As concerns rise over a potential investment bubble in artificial intelligence (AI) infrastructure, Robert Smith, CEO of Vista Equity Partners, emphasizes that the next phase of AI growth will emerge from private software companies already driving significant productivity gains. The discussion around AI investment has largely focused on the high valuations of major companies such as Nvidia, Meta, Microsoft, and Alphabet. However, Smith points out that substantial opportunities lie within non-public enterprise software firms utilizing “agentic AI” to enhance operational efficiencies.
Smith argues that while large tech firms are currently setting up the necessary infrastructure for AI, the next wave of investment will center on application providers. Historically, these companies capture a significant share of economic benefit once technologies mature and spread across markets. He notes that 97% of enterprise software companies remain private, creating a burgeoning sector ripe for investment.
Vista Equity, managing $100 billion in assets and operating over 90 portfolio companies in enterprise software, is investing heavily in the development and implementation of agentic AI. Currently, around 30 of Vista’s companies are generating revenue from AI integrations, with many more set to follow. One of their portfolio companies, SimplePractice, aids mental health professionals using AI to streamline session documentation. Another, Reslinc, assists businesses with regulatory compliance.
Smith challenges the notion that AI will diminish software roles. Instead, he asserts that agentic AI will boost productivity across enterprise tools, yielding substantial gains. For instance, Vista’s investments have led to productivity increases of 30% to 50% in certain tasks. Although some jobs may become obsolete, Smith believes new roles will emerge as AI transforms the workplace.
Why this story matters:
- Highlights growth potential in private AI application companies.
Key takeaway:
- Agentic AI is set to revolutionize enterprise software, enhancing productivity rather than merely replacing jobs.
Opposing viewpoint:
- Concerns exist regarding potential job losses as AI technologies advance.
