AI is creating new billionaires at a record-breaking pace

This version of the article first appeared on CNBC’s Inside Wealth Newsletter. This is Robert Frank, our weekly guide to Net-Worth Investor and Consumer. Sign up to receive future editions directly in your inbox.

This year, the artificial intelligence startup has minted dozens of new billionaires, adding to the AI boom that is becoming the largest wealth creation in recent history.

This year, for artificial and safe emergency situations, Openai, Anysphere and other startups, this year’s blockbuster fundraising round is driving a rating to create a huge new paper fortune and record levels. According to CB Insights, there are currently 498 AI “unicorns” or private AI companies valued at over $1 billion. Of these, 100 were founded after 2023. More than 1,300 AI startups will be valued at over $100 million, the company said.

It is combined with rising stock prices. nvidia, Meta, Microsoft And with massive payments from other publicly available AI-related companies, infrastructure companies building data centers and computing power, and AI engineers, AI is creating personal wealth at a scale that makes the last two technology waves look like a warm-up.

“Back to data from over 100 years, I have never seen wealth generated at this scale and speed,” said Andrew McAfee, MIT’s lead researcher. “That’s unprecedented.”

The billionaire’s new crop is rising with the sky rocket valuation. In March, Bloomberg estimated that four of the largest private companies had created at least 15 billion yen, with a total net worth of $38 billion. Since then, more than a dozen unicorns have been crowned.

Mira Murati, who left AI last September, launched her Thinking Machines Lab in February. By July, she had raised $2 billion in the largest seed round in history, and according to reports, she had given the company a $12 billion valuation.

Human AI is in discussions to raise $5 billion at a valuation of $5 billion at its March valuation. CEO Dario Amodei and their six founders are likely to be large-value founders now, according to people currently familiar with the company.

Anysphere was valued at $9.9 billion in funding in June and reportedly provided a valuation of between $18 billion and $20 billion a few weeks later, reporting that 25-year-old founder and CEO Michael Truell became a billionaire.

Certainly, most of AI wells creations are in private companies, making it difficult for stockholders and founders to cash out. Unlike the dot-com boom of the late 1990s, when corporate floods were exposed, today’s AI startups can stay private longer, given the constant investments from venture capital funds, sovereign wealth funds, family offices and other high-tech investors.

At the same time, the rapid growth of the secondary market allows private company stock owners to sell shares to other investors and provide liquidity. Structured secondary sales or bid offers are widespread. Many founders can also oppose their fairness.

Open AI is in discussions on secondary stock sales to provide cash to its employees. The proposed $500 billion valuation provided a $300 billion valuation following the company’s funding in March.

Dozens of private companies have acquired or merged, providing liquidity as well. After Meta invested $14.3 billion in scale AI, founder Alexandre Wang joined Meta’s AI team. Since 2023, there have been 73 liquidity events, including mergers and acquisitions, IPOs, reverse mergers, or corporate majority interests, according to CB Insights. Following the meta deal, AI co-founder Lucy Guo, who left the company in 2018, bought the mansion in Hollywood Hills, LA for around $30 million.

Still, AI surges are mainly concentrated in the Bay Area, reminiscent of the dot-com era. Silicon Valley companies raised more than $35 billion in venture capital last year, according to the Silicon Valley Regional Studies Institute. According to New World Wealth and Henley & Partners, San Francisco currently has more billionaires than New York. The Bay Area billionaire population has doubled over the past decade, compared to New York’s 45% growth.

More than $20 million homes have been on sale in San Francisco last year, according to Sotheby’s International Realty. Rent rises, housing prices and demand in cities, largely due to AI, indicate a sharp shift in cities that have faced a “loop of destiny” just a few years ago.

“It’s amazing how this wave of AI is geographically concentrated,” said McAfee, who is also co-director of MIT’s initiative on the digital economy. “I’ve heard people who know how to find, fund and grow tech companies say, ‘This is the end of Silicon Valley’ for 25 years. However, Silicon Valley is still Silicon Valley. ”

With time and initial disclosure, much of today’s private AI fate will ultimately become more fluid, providing historic opportunities for wealth management companies. According to Tech Advisors, all major private banks, wirehouses, independent advisors and boutique companies are working with the AI elite in the hopes of winning business.

But seducing the wealthy AI people, like the dot-com billionaires, could be challenging for traditional asset management companies. Simon Klinsky, executive managing director of Passstone and former managing director of Hall Capital Partners in San Francisco, said most AI wealth cannot be converted into asset management accounts as it is trapped in private companies.

“I think a much higher proportion of the ultimate wealth that is being created is illiquid,” he said. “There are ways to get liquidity, but smaller than those employed by Meta or Google,” or other Megacap is a publicly available technology company.

Ultimately, these fates become fluid and are highly valued by wealth management companies. Klinsky said that the wealthy AI people are more likely to follow a similar client pattern as the new, rich dot comers of the 1990s. Initially, DOT-Commers used excessive liquidity and assets to invest in similar high-tech companies they knew through their networks, colleagues, or shared investors. He said the same is likely to apply to people with wealthy AI.

“Everyone turned around and invested with friends in the same type of company that created their wealth,” he said.

After discovering the danger that all wealth is concentrated in a highly unstable and speculative industry, DOTcomer turned to wealth management. And many born-up confusions have turned to reforming the wealth management industry with their image of capital and skills. For example, Jim Clark, founder of Netscape, helped launch MyCFO, a response to bankers and the industry’s aversion.

Krinksy said today’s AI entrepreneurs are likely to follow the same path, and AI can disrupt many of the traditional functions of wealth management.

But ultimately, the ultra-wealthy AI founders discover the need for traditional personalized services that only a dedicated asset management team can provide, whether it’s about taxes, inheritance, real estate planning, charity advice and portfolio construction.

“After people were beaten or hurt in the early 2000s, they came to appreciate some degree of diversification and perhaps to hire a professional manager to protect them from themselves,” Clincy said. “We expect similar trends to those of the AI group.”