Steve Pagliuca Says AI, Pharma, Sports Are Key Investment Focus

PagsGroup Chief Executive Officer Stephen Pagliuca sees a clutch of growing industries, including artificial intelligence and sports, as a key focus for investment over the long term.

AI is entering a 10-to-20-year growth phase as it shifts from theoretical applications to physical deployment across sectors including space, defense and healthcare, Pagliuca said on the sidelines of the Allen & Co. conference in Sun Valley, Idaho.

The infrastructure build supporting AI expansion is “existential” for the largest technology companies, he said, noting that the big seven tech firms risk losing significant business if they fall behind in the AI race, he said in a Bloomberg Television interview.

Most of these companies, with the possible exception of OpenAI, have substantial cash flow businesses capable of funding continued investment, he said, adding that the winners and losers will emerge over the next five to seven years.

The conversation around AI has shifted from building training models to so-called inference and task execution, Pagliuca added.

In biotechnology, AI is facilitating drug development by allowing scientists to simulate how drugs will behave in the body, accelerating what used to be a “a very hit and miss whack-a-mole process,” he said.

“It’s going to get even more sophisticated when you bring in quantum computing” in the next three to five years, Pagliuca said. “That may be the next wave on top of AI as as quantum computing is starting to be cheaper and penetrate and more and more companies are inventing new ways to process information.”

And despite the current challenges the private equity world faces, he’s not giving up on the industry just yet.

Private equity will remain a strong business model despite current market conditions slowing public offerings, Pagliuca said.

The industry allows companies to take longer-term views without quarterly earnings pressure while major firms add value through technology, finance, marketing and digitization capabilities.

Bain Capital has grown 20-fold since early concerns that private equity’s best days had passed, he said, and recent successful initial public offerings in memory chips and optical components demonstrate continued liquidity for quality companies in AI infrastructure, space and defense sectors.

“It’s been a fantastic business model,” Pagliuca said.

Pagliuca, a longtime sports investor and a former owner of the Boston Celtics, said he sees little that could bring the boom in sports to an end.

Valuations have continued to rise as global viewership has expanded thanks to social media and streaming platforms. Competition for media rights deals between traditional broadcasters and streamers has also buoyed valuations and there are few signs that this will end anytime soon, he said.

“So far there hasn’t been enough pushback because this is an incredibly important area for these companies to control,” Pagliuca, who is also a senior adviser at Bain Capital LP, said. “You’re seeing insatiable demand.

When asked about whether he’d invest in the Seattle Seahawks football team, set to be the biggest-ever sale for an NFL team, Pagliuca demurred.

“That’s a little far afield for me. Most of my activities are going to Milan and the East Coast but it’s an amazing franchise,” he said.

This story was produced with the assistance of Bloomberg Automation.