Investment banking is being pulled in two directions. Deal activity is rebounding, but the most stringent mandates are centered on a handful of large banks. AI is changing how research gets done and how deals get executed at the same time as tougher regulation and nontraditional competitors are raising the bar for how banks compete. Success requires knowing which of these shifts carry real weight and which are just noise. This article breaks down eight trends, embracing AI to private credit, shaping investment banking today and describes the ways banks are adapting to them.

Key Takeaways

  • Investment banking activity strengthened in early 2026, tallying record value for mergers and acquisitions (M&A) and increased capital-raising activity.
  • AI is becoming an integral part of investment banking, supporting tasks from research and content creation to complex operational workflows.
  • Tokenization could reshape securities issuance, trading, settlement, and servicing, but significant infrastructure and regulatory challenges remain.
  • Cybersecurity resilience becomes more critical as banks’ attack surfaces expand and cyberthreats grow more sophisticated.
  • Digital transformation is a strategic priority as investment banks modernize legacy systems and adopt AI, cloud computing, and predictive analytics.

The Current State of Investment Banking

Investment banking activity strengthened in the first half of 2026 as M&A and capital markets activity gained momentum despite ongoing macroeconomic and geopolitical volatility. Global M&A value reached a record $2.85 trillion in the first half of 2026, up 50% year over year, even though the number of announced transactions fell 9%, continuing a pattern where an increasing share of deal value is contained within a small number of very large transactions.

But the market was highly condensed. Average deal size increased and activity centered on a limited number of sectors. Technology led overall announced activity, though the composition was uneven. Deal flow in power, utilities, and data infrastructure is being propelled by AI buildout demand, while software M&A aimed at acquiring AI capabilities has cooled, as buyers grow wary of AI disrupting the target company itself. Despite the concentration on deal value, advisory mandates haven’t consolidated among the largest banks. Several independent advisory firms posted record first-half results alongside the bulge bracket, suggesting the biggest deals have not locked in the biggest banks.

Capital-raising activity also grew sharply in the first half, with global IPO proceeds tripling year over year, though a single high-profile US listing (SpaceX) accounted for a substantial share of that total. The number of and proceeds from follow-on registered offerings also rose.

8 Investment Banking Trends to Watch

Investment banks are managing a record dealmaking environment and a rapidly maturing set of AI deployments, just as regulators extend their reach to the technology vendors banks depend on most. The following eight trends warrant particular attention.

  1. AI Digital Transformation

    Major banks that had previously described AI as a general capability are now attaching specific dollar efficiency targets to their technology budgets overall, with AI frequently named as a contributor to those numbers—a level of accountability a general pilot never had to meet. Adoption has also progressed from tools that draft and retrieve information to AI agents built to execute multistep operational workflows involving several systems, such as trade confirmations and collateral calls. Humans still review the highest-risk decisions, though regulators have begun to question whether a human-in-the-loop model still describes what’s actually happening as these systems take on more autonomous work. AI agents can also support client prospecting, lead prioritization, and account planning to allow bankers to spend less time on research and administrative tasks and more time on client relationships. Goldman Sachs estimates that AI could automate tasks representing 25% of current US work hours over the next decade, with bankers and other white-collar professionals likely to see a significant share of their tasks automated.

  2. Tokenization

    Tokenization lets financial institutions create digital representations of ownership or rights in assets, including stocks, bonds, fund shares, loans, and real estate, on a blockchain or other distributed ledger. In 2026, tokenization crossed a regulatory threshold it hadn’t reached in prior cycles. The SEC approved a rule change allowing a major US exchange to trade tokenized securities on the same order book, with the same execution priority, as their conventional counterparts. In addition, 25 major financial institutions committed to a shared on-chain settlement layer connected to existing payment rails, which represents real infrastructure, not a pilot. But the actual value on-chain remains overwhelmingly cashlike, rather than asset-like. Tokenized real-world assets are still a small fraction of stablecoin value. The Boston Consulting Group estimates that the total value of tokenized, real-world assets could reach $14 trillion by 2030 and $55 trillion by 2035—a pace current growth isn’t close to matching—while stablecoins have grown more than 50% over the same period. The nearer-term opportunity for investment banks looks more like collateral and settlement services than tokenized issuance itself.

  3. Cybersecurity Resilience

    Regulatory requirements for cybersecurity and business continuity are increasing pressure on banks to plan for disruptions and maintain controls that have been designed not only to prevent cyberattacks but also to detect and recover from incidents. Nearly half of all breaches now involve a third party—a share that’s grown sharply—and attackers are beginning to operate intrusion campaigns with less human direction than before. Breaches put sensitive business and client data, critical systems, regulatory compliance, and institutional reputations at risk, and can disrupt trading, payments, and settlement. Growing reliance on cloud computing and third-party providers, along with mobile access to business and financial systems, has expanded banks’ attack surfaces. At the same time, GenAI is opening the door to more sophisticated and credible social-engineering attacks occurring at greater scale, including phishing and deepfake impersonations. The Financial Industry Regulatory Authority (FINRA) has denoted a rise in cyberattacks and outages at firms’ third-party vendors as a top supervisory concern and warned that a single vendor incident could affect a large number of member firms at once. It launched a program in 2025 to share cyber and technology risk intelligence directly with potentially affected firms. Key resilience measures now include continuous monitoring, threat intelligence and detection, incident-response and -recovery planning, regular cybersecurity training, and ongoing assessment of third-party and vendor risk.

  4. Predictive Analytics

    Predictive analytics use predictive models, built with traditional statistical methods or AI techniques, to look for patterns in financial and market data and generate insights. Its maturity varies widely by use case. For example, AI is established and deliberately constrained in risk management, with human validation built into higher-risk decisions. It is similarly mature—and more commoditized—in market forecasting. Adoption is moving fastest in deal origination, where it’s governed the least. A 2026 report from Datasite found that 96% of dealmakers use AI to source and screen opportunities, and 24% say it has helped them complete a deal they otherwise would have missed. What’s still missing is measurement. Banks using predictive analytics in credit and fraud can describe the operational benefits but can’t quantify them financially. The same scenario applies to claims about improved deal outcomes. For now, predictive analytics is best treated as an input to sharpen judgment, but it isn’t a replacement for it, particularly at the point where a deal decision is made.

  5. Evolving Regulations

    The regulatory landscape for investment banks continues to change. In March 2026, the Federal Reserve, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency proposed US reforms that would simplify how the nation’s largest banks calculate compliance with risk-based capital requirements, so the calculation better captures credit, market, and operational risks. Regulators’ own estimates suggest the proposal would leave capital requirements roughly flat to modestly lower overall, a notably different profile from the stricter 2023 capital proposal it replaces. In July 2026, the US Securities and Exchange Commission approved FINRA amendments affecting underwriting compensation in public offerings and exemptions for certain private placements. This changes how underwriting compensation is valued and extends private placement filing exemptions to a wider set of sophisticated institutional investors. FINRA’s own 2026 examination prioritizes third-party and vendor risk and GenAI use in recordkeeping and supervision. This position signals that regulatory compliance now extends to how a bank governs its technology vendors.

  6. Fintech and Embedded Finance

    Fintech companies are pushing the investment banking industry forward by pioneering new technologies to deliver or improve financial products and services and to support new business models. One of those technologies is embedded finance, which integrates financial services into nonfinancial platforms and marketplaces, creating new channels for delivering financial products. McKinsey & Co. estimates that fintech companies generated approximately $650 billion in global revenue in 2025, an approximately 21% increase over the previous year but representing only about 4% of total financial services revenue. Fintech’s competitive pressure on investment banks shows up less in advisory or underwriting and more in the cash and payments layer that funds those businesses, particularly as banks and fintechs both build out tokenized deposits and stablecoin-adjacent products. Rather than treating fintechs purely as competitors or advisory clients, several large banks moved to acquire fintech capability directly in 2026 by buying embedded finance and payments platforms, as well as capital markets franchises, outright. That’s a clear sign that some institutions see buying as faster than building.

  7. Private Equity and Private Credit

    Investment banks are benefiting from the growth of private equity (PE) and private credit by providing PE firms and their portfolio companies with M&A advisory and financing services throughout the investment lifecycle. Global PE transaction value climbed to nearly $2 trillion in 2025 from about $1.6 trillion in the prior-year period. Constrained traditional exit routes, meanwhile, have contributed to a growing backlog of portfolio companies. Secondary market transactions, particularly continuation vehicles that let sponsors hold on to prized assets while giving existing investors an exit, have become the industry’s main release valve, creating a durable, less cyclical stream of advisory work. Private credit has also expanded rapidly as an alternative to traditional bank lending, with the worth of US private-credit loans estimated at $1.4 trillion in 2025, according to the Federal Reserve. But the line between bank and private credit is blurrier than that framing suggests. Banks’ own lending to private credit funds has grown several times faster than their overall loan books in recent years, which means that they’re increasingly the funding source behind the very growth often described as bypassing them. That relationship creates opportunity for investment banks’ financing businesses, but it also ties bank balance sheets more closely to private credit’s higher leverage levels and less frequent asset valuations.

  8. Demand for ESG Investments

    The market for environmental, social, and governance (ESG) investments is in flux as regulators, investors, and financial institutions reassess how sustainability factors fit into investment decisions and financial products. ESG regulation remains fragmented, with US regulators seeking to roll back ESG-related requirements and enact anti-ESG measures, while regulators abroad are narrowing disclosure requirements of their own. Amid those political and regulatory headwinds, 84% of institutional investors surveyed by Morgan Stanley in 2025 expected the proportion of sustainable assets under management in their portfolios to increase in the next two years. Asset owners planning to increase their allocations to sustainable investments cited strong financial performance and a maturing track record for sustainable investing among their main reasons. A separate 2026 Morgan Stanley survey found that 92% of responding individual investors globally were interested in sustainable investing, up from 88% in 2025, while 64% planned to increase their sustainable allocations during the following year. Actual allocations tell a slightly different story. The same survey found that investors’ average allocation to sustainable investments ticked down slightly from the year before, even as interest hit a survey high. The same pattern shows up in advisory work. Growth in sustainable debt issuance is concentrated in plain green bonds, while the more complex, fee-generating, sustainability-linked structures have declined sharply.

How Investment Banks Can Adapt and Remain Competitive

With markets, client expectations, and the competitive environment evolving, it’s incumbent on investment banks to continue updating their legacy systems and processes. But that task carries a real measurement problem. Even banking supervisors who study digital investment closely have found it correlates with both higher costs and higher profitability. JPMorgan disclosed a firmwide 2026 technology budget approaching $20 billion, with a specific share earmarked for AI projects across its investment banking, trading, and other divisions. But the efficiency gains banks report are hard to quantify amid record quarterly results that would flatter almost any cost ratio.

The practical case for that spending lies in what the technology does day to day. AI can shoulder labor-intensive research, document review, and the drafting of client materials. Predictive analytics can help banks assess risk and spot market trends. Cloud computing supports the scale and speed that fast-moving markets demand, and automation reduces slow and error-prone manual handoffs. ERP software can anchor these digital transformations by centralizing financial and operational data, so the same information feeds risk models, reporting, and AI tools.

ERP Software Helps Investment Banks Stay Ahead

Investment banks are spending heavily on AI and other technology, but few can say with confidence how much of their reported efficiency gain came from that spending and not from having had a strong revenue year. NetSuite ERP Software for Financial Services brings an investment bank’s financials, client data, planning, and back-office operations onto one platform to deliver segment-level reporting at a degree of detail that’s hard to get when data lives in separate systems. Intelligent Performance Management uses AI to analyze plans and forecasts to hone in on what’s actually driving a change in a business segment’s numbers. The platform also supports governance and regulatory reporting requirements and connects with other operational systems, including loan and portfolio systems.

The convergence of advances in AI and tokenization, shifting markets, fintech and private capital competition, and regulatory uncertainty will continue to test investment banks’ adaptability. But strategic investments in technology can help banks capitalize on the latest trends while managing their associated risks.

Investment Banking Trends FAQs

What are the biggest emerging trends affecting the investment banking industry?

Top investment banking trends include AI, tokenization, cybersecurity resilience, predictive analytics, the rise of fintech, evolving regulations, and private equity and credit. Demand for ESG investments is also shaping the industry.

How are investment banks adapting to digital transformation?

Investment banks are modernizing their core legacy systems and integrating AI—including machine learning, generative AI, and agentic AI—into workflows to increase productivity and remain competitive.

How are client expectations changing in the investment banking industry?

Investment banking clients expect outstanding, personalized customer service with digital, self-service, and frictionless interactions, faster turnarounds, and real-time responses. They also seek digital platforms that seamlessly integrate with their systems and workflows, innovative and customized financial solutions, and transparent, flexible pricing.