VC’s alchemists of AI
1. Key Themes
VC Power Is Concentrating in a Small Number of Elite Firms
The top 30 VC firms are pulling away from the rest of the market in a self-reinforcing cycle of capital, deal access, and portfolio appreciation.
"The 30 leading VC firms have raised over a third of global capital this year and have used it to buy a major chunk of the AI market. From the earliest seed deals to the largest late-stage companies, they have gobbled up the present and future of AI."
"The collective valuation of companies backed by the top 30 firms has doubled to $7 trillion since 2023, and their valuation step-ups now match the 2021-2022 peaks."
Physical AI and Automation Are Creating a Rare US Manufacturing Investment Window
Despite a near-term dip in PE deal value, the structural case for manufacturing investment is the strongest it has been in a generation.
"Physical AI and other automation opportunities offer the best potential for American investment in over 20 years."
Private Capital Platforms Are Consolidating via M&A at a Record Pace
Listed alternative asset managers are acquiring other firms to diversify revenue streams, smooth cyclical exposure, and scale AUM.
"There were a record 296 acquisitions of private capital firms in 2025, up 17% from the previous year. The first seven months of this year have been ahead of pace, with 182 deals totaling $33 billion."
"A more diversified platform also means—potentially—a more stable share price, as it helps listed firms avoid becoming overexposed to a single part of the economic cycle." — Thomas Liaudet, Global Head of GP Capital Advisory, Campbell Lutyens
Germany Is Emerging as Europe's Defense and Deep Tech VC Hub
Capital is rotating from the UK and France into Germany, driven by defense spending tailwinds and deep tech deal flow.
"Germany's VC market is running 40% ahead of last year, with defense and deep tech drawing capital away from the UK and France, but a stubborn late-stage gap threatens to cap the rally."
Global Energy Supply Chains Are Under Geopolitical Stress, Creating PE Opportunity
The Houthi naval blockade is compounding global oil flow disruptions, flagging a PE investment angle in energy supply infrastructure.
"The Red Sea is the latest chokepoint in a blockage of up to 30-35% of global oil flows after Houthi rebels declared a naval blockade against Saudi Arabia."
2. Contrarian Perspectives
The AI VC boom may be the most expensive bet in history — not a sure thing. The article explicitly names the unresolved binary: either this is a generational technology or investors have paid peak prices for a bubble. The $7 trillion collective portfolio valuation and valuation step-ups matching 2021-2022 peaks are sober warning signs, not celebrations.
"There's still one big, unanswerable question: Is AI the generational technology its backers expect, or have they paid the highest prices in history for a bubble?"
Manufacturing PE deal value is falling even as the narrative turns bullish. The conventional signal (declining deal value in H1 2026) cuts against the dominant "reshoring renaissance" narrative — yet PitchBook frames physical AI as the reason to stay constructive. This is a case where headline deal data misleads on forward opportunity.
"Despite the sector's PE deal value falling in the first half of 2026, physical AI and other automation opportunities offer the best potential for American investment in over 20 years."
Ares — the world's largest private credit firm — is sub-scale in PE, exposing a structural gap even giants can have. Despite $644 billion in AUM, Ares's PE business has raised less than $20 billion across four funds since 2012 — an amount Blackstone, KKR, and Apollo can raise in a single fund. Size in one asset class doesn't translate to competitive standing in another.
"With $644 billion in AUM, Ares has grown into the world's largest private credit firm, but its PE business remains sub-scale. The firm has raised four PE funds since 2012 with aggregate commitments of less than $20 billion, and their performance has been mixed."
3. Companies Identified
- Description: Listed alternative asset manager; world's largest private credit firm with $644B AUM
- Why mentioned: In talks to acquire Leonard Green & Partners to quadruple its PE AUM and close a capability gap
- Quote: "Ares has grown into the world's largest private credit firm, but its PE business remains sub-scale."
Leonard Green & Partners
- Description: $85 billion West Coast-focused PE manager; backed Whole Foods, Petco, Shake Shack
- Why mentioned: Acquisition target for Ares; would roughly quadruple Ares's PE AUM if deal closes
- Quote: "The addition of Leonard Green, if it comes to fruition, would roughly quadruple Ares's PE AUM."
- Description: Beijing-based AI company
- Why mentioned: Raised $3.5B at a $35B valuation, backed by China's National AI Industry Investment Fund — one of the largest recent AI rounds globally
- Quote: "Beijing-based Moonshot AI raised a $3.5 billion round at a $35 billion valuation from investors including The National Artificial Intelligence Industry Investment Fund."
Generalist
- Description: Robotics startup developing models for dexterous robot tasks
- Why mentioned: In talks to raise at a $3B valuation led by 8VC; signals rising valuations in physical AI/robotics
- Quote: "Generalist, a robotics startup developing models for robots to perform dexterous tasks, is in talks to raise a new round led by 8VC at a $3 billion valuation."
- Description: Zero Trust cybersecurity software provider
- Why mentioned: Raised a $190M Series F — a notable late-stage cybersecurity deal
- Quote: "ThreatLocker, a provider of Zero Trust cybersecurity software, secured a $190 million Series F led by Elephant."
- Description: Alternative investment platform for financial advisers
- Why mentioned: Raised $170M Series D at $2B+ valuation led by Vista Equity — reflects demand for alts access infrastructure
- Quote: "CAIS, the developer of an alternative investment platform for financial advisers, raised a $170 million Series D led by Vista Equity Partners that valued the company at over $2 billion."
- Description: Developer of connectivity technology for AI infrastructure
- Why mentioned: Closed a $145M Series C at $1B valuation; plays directly in the AI infrastructure stack
- Quote: "Eliyan, a developer of connectivity technology for AI infrastructure, closed a $145 million Series C led by Seligman Ventures at a $1 billion valuation."
ChipAgents
- Description: AI platform for semiconductor design and verification
- Why mentioned: Added $60M to its Series A from B Capital, Bessemer, and Micron — a strategic chip-industry bet on AI-assisted EDA
- Quote: "ChipAgents, which offers an AI platform for semiconductor design and verification, added $60 million to its Series A from investors including B Capital, Bessemer Venture Partners and Micron."
Dwelly
- Description: London-based AI operating system for residential lettings
- Why mentioned: Raised $170M Series B led by EQT Growth and General Catalyst; notable AI-in-real-estate bet
- Quote: "Dwelly, a London-based startup building an AI operating system for residential lettings, raised a $170 million Series B led by EQT Growth and General Catalyst."
Vantage Data Centers
- Description: DigitalBridge-backed global data center operator
- Why mentioned: Exploring a $2B+ sale of Malaysia-based assets — a signal of continued data center asset monetization in Asia
- Quote: "DigitalBridge Group-backed Vantage Data Centers is exploring a sale of its Malaysia-based data center assets, which could be valued at over $2 billion."
Jersey Mike's / Blackstone
- Description: Sandwich chain taken public by Blackstone after an 18-month PE ownership sprint
- Why mentioned: Case study in PE-accelerated IPO execution via a "meticulous to-do list"
- Quote: "Jersey Mike's 18-month journey from PE target to public markets is a success story for Blackstone."
Bridge Data Centers
- Description: Bain Capital-owned Southeast Asia data center operator
- Why mentioned: Attracting bids from Sixth Street, GIC, and La Caisse at $4B+ valuation — continued institutional appetite for Asian data center assets
- Quote: "Sixth Street Partners, Singapore's sovereign wealth fund GIC and La Caisse are all in talks to bid for a stake in Bridge Data Centers... that could be valued at over $4 billion."
FIFA Forward Enterprise
- Description: New $20B commercial subsidiary of FIFA
- Why mentioned: FIFA plans to sell up to 20% to private investors for up to $4.2B — an unusual sovereign sports asset PE play
- Quote: "FIFA plans to sell up to 20% of a new $20 billion commercial subsidiary, FIFA Forward Enterprise, while retaining control of the unit."
4. People Identified
James Thorne
- Description: Reporter, PitchBook
- Why mentioned: Co-author of the lead VC concentration / AI alchemists piece
Stephanie Zhu
- Description: Reporter, PitchBook
- Why mentioned: Co-author of the lead VC concentration / AI alchemists piece
Madeline Shi
- Description: Senior Private Equity Reporter, PitchBook
- Why mentioned: Author of the Ares/Leonard Green M&A analysis
Thomas Liaudet
- Description: Global Head of GP Capital Advisory, Campbell Lutyens
- Why mentioned: Provided expert commentary on why platform diversification stabilizes listed PE firms' share prices
- Quote: "A more diversified platform also means—potentially—a more stable share price, as it helps listed firms avoid becoming overexposed to a single part of the economic cycle."
Benny Wong
- Description: Analyst, PitchBook
- Why mentioned: Authored analysis on PE opportunity in the Red Sea/oil supply disruption
- Quote: "Analyst Benny Wong shares PE's opportunity in the supply crunch."
5. Operating Insights
1. Speed-to-IPO as a PE value creation lever. Blackstone's playbook with Jersey Mike's — acquiring, running through a structured "meticulous to-do list," and IPO-ing within 18 months — is a replicable model for operators and sponsors looking to compress the traditional PE hold period. The implication: IPO readiness work should begin at acquisition, not years later.
"Jersey Mike's 18-month journey from PE target to public markets is a success story for Blackstone. See how the firm fast-forwarded the sandwich chain's IPO with a meticulous to-do list."
2. Platform diversification reduces valuation volatility for listed asset managers. For founders and GPs considering a sale or merger, the strategic logic is clear: single-strategy firms trade at a discount. Diversifying into uncorrelated asset classes (credit, real assets, PE) buffers against cyclical drawdowns in any one vertical.
"A more diversified platform also means—potentially—a more stable share price, as it helps listed firms avoid becoming overexposed to a single part of the economic cycle."
3. AI mega-deals are distorting early-stage share metrics in Europe. Operators and LPs should be cautious interpreting European pre-seed/seed share data — the category is being inflated by a handful of massive AI rounds (Ineffable Intelligence and Advanced Machine Intelligence totaled more than €1.8B), masking the underlying health of the broader early-stage market.
"Pre-seed and seed rounds received a significant boost in share from AI mega-deals. Rounds from Ineffable Intelligence and Advanced Machine Intelligence totaled more than €1.8 billion."
6. Overlooked Insights
1. Germany's late-stage funding gap could cap its VC rally. Despite the 40% YoY growth headline, the article quietly flags a structural weakness: Germany lacks the late-stage capital infrastructure to sustain momentum. This is a white space for growth and late-stage investors looking to enter a market before it matures — and a warning for early-stage investors about exit optionality.
"Germany's VC market is running 40% ahead of last year, with defense and deep tech drawing capital away from the UK and France, but a stubborn late-stage gap threatens to cap the rally."
2. The "open weights" battle in AI could reshape competitive moats. Briefly mentioned in Side Letters, the Silicon Valley fight over releasing AI model weights — the numerical values that determine how a model thinks, without necessarily sharing the underlying code — is a governance and IP issue with profound implications for AI company defensibility and open-source competitive dynamics.
"Silicon Valley is fighting over 'open weights,' releasing the numerical values that determine how an AI model thinks without necessarily sharing the code that built it."