AI Ignites Private Market Boom: Wealthy Investors Seek More Opportunities

Artificial Intelligence (AI) has sparked a private market boom, drawing substantial investment from wealthy individuals and family offices. According to UBS, private equity (PE) opportunities in AI are set to increase over the next five to ten years, as start-ups financed through venture capital (VC) mature and consolidate. VC deals in AI and machine learning have averaged 2,100 per quarter over the last 24 months, representing 19% of global VC deal activity. UBS data shows today's opportunities are three times greater than a decade ago. The US leads the way, with one in three VC dollars allocated to AI and machine learning in 2023. Barclays Private Bank reports growing demand for private markets, fueled by private wealth investors increasingly embracing institutional strategies to boost returns and diversify portfolios. PE funds have secured a 50.5% share of private capital fundraising so far this year, with assets managed by these funds projected to surge to $19.6tn by 2028.



AI technologies, particularly generative AI, machine learning, and natural language processing, have significantly contributed to the private market boom by driving innovation, creating new investment opportunities, and attracting wealthy investors. Generative AI, for instance, has the potential to boost global labor productivity by more than 1 percentage point a year in the decade following widespread usage (Goldman Sachs, 2024). This economic potential has led to substantial investments in AI, with VC deals in AI and machine learning averaging 2,100 per quarter over the last 24 months (UBS, 2024). Additionally, the growing demand for private markets is being fueled by private wealth investors increasingly embracing institutional strategies to boost returns and diversify portfolios (Barclays Private Bank, 2024). As a result, AI-related investment is expected to approach $200 billion globally by 2025, with a significant portion coming from private markets.



Wealthy investors have been drawn to AI's potential in private markets, with a particular focus on generative AI, natural language processing, and computer vision. These technologies have seen significant investment, with venture capital deals in AI and machine learning averaging 2,100 per quarter over the last 24 months, representing 19% of global VC deal activity. The US leads this trend, with one in three VC dollars allocated to AI and machine learning in 2023.

Private banks and wealth management firms have been instrumental in facilitating access to AI investments for their high net worth clients. According to UBS, there are "interesting" diversification opportunities in private markets due to broadening AI adoption and spending trends (Source: Number 1). Laeticia Friedemann, alternative investment strategist at UBS Global Wealth Management, notes that over the next five to 10 years, the opportunity for private equity (PE) will increase as start-ups financed through venture capital (VC) mature (Source: Number 1). Barclays Private Bank also reports growing demand for private markets, fueled by private wealth investors increasingly embracing institutional strategies to boost returns and diversify portfolios (Source: Number 1). This trend is further supported by the rapid growth of VC deals in AI and machine learning, averaging 2,100 per quarter over the last 24 months, representing 19% of global VC deal activity (Source: Number 1).

Wealthy investors, recognizing the potential of AI in private markets, have employed several strategies to diversify their portfolios. Firstly, they are increasingly allocating capital to venture capital (VC) funds focused on AI, with UBS reporting a threefold increase in opportunities over the past decade (PWMNet, 2023). Secondly, they are investing in private equity (PE) funds that specialize in AI, as these funds can provide exposure to mature start-ups and industry consolidation (UBS, 2023). Lastly, wealthy investors are also exploring direct investments in AI start-ups, allowing them to gain early access to promising technologies and potentially higher returns (Barclays Private Bank, 2023). By employing these strategies, wealthy investors aim to capture the growth potential of AI while mitigating risks associated with public market volatility.

In conclusion, AI has ignited a private market boom, attracting substantial investment from wealthy individuals and family offices. As AI technologies continue to drive innovation and create new investment opportunities, wealthy investors are seeking more ways to capitalize on this trend. By diversifying their portfolios through VC and PE funds, as well as direct investments in AI start-ups, wealthy investors aim to capture the growth potential of AI while mitigating risks. As the AI market continues to evolve, private market investors will play a crucial role in shaping its future and reaping the benefits of this transformative technology.