AI now accounts for roughly half of the venture capital market’s total valuation. That concentration is straining the rest of the ecosystem, but it may also be the clearest signal yet of where long-term value is being built.
In a recent Institutional Investor article on the state of the venture capital market, Alpha Partners Managing Partner Steve Brotman shared his perspective on why AI’s growing share of venture activity may not be the warning sign some observers see it as.
“We’re in an AI supercycle,” Brotman told Institutional Investor, comparing the current moment to the industrial revolution. Brotman shared his view that in the future, “every company will be an AI company” in some fashion.
The article frames a tension that has come to define the venture market. AI-related companies are absorbing a historic share of available capital, while the rest of the market is, in the words of the report’s authors, fighting for capital and staring at expected returns well below those of the past. At the same time, exits remain rare, the IPO backlog is still long, and Series A AI companies are commanding meaningful valuation premiums over their non-AI peers.
Brotman’s comments help frame why that concentration may be more rational than it appears. If AI is the foundation of the next platform shift, then capital flowing toward it is not crowding out value, it is following value. Brotman believes tech could grow to represent 60 to 70 percent of the S&P 500 over time, up from roughly 45 percent today. In that environment, the question is less about whether AI is taking up too much oxygen, and more about which AI businesses are actually positioned to compound.
As the article notes, even late-stage software unicorns with credible near-term IPO paths have seen public market comparables marked down as AI reshapes their competitive landscape. Rising entry prices also compress the return multiple at exit, raising the bar for what AI investments need to deliver. Concentration may be the headline, but selectivity will likely determine returns.
At Alpha Partners, we continue to focus on the late-stage segment of this market, where pricing discipline, durable unit economics, and a clear line to liquidity matter most. A supercycle creates a wider opportunity set, but it also raises the bar on diligence. Although there are no guarantees in any market cycle, and selectivity does not eliminate the risk of loss, the companies most likely to reward investors over the next several years will be the ones whose AI exposure is real, defensible, and tied to genuine enterprise demand, not the ones that simply benefit from the label.
AI may be absorbing the venture market today, but if Brotman is right, the more important question is not how much capital it is taking in, but how much value it will ultimately return.
Read the full Institutional Investor article here.
Note: The views expressed by Steve Brotman represent his personal perspective and may not reflect the views of Alpha Partners as a firm.
