Why big private investors aren’t worried

The biggest investors in the world often have a greater focus on the private than public markets, but with the artificial intelligence boom set to reshape the economy for decades to come, they can’t afford to not pay close attention to what’s taking place with the largest publicly traded tech stocks, and they are not worried.

Amid fears about risky over-concentration in the so-called “Magnificent Seven” stocks that dominate the S&P 500, and related fears of an AI bubble, two managers overseeing tens of billions of dollars from investors told CNBC at its Delivering Alpha conference last week they remain bullish on what’s taking place in the U.S. tech sector and the huge sums being invested in AI.

Coatue Management founder and portfolio manager Philippe Laffont, whose fund manages roughly $70 billion in assets, according to a Securities and Exchange Commission filing, said at Delivering Alpha that there is an important difference between now and the dotcom bubble, what he called the “hyper-scaler advantage,” a reference to the ability of companies including Alphabet, Microsoft and Amazon to invest what Wall Street estimates may reach over $500 billion in AI bets next year.

General Atlantic Chairman and CEO Bill Ford, whose firm manages $118 billion in assets, agreed that the dollar signs currently being discussed in the market are a reason for conviction about the biggest public tech stocks rather than doubts. “The people driving change in AI are the large public companies and the incumbents, they have the advantage,” he said.

Even as Ford said his firm remains focused on the private market opportunities and how AI can be applied to its portfolio companies — investments he says are being made across every one of the 200 companies in which General Atlantic is invested — he added, “You cant invest in the private market without an understanding of what Oracle, what Google, what Microsoft is doing.”

“You can’t make good decisions. We have to be fully aware of what they are doing even if we are not investing in them,” Ford said.

General Atlantic has been “pretty aggressively” investing across its portfolio companies in AI and Ford said it has already seen a “pretty high payback,” and he added that is in what he would describe as just the “front edge” of the value opportunities from apply AI, in areas like customer care, coding and digital marketing.

Laffont, whose firm invests in both public and private companies, said it is fair to have concerns about tech stocks that increase in value very quickly because that can be at odds with a bullish view of valuations over the longer term. That’s because with publicly traded stocks, he said, belief in the future doesn’t necessarily mean that belief hasn’t already been priced in. He…