Open AI era pushes old-school stock analysts into private markets

The growing clout of private companies like Open AI is causing Wall Street to redraw the boundaries of its equity research business.

- BLOOMBERG

Morgan Stanley last week launched a dedicated product to cover closely held firms, joining rivals including JPMorgan Chase & Co and Citigroup Inc in expanding coverage of private assets. The banks are aiming to capture the potential impact of unlisted competitors.

“The demand from clients is huge,” said Anne Malone, head of US equity research at Citigroup, which hired Balyasny Asset Management alum Heath Terry to lead coverage of the heavily private technology sector. “Everyone wants to hear about private companies for one of two reasons. One, they want to invest in them. Or, you want to know about it because they might be a threat to your investments.”

Private companies are too big to ignore, with nearly 1,600 globally boasting a valuation of $1 billion or more, according to data compiled by Pitch-Book. These firms were worth a combined total of about $6.5 trillion as of November 5, a 22 per cent increase from the end of last year. Two of them — Open AI and Elon Musk’s SpaceX — have valuations that would place them among the 25 largest companies in the S&P 500.

For its private-company research, JPMorgan has built a small team of specialists to supplement its existing analysts in AI and fintech.