(HedgeCo.Net) Private markets have always grown in the shadows of public markets—quietly funding companies before they ring the bell, financing assets before they’re securitized, and absorbing risk that banks and listed credit often can’t—or won’t—hold. What’s changed is the scale, the scope, and the role private capital now plays in the real economy.
In J.P. Morgan Asset Management’s latest Alternatives outlook, the firm argues that we’ve entered a “public-private convergence” era: companies are staying private longer, enabled by the depth of private capital pools now estimated to be close to USD $20 trillion, while AI and the “electronification of everything” are driving an “investment super-cycle” that will demand enormous spending on data centers, networks, and power infrastructure.
That headline—private markets approaching $20 trillion—matters not only because it signals growth, but because it hints at a structural rewiring of where innovation is funded, where returns are captured, and how portfolios will be constructed. The AI surge is accelerating that rewiring. It’s pulling forward demand for compute, energy, and logistics, and it’s simultaneously pushing more of the value chain into the private sphere—venture, growth equity, buyouts, infrastructure, private credit, and real assets.
The implication is straightforward and disruptive: if AI is the defining capital cycle of the next decade, investors who remain anchored to public markets alone may increasingly be investing in the “finished products,” not the early compounding phase.
The $20 Trillion Marker Is Less a Forecast Than a Map of Power
J.P. Morgan frames private markets’ growth as the result of a profound structural shift: firms that once relied on public markets can now access vast private pools through venture capital, growth equity, and buyouts, remaining private longer while still scaling. This is not a subtle point—it’s a claim about where capitalism is happening.
For much of the 20th century, public markets were the center of gravity. IPOs were common, the public float was the growth engine, and the equity risk premium was largely collected by investors who owned listed stocks. That system has been changing for years, but AI is speeding it up. Why?
Because AI is not a single product cycle. It is a capacity cycle—a build-out of physical infrastructure (data centers, fiber, power generation, transmission, cooling) and a parallel build-out of software and applications (models, agents, vertical tools, enterprise automation). Capacity cycles reward early capital that can fund assets before they reach public-market liquidity.
In that framework, “private markets nearing $20 trillion” is not just a size statistic. It’s a map of where financing power has consolidated—and where the next wave of growth is being warehoused.
AI Is Turning Alternative Assets Into the “Picks and Shovels” Portfolio
When markets talk about AI, they often default to semiconductors and mega-cap platform stocks. Private markets see the broader ecosystem: the “picks and shovels” that must be built regardless of which model wins.
J.P. Morgan’s outlook emphasizes how private strategies can capture AI across the value chain—from venture backing cutting-edge development to infrastructure supporting data centers’ energy demands—and notes that spending by hyperscalers has effectively shifted value from public to private markets, with private equity, infrastructure, and private credit financing data centers, networks, and power grids.
That’s a critical point: AI is as much an infrastructure story as it is a software story. The surge in compute is meaningless without energy. Energy demand is meaningless without grid capacity. Grid capacity is meaningless without permitting, construction, and capital willing to fund long-duration assets. Private markets specialize in long-duration funding—especially when the path to liquidity is uncertain or delayed.
The AI boom is therefore pulling alternative asset classes into a more central role:
- Infrastructure funds finance digital and energy assets: data centers, transmission upgrades, distributed generation, renewables, and cooling systems.
- Private credit provides the flexible, bespoke financing that sits between bank loans and public bonds—often faster, often with stronger covenants, and often tailored to unique project risk.
- Private equity funds the operational build-out—platform rollups in services, industrial automation, cybersecurity, data engineering, and vertical software.
- Venture and growth fund the application layer—agents, model tooling, AI-native workflows, and sector-specific “vertical AI.”
In other words, AI is turning alternatives into the economic backbone of the cycle.
Why Private Credit Sits at the Center of the AI Capital Expenditure Cycle
If private markets are approaching $20 trillion, it’s partly because private credit has transformed from a niche into a global financing machine. J.P. Morgan notes private credit markets have grown dramatically over time—citing growth to roughly USD $2.5 trillion (in the firm’s framing) and emphasizing how private capital’s depth enables companies to stay private longer.
For the AI cycle, private credit matters for a simple reason: AI capex is lumpy, urgent, and often collateralizable. Data centers, power contracts, and mission-critical networks create cash-flow profiles that can be financed—and refinanced—through private structures.
But the deeper reason is that private credit has become a capital markets substitute. Where banks pull back and public markets demand broad liquidity, private lenders step in with negotiated terms. In cycles defined by speed and specialization, negotiated finance often wins.
That doesn’t mean risk disappears. It means risk becomes portfolio- and underwriting-dependent, not index-dependent. And that is precisely why private credit is becoming so strategically important: investors aren’t just buying “yield”—they’re gaining exposure to the financing layer of the AI economy.
The Public-Private Convergence: More Than a Trend, a Structural Shift
J.P. Morgan’s view is that interpreting private markets’ growth solely as excess overlooks the broader context: private markets are evolving to reflect a “new normal” in corporate finance, and their increasing role appears more structural than cyclical.
That claim is worth unpacking, because it’s the heart of the “$20 trillion” story.
The old model was: innovate privately, list publicly, scale publicly. The new model increasingly looks like: innovate privately, scale privately, and consider public markets later—if at all. Several forces reinforce this:
- Late-stage private capital is abundant. Growth equity and crossover capital can fund scale without IPO pressures.
- Regulation and reporting burdens make staying private attractive. For many founders, the trade-off is worth it.
- Public markets have become more concentrated. Large-cap winners dominate index performance, making it harder for new listings to gain attention or sustain valuations.
- Technology cycles reward long runway investment. AI development and infrastructure build-outs don’t always fit quarterly expectations.
If this is the direction of travel, then private markets are not a “satellite allocation.” They’re becoming a core venue of economic activity—where the earlier stages of compounding are captured.
The “AI Surge” Narrative Has a Credit Shadow
No serious outlook can talk about AI-driven opportunity without acknowledging AI-driven disruption. As AI tools spread, they can compress the value of certain legacy software models, reshape margins, and alter competitive landscapes quickly. That shift can ripple into credit—especially leveraged borrowers whose business models depend on pricing power or sticky enterprise contracts.
Recent reporting has highlighted how AI-driven disruptions in software could create risk pockets in credit markets, especially where lower-rated loans have tighter maturity schedules and weaker disclosure.
This matters for private markets for two reasons:
- Private equity portfolios often have exposure to software and tech-enabled services—exactly where AI can be both tailwind and threat.
- Private credit portfolios finance sponsor-backed companies where disruption can undermine cash flows before lenders can react.
So the AI capex super-cycle is not simply “buy everything AI.” It’s a capital rotation: away from some legacy cash flows and toward the infrastructure and application winners. Private markets, by definition, will hold both types of exposure—meaning manager selection and sector underwriting become the difference between capturing the cycle and being impaired by it.
Why Investors Are Moving Faster Than the Headlines Suggest
J.P. Morgan’s outlook also argues the investor base is changing: retail investors and retirement systems are increasingly participating, supported by regulatory changes expanding access to alternatives.
This retailization of private markets is controversial, but it’s also logical. In a world where innovation stays private longer, investors want access. If the “growth curve” is increasingly off-exchange, portfolios that exclude private markets risk becoming portfolios that arrive late.
At the same time, democratization raises real questions—particularly around liquidity, transparency, and valuation practices. J.P. Morgan explicitly acknowledges these questions while framing them as signs of a market evolving rather than pure excess.
The key tension is this: private assets are long-duration and illiquid; mass-market distribution prefers liquidity and daily pricing. The compromise has been the rise of evergreen and semi-liquid structures—vehicles that offer periodic subscriptions and redemptions while holding illiquid assets. J.P. Morgan notes these flexible fund structures have offered investors new ways to access private markets.
That’s opportunity—but also a structural feature investors must understand. The AI surge is pulling new investors into private markets, and private markets are evolving wrappers to meet them.
What “$20 Trillion” Implies for the Next Portfolio Playbook
If you accept J.P. Morgan’s framing—that private markets have reached system-level scale and AI is driving a once-in-a-generation capex cycle—then portfolio construction is likely to change in several ways:
1) Alternatives Become a Core Allocation, Not a Tactical Sleeve
Historically, alternatives were treated like seasoning: modest allocations to boost diversification and returns. In a world where private markets are central to innovation and infrastructure build-out, the allocation becomes more structural. J.P. Morgan’s outlook positions private markets as “essential” for diversification and accessing themes like AI.
2) The “Innovation Premium” Shifts Earlier
Public markets may increasingly capture mature winners, while private markets capture earlier-stage compounding—venture through mid-market buyouts and growth equity. That means investors who want exposure to AI’s broad value chain may need to allocate across multiple private strategies, not just public tech.
3) Infrastructure and Private Credit Move to the Front of the Line
The AI story is built on energy and compute. That naturally elevates infrastructure and credit—assets that can fund, own, and lend against the physical build-out.
4) Selectivity Becomes the Real Alpha
As private markets scale, dispersion widens. The “average” manager matters less than the right manager. J.P. Morgan itself stresses that the next phase rewards selectivity and discipline.
The Risks That Could Complicate the Private Markets Boom
A serious article must address what could break the narrative. Three risks stand out:
- Valuation and transparency pressure. Private marks are not continuous. In a volatile environment, the gap between public repricing and private valuation adjustments can create distrust and redemption pressure.
- Liquidity mismatch in semi-liquid structures. If too much capital seeks redemption at the wrong time, gates and tender limits can create headline risk even if underlying assets are fine.
- Concentration and crowding. As private markets become mainstream, capital can crowd into popular themes (including AI infrastructure). Competition can compress returns and weaken terms—especially in private credit.
J.P. Morgan’s framing acknowledges that questions around valuations, transparency, and liquidity remain, while arguing the market’s role is increasingly structural. The tension is not whether risk exists—it does. The question is whether the structural drivers (AI capex, private staying power, broader investor access) overpower those risks over a multi-year horizon.
Bottom Line: AI Is Pushing the Economy Into Private Market Rails
J.P. Morgan’s “near $20 trillion” message is ultimately a thesis about where growth will be financed. The AI surge is not simply lifting tech equities; it is triggering a broad capital cycle—one that demands real assets, long-duration funding, and flexible financing structures. J.P. Morgan explicitly links AI and electronification to an investment super-cycle and highlights how private equity, infrastructure, and private credit are financing the data-center and power-grid build-out.
If that thesis is right, then private markets aren’t a side bet—they’re becoming the rail system underneath the next decade’s economy. For investors, the most important decision may not be whether to allocate to private markets, but how: which strategies capture AI’s upside, which managers can avoid disruption risk, and which structures match the liquidity reality of long-duration assets.
The $20 trillion number is a milestone. The AI surge is the accelerator. The convergence of the two may define how capital—and returns—are distributed for years to come.