a16z ‘State of the Market’ Report: 55% of AI growth is concentrated in private markets, limiting access to retail investors

by
Alyssa Davidson

Posted: January 23, 2026 9:30 AM Updated: January 23, 2026 8:59 AM

by well

Correction and fact check date: January 23, 2026, 9:30 AM

We sometimes use automatic translation plugins to improve your local language experience. The automatic translation may not be accurate, so please read the original text for accurate information.

Andreessen Horowitz (a16z) has released its latest “State of the Market” report, which provides a comprehensive analysis of the current AI landscape and its impact on investors, businesses and the broader technology ecosystem.

The report highlights the increasing concentration of value within smaller private companies, noting that among the top 50 private AI companies, about two-thirds of revenue comes from a16z portfolio companies, which generate $26.5 billion compared to $14.1 billion for all other companies.

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

This performance reflects a shift toward profit-driven growth rather than speculative expansion, with valuation multiples remaining stable or contracting slightly, marking a clear departure from the unprofitable growth trend of 2021-2022.

The report also examines questions about the infrastructure supporting AI development and potential market overheating. Unlike earlier cycles when unprofitable startups drained venture capital, today’s investments are driven by historically highly profitable technology giants that allocate a significant portion of their profits (30% to 65%) to capital expenditures. In some cases, hyperscalers’ spending could reach 75% of operating cash flow by 2026.

While a16z acknowledges the risks of high market concentration, it argues that the fundamental conditions are different from existing technology bubbles. Legacy hardware is still fully utilized, TPUs that are 7-8 years old are operating at full capacity, while demand continues to exceed supply. The so-called Jevons paradox is evident as cheaper tokens and processing units lead to increased consumption and GPU utilization often runs above 80%.

Private markets account for most of the growth and top unicorns dominate value creation.

Monetization strategies are evolving rapidly, especially on Software-as-a-Service (SaaS) platforms. Salesforce Agentforce’s annual recurring revenue reached $100 million, and DocuSign’s intelligent contract management platform grew more than fivefold in one year from $75 million to $400 million in ARR.

Overall, AI-based products are monetized through subscriptions, consumption-based credits, and agent capabilities, demonstrating the breadth of commercial adoption. The potential size of the AI ​​market is enormous. Goldman Sachs estimates that AI infrastructure alone will generate up to $9 trillion in revenue.

Software spending by U.S. businesses amounts to $300 to $350 billion, or about 1% of GDP, and white-collar wages exceed $6 trillion, or about 20% of GDP. The economic impact of AI goes beyond software and targets labor productivity and workflow automation.

Private markets continue to play a dominant role in value creation. Companies often remain private for long periods of time and grow from $1 billion before going public to $5-6 billion.

Most of the growth occurs before IPOs and is 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 with access to only 45% of growth opportunities.

The power law is also strengthening, with the top 10 unicorns, including SpaceX, OpenAI, xAI, Anthropic, Databricks, Stripe, Revolut, Scale, Waymo, and Checkout.com, accounting for 38% of the total value of North American and European unicorns, showing how market winners are capturing disproportionately large amounts of value.

As MPost’s resident journalist, Alisa specializes in the broad areas of cryptocurrencies, zero-knowledge proofs, investing, and Web3. With a keen eye for new trends and technologies, she provides comprehensive coverage to inform and engage readers about the ever-evolving digital financial landscape.

• 
  
  

more articles