By Thomas H. Ruggie
Published on Forbes.com
September 16, 2025
We are at the beginning of what will be remembered as the “AI revolution.” Demand is overwhelming. Valuations in private markets are climbing quickly. Public companies are pouring billions into research and deployment. For investors, it feels like a rare moment of excitement and opportunity.
What makes this different from prior technology booms is more than just the capital being poured in. It’s the way investors, especially high-net-worth individuals and family offices, can now participate directly in private companies. That level of access simply didn’t exist in earlier cycles.
How AI Investing Differs From The Dot-Com Era
The similarities between today and the dot-com boom are obvious: bold new companies, enormous amounts of capital and excitement around technology whose value is still being defined. But the differences matter more.
Back in the late 1990s, the internet was still a mystery to most people. Knowledge wasn’t as available and investment options were narrow. Unless you were among the ultra-wealthy with deep institutional ties, your only entry was through public stocks like Yahoo, Cisco or AOL. Direct investments and co-investments weren’t realistic options even for ordinary high-net-worth investors.
Today, knowledge is at everyone’s fingertips. Family offices and qualified investors can get into private AI companies before they go public. Direct investments, secondary transactions and syndicated opportunities are coming fast, and capital is chasing them aggressively.
At the same time, the public market leaders continue to dominate. AI investments by the so-called “Magnificent Seven” (Google, Microsoft, Amazon, Apple, NVIDIA, Meta and Tesla) ripple outward. If you own Microsoft, you effectively own a piece of OpenAI. If you own Amazon or Google, you’re tied to Anthropic. That gives even public market investors exposure to AI, though not always as directly as in the private markets.
For those of us with access, the private side is booming. My firm has completed multiple direct investments with AI companies, and activity is only accelerating. Secondary markets add more options, but they often come at a premium. This year, we’ve seen offerings available at higher prices than on a company’s cap table. That extra cost is one of the trade-offs that investors have to consider.
With so much activity, structuring investments properly is critical. Family offices and high-net-worth investors typically use a mix of public equities, specialized funds, ETFs and direct deals. Public equities are straightforward and liquid. Private investments offer greater upside, but they also bring higher fees and risk.
Access itself can feel like a dividing line. Many advisors lean heavily on public markets because direct deals are harder to secure. As a registered investment advisor, I have more flexibility, but even then, I recognize that access is an advantage not everyone enjoys.
Investors also need to be realistic about what they’re buying. Private AI companies are raising capital at a staggering pace. In all likelihood, only a small percentage will truly win, another slice will survive and most of the rest will disappear.
That reality brings several risks. Liquidity is the most obvious. When you invest in a private AI company, you should assume a five-to-10-year holding period, even if actual exits come sooner. Volatility is another concern, as these companies face lawsuits, regulatory pressure and massive capital needs. Transparency is limited compared to public companies, since much of the information flows through private equity firms. Concentration risk is also high, given that so much money is chasing just a handful of names.
I always come back to diversification. In practice, that means spreading your allocation across multiple deals over time. Whatever number you’re comfortable investing in AI, divide it by 10 and place those bets gradually over the next year or so. Everything looks good on a polished investor deck, but the reality is that many of these companies will fail outright.
A Measured Path Forward
The opportunity in AI is enormous, but the risks are just as real. Investors should resist the temptation to bet everything on a handful of names. The public markets, the Magnificent Seven, ETFs and direct investments all have a role to play. The art is in finding some kind of balance.
I often remind clients of the old adage that higher returns always come with higher risk. AI may be one of the most compelling investment themes of our time, but it’s also one of the riskiest. The best approach is measured and diversified. Build exposure thoughtfully. Spread risk across companies and vehicles and, above all, stay patient and informed.