Robert Smith, the chairman, founder, and CEO of Vista Equity Partners, recently joined CNBC Television’s "Inside Alts" to outline a fundamental shift in the artificial intelligence landscape. Speaking with Robert Frank, Smith explained that the global economy is entering the third "leg" of the AI journey—the application provider phase. While the first two waves focused on hardware vendors like Nvidia and the build-out of infrastructure by hyperscalers, Smith argues that the application layer is where the lion’s share of economic rent will be captured long-term. This transition is particularly significant for the private markets, as Smith estimates that over 99% of these application-software companies currently utilizing generative AI are private, offering a unique value-creation opportunity for private equity investors.
To capitalize on this shift, Vista has established an "agentic factory" designed to transform cloud-based businesses into AI-driven enterprises. This follows Vista’s historical success in moving companies from on-premises systems to the cloud, a move that previously yielded a three-fold increase in economic rent. The new factory aims to create "agentic" software, where AI agents do not just act as tools but actually perform complex tasks within a workflow with higher frequency and precision than human workers. Smith notes that while consumer AI might be acceptable at 93% precision, enterprise sectors like banking, insurance, and automotive demand a much higher standard, which the agentic factory is built to deliver. So far, over 30 companies have moved through this pipeline, with the remainder of Vista’s portfolio expected to follow by next quarter.
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The financial benchmarks for the industry are also being rewritten by this technology, moving from the traditional "Rule of 40" to what Smith calls the "Rule of 70". By integrating generative AI across cost infrastructures, software companies are seeing coding productivity increases of up to 50% for new code and a dramatic reduction in customer acquisition costs. These efficiencies allow firms to nearly double their margins while maintaining hyper-accelerated growth. This massive potential for productivity has attracted a new wave of high-net-worth investors and family offices to Vista, many of whom are former entrepreneurs who recognize the operational value of "agentic" solutions.
On a personal level, Smith utilizes his own AI agent, "Agent Q," to monitor global economic shifts across regions like Asia and Latin America, as well as to track key performance indicators (KPIs) across his 90 portfolio companies in real-time.
While he acknowledges that AI is a "true general-purpose technology" that will cause significant disruption, he remains optimistic about its role as a "massive enablement tool". He famously noted during the CNBC Television interview that while AI might not replace every job directly, "the person using AI will replace your job". Ultimately, Smith views this moment as an inflection point that democratizes compute, allowing the average employee to achieve unprecedented levels of productivity and driving a surge in the global economy.
Viewing the current AI landscape is much like watching the construction of a massive high-speed railway system; while the world has spent years marveling at the strength of the steel tracks and the power of the engines, the real wealth and transformation will come from the merchants and cities that use that speed to deliver goods and services more efficiently than ever before.
