Citigroup Ups Focus on Privately-Held AI Startups

Citi has appointed Heath Terry to lead AI industry coverage and private firm research, a strategic move reflecting the significant market shift towards private companies, particularly in AI and aerospace, which has increased data opacity. This initiative is crucial given the explosive growth in AI M&A, with deal values surging 288% to $49.9 billion in 2024 and a rising number of billion-dollar startups. The substantial imbalance between venture capital inflows ($104.3B) and exits ($36B) for US AI startups in H1 2025 further underscores the evolving investment landscape and the imperative for deeper analysis into these less transparent, yet increasingly dominant, sectors.

Analysis

Citigroup's strategic appointment of Heath Terry to lead AI and private firm research underscores a significant structural shift in capital markets, where the proliferation of privately-held companies is increasing data opacity. This trend is particularly acute in the technology sector, evidenced by the explosive growth in AI-related M&A, with global deal values surging 288% to $49.9 billion in 2024 and deal volume rising 53%, according to Mergermarket data. The long-term trend is even more pronounced, with deal values skyrocketing 730% since 2019. This M&A surge is identified as a natural market maturation phase where established players acquire technology. Furthermore, the private market's scale is highlighted by a substantial imbalance in the venture capital ecosystem; US AI startups raised $104.3 billion in the first half of 2025, while exits accounted for only $36 billion. This disparity indicates a large and growing pipeline of valuable, non-public companies, validating Citi's move to develop specialized research capabilities as a fundamental necessity, or 'table stakes,' for navigating modern investment landscapes.

Key Decisions for Investors

• Investors should monitor large-cap technology firms for increased M&A activity, as the acquisition of private AI startups is now a primary strategy for accessing cutting-edge technology and driving growth.
• Consider the growing importance of private market intelligence; firms like Citigroup investing in this coverage may offer a competitive advantage in identifying investment opportunities and risks in opaque sectors.
• The significant gap between venture capital inflows and exits in the AI sector suggests a future pipeline of potential IPOs or acquisitions, warranting close attention for opportunities and market volatility.
• Evaluate portfolio exposure to innovation, recognizing that a substantial portion of disruptive growth in themes like AI is occurring within private companies, which may necessitate investments beyond public equities.