Citi report delivers insights to market opportunities with AI

AI and machine learning have exploded onto the market, the public consciousness, and usage in the past 12 to 18 months. OpenAI’s ChatGPT hit 100 million weekly users in November 2023.

In public markets, AI has fuelled all-time highs in multiple indexes and stocks. In private markets and primarily in venture, AI has seen significant resilience.

Such resilience still speaks to the stage of the AI adoption cycle, as does the cumulative valuation of all private AI unicorns, which is at a record $1.12 trillion.

Tech companies’ utilisation of AI in core legacy products and services has driven many companies’ surges in the past several months.

Enterprise software remains the focal point for the untapped potential of AI agents, and this has been further evidenced by the ebbs and flows of enterprise software venture capital (VC) investment activity.

Although multiple enterprise software companies are focused on building their own AI models, borrowing from open-source options, the flow of VC shows that AI is gradually proliferating across multiple aspects of enterprise software delivery, from back-end assembly optimisation, automated customer service, and product design, to predictive maintenance for hardware.

The average capital raised prior to going public dwindled from a peak in 2019, while the median time between the final private VC round and going public has risen by approximately 18 months.

These trends suggest that AI companies and their backers are pushing into various frontiers of AI applications without raising as much as in the past, as these niche plays do not require vast sums of capital.

The report reads that M&As will likely remain the prime driver of exits going forward, as some deep-pocketed companies turn to the acquisition of innovative products and services.

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