idle cash, borrowers are turning to private credit funds for flexibility, and sovereign wealth funds are increasingly acting as lead investors rather than passive backers.

Private equity now accounts for roughly 40% of global M&A activity, according to Goldman Sachs. Despite signs of stress in the private credit market — now valued at roughly $2.1 trillion — Goldman expects the asset class to more than double by 2030, broadening the pool of capital available to fund large transactions.

The "Real Economy" Beckons

Investors are increasingly weary of the massive capital expenditure (capex) required to sustain the AI boom without immediate, bottom-line returns. Sectors like Industrials and Financials are seeing record inflows as they offer something the AI sector currently lacks: predictable cash flows and deep-value cushions.

After years of growth-at-any-cost fueled by the AI narrative, the market is returning to a "tangible asset" philosophy. The most successful firms in 2026 will likely be those in the Healthcare and Financials sectors that use AI to optimize staffing, detect fraud, and reduce overhead.

FAQFrequently Asked Questions

M&A activity surged in 2025, defying earlier predictions of a slowdown, as companies reassessed their portfolios. This resurgence was primarily fueled by the growing demand and influence of artificial intelligence (AI) across various industries.

AI is significantly influencing the M&A market by driving companies to consolidate and acquire new technologies to stay competitive. However, heavy capital spending on AI may constrain M&A activity as companies prioritize internal growth, dividends, buybacks, and R&D.

The pool of discretionary capital available to fund M&A deals is historically thin, leading to a capital squeeze. According to Bain & Company, the proportion of capital allocated to M&A hit a 30-year low in 2025, forcing executives to be more selective in their dealmaking.

Private equity firms are playing a more prominent role in M&A deals due to the funding crunch. These firms are deploying idle cash, and borrowers are increasingly turning to private credit funds for flexibility, with private equity now accounting for roughly 40% of global M&A activity.

Sectors like Industrials and Financials are seeing record inflows as investors become wary of the massive capital expenditure required to sustain the AI boom without immediate returns. These sectors offer predictable cash flows and deep-value cushions, attracting investors seeking a return to a "tangible asset" philosophy.