The firm sees a less than 50 per cent chance AI valuations are in a bubble, arguing private markets offer better diversified exposure than concentrated public markets.
The private markets investment firm has estimated a 40 per cent chance AI valuations are in a bubble. Against this backdrop, it argued investors should still seek AI exposure, with private markets offering the best opportunities given public market concentration.
On the one hand, the firm said AI valuations could be stretched because model progress and monetisation might not support current premium pricing. It also cited concerns about circular funding between players, while the addressable market may be smaller than claims that AI can replace “the entire labour market.”
However, it argued that AI funding is still mainly driven by equity, corporate capex and venture capital (VC) rather than debt, and is being embedded into core workflows with recurring revenue. It contrasted this with dot-com-era hype metrics, adding that growth is constrained less by demand and more by an undersupply of digital and physical infrastructure.
Speaking at its annual markets overview discussion this week, Hamilton Lane’s executive co-chair Hartley Rogers said the firm sees AI playing out differently in private versus public markets, with key companies staying private longer and VC driving activity public markets can’t currently match.
“With public markets remaining highly concentrated in a small group of AI-linked companies, private markets – specifically venture capital – can provide broader exposure and diversification, which may be more important now than ever,” Rogers said.
He noted AI has shifted from niche to dominant in venture deal value since COVID, now on a trajectory similar to what was seen among software-as-a-service (SaaS) companies rather than following a dot-com-style trajectory.
“AI has become a huge part of total venture deal value. You can see that if you go back to when the venture bubble popped in 2022, AI-related investments were 20 per cent of the deal value, and today it’s somewhere like 50 or 60 per cent positive trend.”
For his part, Rogers said buyout-owned companies are typically better managed than smaller public firms, and that strong private equity backing makes it easier to invest in and adopt AI thanks to access to GP support, including hiring engineers and software talent.
His colleague Lauren Williamson, principal, client solutions at Hamilton Lane, agreed, saying private markets offer greater opportunity in the AI application layer than is reflected in public market exposure.
She added that while they may hold exposure to leading names preparing for IPOs this year, such as Anthropic and OpenAI, questions remain around valuations and the prospect of multiple large companies listing at once.
Meanwhile, she said that many other non-AI companies are now pivoting to embed AI into their business models at the adoption stage, but remain reluctant to list, creating opportunities that are more accessible in private markets.
The firm’s comments also come as private markets face scrutiny over software exposure, a sector seen as vulnerable to AI disruption, with rising redemptions from retail investors recently drawn into private credit funds.
Private market access change
The firm’s broader AI and private markets commentary also comes as it highlights a major shift in investor access, with evergreen funds and secondaries gaining popularity.
Based on Hamilton Lane’s 2026 Market Overview data, it found that private equity and secondary-focused evergreen funds have outperformed closed-end fund peers across one- and three-year periods, running counter to the narrative that investors may sacrifice returns for a friendlier structure and the option for liquidity.
Along with discussing AI bubble concerns, it has also weighed in on fears around private credit. Having outperformed its public benchmark every year for 24 years and by hundreds of basis points over the past decade as of 30 September 2025, it argued that the sector ultimately remains resilient.
“Despite questions around a possible bubble, the forces that have been reshaping the private credit landscape globally have only grown during a bull market for credit, and it is showing limited signs of stress,” the firm stated.
Overall, Hamilton Lane said Australian investors remain committed to private markets, seeking diversified AI exposure amid global public market concentration at its highest since the 1970s.
