Commercial Awareness Update: 24th September 2026

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Hey {{first_name}} 👋!

September is peak application season. So here’s the question: if your dream firm invited you to interview tomorrow, would you actually be ready?

Applications are going in now. Interviews are already happening. And the gap between “I hope I get something” and “I know exactly what I’m doing” gets harder to close as the cycle progresses.

I currently have 3 spaces available for my 1-to-1 coaching programme: 6 months of personalised coaching, regular video calls, unlimited mock interviews, application support and an offer guarantee.

If you want me in your corner until you secure an offer, reply “Interested” to this email and I’ll send you the details.

3 spaces available this month.

Now onto today’s newsletter. Let’s go over three stories from the last week that are particularly useful for interviews.

Here's what we're covering:

For each one, we're going beyond the headline.

You should leave knowing:

Let's get into it.

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For most of the last few years, the interest-rate conversation has been about one question:

When will rates come down?

That conversation has changed.

Last week, the Federal Reserve raised its benchmark interest rate by 25 basis points, its first increase in more than three years.

The reason is inflation.

Higher energy prices have complicated the Fed's attempts to return inflation sustainably towards its 2% target, while underlying inflationary pressures elsewhere in the economy have remained stubborn.

And Fed officials now face an uncomfortable problem.

Raise rates too aggressively and you risk slowing the economy and weakening employment.

Don't raise them enough and elevated inflation could become embedded in people's expectations.

Why do expectations matter so much?

Imagine a business expects its costs to rise 5% every year.

It might pre-emptively increase its own prices by 5%.

Employees experiencing higher prices then demand higher wages.

Those higher wages increase companies' costs further.

Companies raise prices again.

You can end up with a self-reinforcing cycle.

That's why central banks care about inflation expectations almost as much as the inflation number itself.

The Fed's challenge is therefore not simply bringing inflation down.

It's convincing households and businesses that inflation will come down.

And the implications extend far beyond Washington.

Higher US interest rates affect almost every major asset class in the world.

Bond yields can rise.

Mortgages and corporate loans become more expensive.

The dollar can strengthen.

Equity valuations can come under pressure.

Leveraged buyouts become harder to finance.

Emerging-market borrowers with dollar-denominated debt can face higher repayment costs.

This is why interest rates are sometimes described as the price of money.

Change that price and the effects move through almost everything else.

Know what happened

The Fed raised rates by 25 basis points for the first time in more than three years as it responded to renewed inflationary pressure.

How does it impact the firm?

For a large bank, higher rates create both opportunities and risks.

Net interest income can benefit in parts of the banking business because lending rates may rise.

At the same time, higher rates can reduce demand for borrowing, increase credit risk and create volatility across equities, bonds and currencies.

For an investment bank specifically, sustained higher rates can make debt-financed M&A and leveraged buyouts more difficult.

How does it impact the division?

If you're interviewing for Investment Banking, talk about higher financing costs, valuations and deal activity.

For Sales & Trading, talk about volatility across rates, FX and fixed income.

For Asset Management, discuss portfolio positioning, duration and the relative attractiveness of bonds versus equities.

For Wealth Management, think about asset allocation and whether clients should hold more fixed income now that yields are more attractive.

For Risk, think about borrowers refinancing debt at significantly higher rates.

How does it impact clients?

Corporate clients may delay acquisitions or investment because financing has become more expensive.

Private equity clients may need to contribute more equity to transactions.

Institutional investors may rotate towards fixed income.

Wealth clients may suddenly find government and corporate bonds considerably more attractive than they were when yields were close to zero.

What's your opinion?

A reasonable view could be:

"I think the Fed is right to prioritise preventing inflation expectations from becoming entrenched, even if that means accepting some short-term weakness in growth. The risk is that energy-driven inflation is partly a supply-side problem, so higher rates cannot directly create more oil or energy supply."

The important part isn't having the "correct" opinion.

It's being able to justify it.

What would I watch next?

Three things:

Inflation → Labour market → Oil

If underlying inflation continues rising, employment remains resilient and oil stays elevated, the argument for further tightening strengthens.

If inflation falls and unemployment begins increasing materially, the Fed has much more reason to pause.

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One company has just demonstrated how enormous the AI capital cycle has become.

SoftBank has raised $11.1 billion through the bond market, largely to finance investments in OpenAI and other AI-related businesses and infrastructure.

It's reportedly the largest high-yield corporate bond sale ever.

SoftBank isn't borrowing billions to acquire factories producing washing machines or expand a traditional retail network.

It's borrowing billions to increase its exposure to AI.

Founder Masayoshi Son wants SoftBank positioned across the AI ecosystem — from semiconductor infrastructure and data centres to large language models and robotics.

But there's another number that makes this story particularly interesting.

SoftBank's debt is below investment grade.

In other words, investors are accepting greater credit risk to finance one of the largest AI investment strategies in the world.

Here's the mechanism worth understanding.

SoftBank wants to invest another $10 billion into OpenAI.

It could theoretically fund that entirely using cash.

It could sell investments.

It could issue equity.

Or it can borrow.

By issuing bonds, SoftBank gets the capital today while retaining its existing equity ownership.

But debt isn't free.

Bondholders expect interest payments regardless of whether SoftBank's AI investments perform well.

That's the fundamental difference between debt and equity.

If an AI investment doubles in value, SoftBank keeps the upside after paying its lenders.

If it collapses, the debt still needs to be serviced.

Leverage therefore magnifies the consequences of being right or wrong.

And there's a fascinating contradiction here.

Story 1 tells us that the world's most important central bank has started raising rates again.

Story 2 tells us companies are simultaneously borrowing enormous amounts of money to fund the most capital-intensive technology buildout in decades.

AI needs enormous quantities of capital at exactly the moment capital is becoming more expensive.

That's one of the most important financial tensions to watch over the next few years.

Know what happened

SoftBank raised $11.1 billion in bonds to help finance its investments in OpenAI and the broader AI ecosystem, in the largest high-yield corporate bond sale on record.

How does it impact the firm?

For banks, enormous financing requirements create opportunities.

Companies participating in the AI buildout need:

The AI boom therefore isn't only generating revenue for Nvidia and technology companies.

It's potentially generating significant fee pools for financial institutions.

How does it impact the division?

For Debt Capital Markets, this is directly relevant: banks help structure, price and distribute bonds to investors.

For Investment Banking, AI investment can generate financing, restructuring and M&A mandates.

For Asset Management, the question is whether the yield adequately compensates investors for SoftBank's credit and concentration risks.

For Sales & Trading, a huge issuance creates bonds that need to be priced, distributed and traded.

For Risk, the important question is whether leverage is increasing faster than the underlying cash flows available to service it.

How does it impact clients?

Corporate clients can look at SoftBank and see that capital markets remain open for strategically important investment — even for below-investment-grade borrowers.

Institutional investors get access to relatively high-yielding debt from a company with substantial exposure to AI.

But they're also taking the risk that SoftBank's enormous AI bets don't generate the expected returns.

What's your opinion?

You could argue:

"I think the most interesting part of the AI boom is increasingly the financing rather than the technology itself. Companies are committing such enormous amounts of capital that AI is becoming a credit-market story as much as an equity-market story. My concern would be whether expected AI cash flows ultimately justify the amount of debt and infrastructure investment being committed today."

That is much more interesting than:

"AI is growing quickly and I think it's exciting."

What would I watch next?

Watch:

AI revenues → AI capex → Debt issuance → Credit spreads

The key question is whether revenue generated from AI applications grows quickly enough to justify the infrastructure and financing behind them.

If it does, today's enormous investment may look rational.

If it doesn't, highly leveraged participants will feel the pressure first.

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While SoftBank is borrowing billions to fund AI, equity investors are doing something else:

They're piling back into AI stocks.

This week, AMD became the latest semiconductor company to reach a $1 trillion market valuation.

The move came as enthusiasm around AI accelerated again following the launch of Meta's new AI agent, Muse.

Meta shares jumped more than 11%.

Semiconductor stocks rallied.

And the Nasdaq reached another record high.

There was another remarkable data point underneath the rally.

South Korean semiconductor exports during the first 20 days of September increased approximately 259% year-on-year.

That's significant because South Korea sits at the centre of the global semiconductor supply chain.

So investors aren't simply betting on an abstract AI story.

They're seeing enormous real-world demand for the hardware required to build it.

But a $1 trillion valuation creates a much harder question:

How much future success is already priced in?

This distinction is critical.

A company can be an exceptional business and still be a poor investment at the wrong price.

Imagine a company earns $10 billion.

If you pay $100 billion for it, you're paying 10x earnings.

If investors become incredibly optimistic and the company becomes worth $500 billion without earnings changing, you're now paying 50x.

The underlying company hasn't become worse.

The expectations embedded in the share price have simply become much higher.

And the higher expectations become, the less room there is for disappointment.

This is one of the central questions surrounding AI equities today.

The debate isn't really:

"Is AI important?"

It obviously is.

The more useful question is:

"How much of AI's future economic value is already reflected in today's share prices?"

That is a completely different question.

And it links directly back to our first two stories.

The Fed is raising the risk-free rate.

SoftBank is taking on billions of dollars of debt to finance AI investment.

Meanwhile, equity investors are assigning trillion-dollar valuations to the companies expected to benefit from that investment.

We're simultaneously seeing:

Higher discount rates + higher AI leverage + higher AI valuations.

Something eventually has to justify those numbers:

cash flow.

Know what happened

AMD reached a $1 trillion market capitalisation as AI-related equities rallied, while extremely strong semiconductor export data reinforced expectations of continued demand.

How does it impact the firm?

Banks benefit from strong equity markets through trading activity, equity issuance, wealth management and potentially increased technology-sector dealmaking.

However, concentrated valuations can also increase market and client risk if sentiment reverses sharply.

How does it impact the division?

For Equity Research, the question is whether earnings forecasts justify the valuation.

For Sales & Trading, greater investor activity and volatility can increase trading opportunities.

For Asset Management, portfolio managers need to decide whether remaining underweight AI creates greater risk than buying companies at elevated valuations.

For Wealth Management, advisers face the challenge of clients wanting exposure to assets that have already appreciated dramatically.

For Investment Banking, high valuations can make equity financing more attractive and give technology companies valuable shares they can potentially use as acquisition currency.

How does it impact clients?

Institutional investors face an uncomfortable decision.

Don't own enough AI and you risk underperforming the benchmark if the rally continues.

Own too much and you become exposed to a crowded trade if expectations change.

Corporate clients can potentially take advantage of strong valuations to issue equity, make acquisitions or accelerate investment.

What's your opinion?

A nuanced answer could be:

"I'm structurally positive on AI demand, and the semiconductor export data suggests the infrastructure buildout is translating into genuine hardware demand. But I'd distinguish between being positive on the technology and being positive on every valuation. At trillion-dollar valuations, the question becomes whether earnings can grow quickly enough to meet expectations."

Notice what that does.

You're not predicting a crash.

You're not blindly saying AI goes up forever.

You're separating business fundamentals from valuation.

What would I watch next?

Watch:

Revenue growth → Margins → Capex → Free cash flow

If AI-related revenues and profits accelerate alongside investment, high valuations become easier to justify.

If capital expenditure continues exploding while free cash flow disappoints, investors may begin questioning the economics of the AI arms race.

There are three separate headlines this week:

The Fed raised rates.

SoftBank borrowed $11.1 billion.

AMD became a $1 trillion company.

But they're really one story.

They're about the price of capital versus the expected return on capital.

The Fed is increasing the price of money because inflation remains too high.

SoftBank believes the potential return from AI is attractive enough that it's willing to borrow billions even in that environment.

Equity investors believe the opportunity is attractive enough to value AMD at $1 trillion.

That creates the question sitting underneath the entire market:

Will AI generate enough future cash flow to justify the amount of capital being invested today?

If the answer is yes, companies spending aggressively now could create enormous value.

If the answer is no, higher interest rates make the consequences more painful because the hurdle rate for every investment has increased.

And that's the level you should aim for when discussing commercial awareness in an interview.

Don't stop at:

"The Fed raised rates."

Know why.

Then ask how that affects the bank.

How it affects your division.

How it affects the bank's clients.

Form your own reasoned opinion.

And finally ask:

What happens next?

If you can consistently move through those six levels, you're no longer repeating the news.

You're thinking about it like someone who actually works in finance.

That’s all for now. Have a good rest of the week!

Afzal

Ps. Whenever you’re ready: