AI Is Rewriting the PE Playbook

For years, when private equity talked about technology, it talked about cost. Squeeze the back office. Consolidate the stack. Expand the margin. Listen to how PE leaders talk about AI now and you hear something different. Something more existential.

“Do you have sovereignty and dominion over the workflows and the data sets?” Robert Smith, founder and CEO of Vista Equity Partners, asked on Dry Powder. “If you do not, you have to question your right to exist as a software company.”

That is the reframing. AI is no longer an efficiency tool. It’s a survival question. And it runs through nearly every recent PE conversation on the subject. Three shifts stand out.

The First Move Is Revenue, Not Cost
Watch where these investors start. “It’s impressive, because when I hear about AI and software companies, the first thing I usually hear are cost efficiencies and productivity,” one host noted to Smith, “but the first place you went was revenue.” Vista expects at least ten portfolio companies to clear $3 million in “agentic revenues” within the year. At Hg, David Toms put the structure plainly: “The majority of the headcount related to AI sits within the portfolio companies themselves.” AI is going into the assets, not just the deal team.

Data And Workflow Ownership Is The New Moat
If AI commoditizes software features, defensibility moves to proprietary data and embedded workflows. “If you think about AI as knowledge work, it changes how you articulate the value proposition to your customers,” said Bob Morse of Strattam Capital. His portfolio-wide survey turned up a surprise: “the usage of AI tooling was higher in sales and marketing than in engineering.” Caroline Tarpey of Lead Edge named the threat directly. Portfolio companies face “the existential threat on the product side and the AI tools that will potentially replace current workflows.”

AI Is Now A Terminal-Value Question
EQT’s Arvindh Kumar said it cleanest. “AI is probably one of the biggest focus areas as a driver for both growth and higher margins, as well as just sustained value going forward, amidst a time where people are questioning terminal value.” His prescription is governance, not gadgets: “making sure you have the right CEO, an AI-forward CEO and management team, that’s driving the change management that’s required.”

And the hype filter is on. Kyle Roemer of Accordion flagged “AI theater, especially for PE-backed businesses about to exit, of like, ‘oh, we have a strategy.’” Diligence has changed too. As the team at Code & Co put it, if you “slop AI on” the wrong architecture, “you’re going to turn that thing into a blob.” The new question is how you diligence AI-generated code and inference costs before you buy.

Here’s the throughline. In 2026, AI in private equity stopped being a productivity line-item. It’s the center of the investment thesis now. A driver of revenue. A test of defensibility. Increasingly, the difference between a clean exit and a value trap.