Concentration risk rises as private equity pours billions into AI

Global private equity and venture capital firms are increasingly betting on large AI funding rounds, which may expose limited partners to unintended concentration risk.

Private equity-backed unicorn rounds — funding rounds worth at least $1 billion — totaled $179.33 billion in the first quarter. This accounted for nearly 86% of the aggregate amount raised by AI companies through funding rounds in the first quarter, according to S&P Global Market Intelligence data.

For comparison, billion-dollar-plus funding rounds for AI companies accounted for 55% of the total in full year 2025 and about 41% in 2024.

The concentration of capital in unicorn rounds in the first quarter was led by OpenAI LLC's $122 billion round in February.

This was followed by X.AI LLC's $20 billion series E round in January.

Andreessen Horowitz LLC was the most active participant in recent billion-dollar AI rounds, investing in 12 rounds between January 2025 and March 2026.

Sequoia Capital Operations LLC ranked second with eight rounds, followed by Lightspeed Ventures LLC with seven rounds.

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Limited partners should consider the potential risk of these large investments in AI companies, as private equity firms — or general partners — underwrite transactions independently and do not manage based on a limited partner's total portfolio exposure, according to Darius Craton, director at placement agent Raymond James Private Capital Advisory.

"Silver Lake doesn't care what Thoma Bravo is doing necessarily or what Vista Equity is doing. They might be investing alongside each other, but they don't think about the underlying exposure that an LP might be in all three of those firms. Instead of taking a 10% allocation to this thing, [a limited partner may] have 15%, 20% [exposure]," Craton said.

The underlying driver of returns becomes concentrated when general partners pour money into the same AI companies, according to a research report by Market Intelligence.

"[Limited partners] may find themselves with meaningful exposure to the same handful of category leaders across multiple managers. While that is not necessarily problematic, it is a structural reality worth mapping," according to the report.

To mitigate potential risks associated with concentrated AI investments, limited partners should track the overlaps in investments across managers through the general partners' quarterly reports and check whether different managers are valuing the same asset differently, Craton said.

"It's always interesting to cross-reference and ask questions. What is your underwriting compared to theirs? Why do you have worse or better expectations for this asset at this given time?" Craton said.

While these dynamics raise concerns about overlapping exposures and potential risks for limited partners, Kirsten Morin, head of venture capital at hedge fund manager HighVista Strategies LLC, believes that such concentration could actually benefit investors.

The concentration of capital in industry leaders is inherently positive, as these companies are expected to become the most attractive IPO and M&A candidates as the exit window opens wider, Morin said.