Is AI Influencing Private Equity's Next Pivot?

I recently came across a discussion about private equity firms increasing their investments in professional sports. It got me thinking about a broader trend I've been watching across technology, operating businesses, and capital allocation.

I've spent much of my career working in and around private equity-backed companies. Several of the organizations I've been fortunate to help build were ultimately acquired. I'm certainly not a private equity expert, but those experiences have given me a front-row seat to how investment priorities evolve as markets, technology, and growth expectations change.

Over the past 27 years, I've also had the opportunity to work through several major technology transformations. Early in my career at NetFortris, I was part of one of the companies helping pioneer enterprise VoIP, cloud communications, networking, managed services, and hosted collaboration long before they became mainstream. Later, at TigerConnect, I experienced another transformation as healthcare rapidly embraced mobile-first clinical communication and workflow automation. Today, my work centers on AI, autonomy, and clinical mobility, helping healthcare organizations secure and modernize how care teams communicate and deliver care.

One thing I've learned is that every major technology shift eventually changes where capital flows.

SaaS was the darling. Then markets evolved.

For years, SaaS was the darling of private equity. The formula was compelling: recurring revenue, attractive margins, scalable operations, and the promise of sustained double-digit growth. It was a model investors couldn't get enough of.

Markets evolve. As software businesses mature and growth becomes harder to sustain, it's only natural for investors to look toward other industries that generate stable profits and predictable cash flow. That helps explain why we're seeing increased interest in professional sports, as well as essential service businesses like electrical contractors, plumbing companies, HVAC providers, restoration services, logistics, infrastructure, manufacturing, and other skilled trades.

To me, that isn't a move away from software. It's simply good portfolio management. Diversification has always been part of investing.

What makes this moment different is AI

Many private equity firms have significant investments in enterprise software and SaaS. At the same time, AI is advancing faster than almost anyone imagined. It's becoming increasingly difficult to predict how software will be built, delivered, implemented, priced, and supported over the next decade. The path from an idea to production is already dramatically faster than it was just a few years ago, and developer productivity continues to accelerate.

That doesn't make software less valuable. Quite the opposite.

We'll still need exceptional product leaders, architects, engineers, designers, operators, and business leaders. AI doesn't eliminate the need for vision, strategy, creativity, or deep domain expertise. We still have to define the problems worth solving and the outcomes we want to achieve.

AI changes the mechanism, not the destination

Teams will spend less time writing repetitive code and more time orchestrating AI, defining business outcomes, and solving increasingly complex problems. The destination hasn't changed. The journey is becoming dramatically faster.

Does that ultimately increase software valuations through greater innovation? Or does it compress valuations because barriers to entry become lower? I honestly don't think anyone knows yet.

That's one reason diversification seems like a rational strategy.

Software isn't doomed. It's being reshaped.

To be clear, I'm not suggesting software or SaaS is somehow doomed because of AI. I believe the opposite is more likely. AI may unlock an entirely new generation of software companies, products, and business models. This is simply one of many factors that may influence how investors think about balancing risk across their portfolios.

History has shown that every major technology disruption creates uncertainty before it creates clarity. I've watched it happen with VoIP, cloud communications, mobility, and now AI. Capital has always adapted alongside those shifts, and I suspect this era will be no different.

An open question worth having

These are simply observations from someone who has spent a career navigating technology transitions while working inside and around private equity-backed businesses. I could certainly be wrong, but I think it's an interesting discussion worth having.

What do you think? Is AI already influencing where private equity allocates capital, or are broader market forces driving what we're seeing?