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Amid growing fears of an investment bubble in artificial intelligence infrastructure, the next phase of AI growth will come from private software companies that are already generating huge productivity gains, according to Robert Smith, CEO of Vista Equity Partners.
The surge in valuations of Nvidia, Meta, Microsoft, AlphabetOpenAI and other hyperscalers and large language models have dominated the debate about the opportunities and risks of AI. Still, some of the biggest investment opportunities in AI will be among non-public enterprise software companies that use specific agents, or “agentic AI,” to carry out business tasks, according to Smith, who is also founder and chairman of Vista.
“AI has sucked a lot of the oxygen out of the air for many investors and attracted them to Mag 7,” Smith told CNBC. “These hyperscalers are now starting to build out their infrastructure and their capabilities. Some might say they’re overvalued in some ways. But the (next) wave will be the application providers. And that’s generally how these cycles have played out. The application providers generally get the lion’s share of the economic rent in the long term, once the technology has been released into those markets and into those technologies. That’s really where we are in the cycle.”
Vista’s aggressive bet on applications and agent software highlights one of the fastest-growing sectors in AI trading and alternative investments. Unlike the AI infrastructure sector – which includes dozens of publicly traded companies, hyperscalers and LLMs – the vast majority of companies creating AI applications are private. Smith said 97% of enterprise software companies are privately owned.
Vista aims to lead the enterprise agent revolution. The private equity firm, with $100 billion in assets under management and more than 90 portfolio companies specializing in enterprise software, has created an “agentic factory” to deploy AI across its companies and transform their businesses. Smith said 30 of Vista’s companies are generating revenue from their conversion to agentic AI, and another 30 or 40 will convert in the coming months.
“Over two and a half years ago we built the infrastructure,” Smith said. “We now have the right partners to do this with: hyperscalers, who have technology capabilities and capabilities that we can then infuse into each of our businesses to make this a reality.”
One example is a Vista portfolio company called SimplePractice. The company’s software helps mental health professionals, using agents to record sessions, transcribe and write notes. Another Vista company, called Reslinc, helps businesses assess their potential tariff exposure and meet regulatory requirements.
Vista’s approach challenges the theory that AI will “eat software,” as Nvidia CEO Jensen Huang predicted in 2017. While it may undercut many software-as-a-service companies and allow companies to code and perform many software tasks themselves, agentic AI will accelerate the growth of enterprise software tools that can perform tasks with high levels of precision, Smith said.
“AI will enable enterprise software to consume services,” he said.
The productivity gains and benefits of agentic AI are already apparent. Vista’s portfolio companies are seeing productivity gains of 30 to 50 percent in writing code, Smith said. Some tasks that take hours for a person to complete can be done in seconds using AI, he said. He said 20 cents of “inference,” or running an AI model, can lead to savings of up to $10.
Although some jobs will be eliminated, Smith said others will be created or reinvented.
“All knowledge workers will be affected in some way,” he said. “For some, there will no longer be this job category. For some, it will be a hyper accelerator of their abilities. I tell people that AI will not replace work in some companies, but the person using AI will replace your job.”