AI Firms Attract Majority of Private Capital Inflows Despite Low Exit Activity, S&P Report States

Artificial intelligence companies are attracting a disproportionate share of capital inflows compared to other private market sectors, according to a report from S&P Global Market Intelligence. More than 75% of limited partners intend to allocate to AI in the next 12 months, which is more than four times the rate for blockchain.

This influx supports large funding rounds, but exit activity remains relatively subdued. Fresh capital is entering the market faster than it is leaving, creating a structural imbalance. The report stated that deployment is now decoupled from exit cycles, with limited partners showing forward-looking commitment to AI as a transformative platform.

Broad-based endowments, wealth managers, and family offices are increasing their exposure to AI, even as opportunities for scalable investments narrow.

Investment in AI has become concentrated, with 82% of new capital flowing into deals above $1 billion, primarily U.S.-based platforms. Ilja Hauerhof, new product development director for private markets at S&P Global Market Intelligence, told Benzinga that there is opportunity in underfunded companies that are scaling without full market pricing.

Limited partners are relying on interim performance signals rather than waiting for liquidity events.

“AI venture funds are posting double-digit returns, but this outperformance is built almost entirely on paper valuations and mark-to-market gains, not cash distributions.”

AI venture funds are showing double-digit returns based on paper valuations and mark-to-market gains, not cash distributions, the report stated. Exit markets remain subdued with minimal initial public offerings and limited mergers and acquisitions. The bridge to liquidity depends on the exit window reopening and which companies can access it.

Over the past three quarters, deal counts have fallen 23%, while total funding has more than tripled. Average investment sizes are rising as capital concentrates in fewer companies, driving valuations higher. Access to essential platforms is tightening, according to the report.

Geographic imbalances are widening, with U.S. markets capturing most AI deal activity. This trend is reshaping global capital flows, as investors from Europe and the UK move capital to U.S. mega-deals. The AI investment landscape is defined by concentrated flows and unrealized gains rather than liquidity events, the report stated.

Until exit markets reopen, the sector will likely continue to rely on investor conviction and paper performance rather than realized returns.