Family offices prefer to bet on AI boom with stocks versus startups and VC funds

A Goldman Sachs survey of 245 family offices reveals a strong preference for AI exposure through public equities (52%) and ETFs over direct startup investments (25%), citing more tempered valuations in public markets. While some prominent family offices directly fund AI startups, the broader investor base also targets companies leveraging AI for productivity and secondary beneficiaries like energy providers. The report indicates that family offices may have greater AI exposure than realized through major public stocks, and significant private market opportunities, including a substantial backlog of unicorns, remain despite the public market preference.

Analysis

A recent Goldman Sachs survey of 245 global family offices, two-thirds of which manage over $1 billion in assets, reveals a distinct preference for gaining artificial intelligence exposure through public markets. The data shows 52% of respondents use primary public equities or ETFs for AI investment, compared to only 25% who invest directly in AI startups. This preference is largely attributed to more tempered and transparent valuations in public markets, as private market valuations from recent years are still being grown into. Despite this trend, high-profile family offices like Bezos Expeditions and Hillspire continue to make significant direct investments in AI startups, co-leading rounds such as the $405 million for Field AI. The analysis suggests family offices may have greater AI exposure than they realize, as the top AI-driven stocks constitute 40% of the S&P 500. Beyond direct AI plays, 38% of offices are investing in companies leveraging AI for productivity, and 32% are targeting secondary beneficiaries like energy providers, with 27% anticipating an overweight position in energy and materials over the next year. While public equities are favored, the private market still holds substantial opportunity, evidenced by a backlog of approximately 800 unicorns that would take an estimated 12 years to clear at current IPO rates, indicating a long runway for private investment.

Key Decisions for Investors

• Investors should reassess their public equity portfolios to quantify their true, and likely understated, exposure to the AI theme, given that the largest S&P 500 components are heavily AI-driven.
• Consider diversifying AI-related investments beyond core technology by exploring secondary beneficiaries, such as energy and materials companies, which a significant portion of family offices intend to overweight.
• For those with a long-term horizon, the large backlog of private unicorns presents a potential opportunity to access growth not available in public markets, but rigorous valuation discipline is critical given the sentiment that private valuations remain elevated.
• The preference for public markets signals a broader concern about private market valuations; therefore, any direct or private fund investments in AI should be scrutinized for entry price and potential for growth to justify the valuation.