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US broker Robinhood plans to give amateur investors a route to put money into private artificial intelligence companies whose valuations have vastly increased.
Chief executive Vlad Tenev told the Financial Times that he is more interested in giving “normal people” exposure to the rapid growth of private AI companies than worrying about whether a bubble is forming in the sector.
AI is going to create “widescale disruption and we want people to have exposure to the drivers of that disruption”, he said.
Robinhood plans to offer tradeable shares in a new fund managed by its subsidiary Robinhood Ventures, which will invest in a highly concentrated portfolio of five or more “best in class” private companies — and may borrow money to boost its return.
The trading platform’s move comes as money managers are seeking to tap small investors as a new pool of capital to plough into private markets.
President Donald Trump’s executive order in August has made it easier for employers to include assets such as private equity and private credit in retirement plans.
Asset managers including Blue Owl, Blackstone and Apollo are moving beyond institutional investors and seeking to appeal to individuals.
Public markets have been shrinking for decades, while the number of private companies in the US valued at more than $1bn rose above 1,000 in 2024 from 20 in 2016, PitchBook data shows.
Top AI developers such as OpenAI and Anthropic have led the boom in start-up valuations, with just 10 lossmaking companies adding close to $1tn to their value over the past 12 months through private deals.
Robinhood’s move to open the door for small-time investors to back these groups has caused concern, given the proposed fund’s structure and the trading venue’s relative lack of experience managing money.
The fund will be closed-end, meaning traders will not be able to quickly redeem their shares at will and could find their money trapped if too many investors rush for the exit.
“Managing a complex, private equity strategy like this could seriously burn their fast-moving user base,” said Bryan Armour, director of passive strategies research at data provider Morningstar.
Tenev said retail customers notorious for buying stock market dips are clamouring for such opportunities despite the significant amount of risk and the knowledge that investments could go to zero.
He also pushed back against concerns that the AI boom is a bubble and said Robinhood customers were “buying heavily” into the AI theme.
“I don’t think [Big Tech] price-to-earnings ratios are crazy out of whack,” said Tenev, who became one of the faces of the 2021 meme stock boom because of Robinhood’s popularity with the raucous crowd of adventurous, do-it-yourself traders.
Robinhood is the S&P 500’s third-best performing stock this year, up 255 per cent. The California-based company’s shares fell almost 11 per cent on Thursday even after it said revenues in the third quarter doubled year-on-year to $1.27bn. Revenues from crypto transactions rose 300 per cent to $268mn.
In March, Robinhood partnered with Kalshi to launch its own prediction market business, offering traders shares in binary outcomes — whether a basketball team wins or loses, for example — amid a wider explosion in gambling in the US on sports, politics and pop culture events.
The number of so-called event contracts traded on its platform more than doubled quarter-on-quarter to 2.3bn between July and September and rose to 2.5bn in October alone, Robinhood said on Wednesday.
Tenev predicted this market could expand further into new areas. “A lot of people think that this evolves to become more bespoke and personalised, a direction that’s very exciting,” he said.
“If you could price the risk of someone’s house being subjected to a flood or fire, that could be a much better product potentially than the insurance products that one can currently get.”