a16z ‘State Of Markets’ Report: 55% Of AI Growth Concentrated In Private Markets, Limiting Access For Ordinary Investors

Andreessen Horowitz (a16z) has released its latest “State of Markets” report, offering a sweeping analysis of the current AI landscape and its implications for investors, enterprises, and the broader technology ecosystem. 

The report highlights the growing concentration of value within a small group of private companies, pointing out that roughly two-thirds of revenue among the top 50 private AI firms comes from a16z portfolio companies, generating $26.5 billion compared with $14.1 billion from all other players. 

Public markets have similarly reflected this dominance, with AI stocks accounting for approximately 78% of S&P 500 returns since November 2022, while non-AI equities gained only 26%. 

This performance reflects a shift toward profit-driven growth rather than speculative expansion, with valuation multiples remaining steady or slightly contracting, a stark departure from the unprofitable growth trends of 2021–2022.

The report also examines the infrastructure powering AI development and questions of potential market overheating. Contrary to earlier cycles characterized by unprofitable startups burning venture capital, investment today is being driven by historically profitable technology giants allocating substantial portions of revenue—between 30% and 65%—to capital expenditures. In some cases, hyperscalers’ spending could reach 75% of operating cash flow in 2026. 

While a16z acknowledges the risk of high concentration in the market, the firm contends that fundamental conditions differ from previous technology bubbles. Legacy hardware remains fully utilized, and seven- to eight-year-old TPUs operate at full capacity, while demand continues to exceed supply. The so-called Jevons paradox is evident, as cheaper tokens and processing units drive rising consumption, with GPUs frequently running above 80% utilization.

Private Markets Capture Majority Of Growth And Top Unicorns Dominate Value Creation

Monetization strategies are advancing fast, particularly in software-as-a-service (SaaS) platforms. Salesforce Agentforce has reached $100 million in annual recurring revenue, and DocuSign’s Intelligent Agreement Management platform has grown more than fivefold in a single year, from $75 million to $400 million ARR. 

Across the board, AI-driven products are generating revenue through subscriptions, consumption-based credits, and agentic capabilities, illustrating the breadth of commercial adoption. The potential scale of the AI market is staggering; Goldman Sachs estimates up to $9 trillion in revenue from AI infrastructure alone. 

With US corporate software spending at $300–350 billion, representing about 1% of GDP, and white-collar wages exceeding $6 trillion, roughly 20% of GDP, AI’s economic impact extends far beyond software, targeting labor productivity and workflow automation.

The private market continues to play a dominant role in value creation. Companies are remaining private for longer periods, often growing from $1 billion to $5–6 billion before going public. 

The majority of growth occurs prior to IPOs, concentrated in the hands of venture capital, private equity, and large institutional investors. This dynamic means that 55% of value is created in private markets, leaving public investors access to only 45% of growth opportunities. 

Power laws are also intensifying, with the top 10 unicorns—including SpaceX, OpenAI, xAI, Anthropic, Databricks, Stripe, Revolut, Scale, Waymo, and Checkout.com—accounting for 38% of the combined valuation of North American and European unicorns, illustrating how market winners are capturing a disproportionately large share of value.

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