Online broker Robinhood wants to let everyday investors put funds into private AI companies.
In an interview with the Financial Times (FT) published Monday (Nov. 10), CEO Vlad Tenev said he was interested in offering “normal people” a chance to invest in fast growing artificial intelligence firms, and less worried about a possible industry bubble.
AI is going to lead to “widescale disruption, and we want people to have exposure to the drivers of that disruption,” said Tenev.
He told the FT the company aims to offer tradeable shares in a new fund managed by its subsidiary Robinhood Ventures, which will invest in five or more “best in class” private companies — and could borrow money to bolster its return.
The report notes that this is happening amid the ongoing shrinkage of public markets and a massive jump in the number of private American companies valued at more than $1 billion. There were 20 such companies in 2016 and more than 1,000 last year, the FT said, citing data from PitchBook.
High-profile AI companies like OpenAI and Anthropic have driven a surge in startup valuations, the report added, with just 10 firms adding nearly $1 trillion to their value in the last 12 months through private deals, the report added.
According to the FT, Robinhood’s plan has caused concerns, due to the structure of the planned fund and the company’s relatively short track record in managing money. The fund will be closed-end, which means investors won’t be able to quickly redeem their shares at will and could see their money trapped if too many investors scramble to exit.
“Managing a complex, private equity strategy like this could seriously burn their fast-moving user base,” said Bryan Armour, director of passive strategies research at data provider Morningstar.
Tenev said retail customers are aware of the risks involved, and pushed back against fears that the AI boom is a bubble and said Robinhood customers were “buying heavily” into the sector.
In other Robinhood news, Tenev said last week that prediction markets could become one of the largest asset classes, with the company doubling its volume of contracts each quarter since introducing the service last year.
“I think it’s really exciting to see where this can go,” Tenev said during an earnings call. “I mean, we love being early to this new asset class, and some people are saying this could be one of the largest asset classes because you can price risk in pretty much anything.”
Source: https://www.pymnts.com/