JPMorgan Expands Research to Private Firms Using OpenAI

JPMorgan Chase, one of the largest financial institutions in the United States, is expanding its research coverage to include private companies. This strategic move reflects a growing trend where company founders and boards are choosing to remain private for longer periods, delaying initial public offerings (IPOs) and influencing various industries, particularly in the new economy space. The bank's head of global research, Hussein Malik, outlined this new initiative in internal and client memos, emphasizing the importance of understanding private markets to make informed investment decisions. According to Malik, the median age of a private company going public has risen from 6.9 years a decade ago to 10.7 years today, as reported by Morningstar. This shift is largely due to the influx of private equity and venture capital funding. PitchBook estimates that private markets, including venture capital and private equity, currently hold $18.7 trillion in assets, a figure projected to increase to $24 trillion by the end of 2029. The number of private companies achieving unicorn status—valuations above $1 billion—has surged, reaching approximately 1,200 between 2020 and 2023, a significant jump from around 330 between 2016 and 2019. North America alone boasts over 1,000 unicorns, collectively valued at nearly $4 trillion. Jamie Dimon, JPMorgan’s CEO, has been vocal about the declining number of publicly traded companies in the U.S. In his 2023 letter to investors, he noted that the number of U.S. public companies has dropped from a peak of 7,300 in 1996 to 4,300 today. Dimon expressed concerns about this trend, questioning whether it is desirable for the American financial system. The decrease in public companies is attributed to several factors, including stringent regulatory requirements, costly compliance, and the increasing availability of funding in the private markets, which allows companies to grow and scale without the pressures of public scrutiny. To address this growing demand for insights into private companies, JPMorgan has launched a new type of brokerage report. These reports differ from traditional equity research in that they do not include financial estimates, price targets, or ratings. Instead, they focus on providing structured information and deeper analytical insights into key disruptors and their impact on the sectors they operate in. The bank’s initial report, released on OpenAI, highlights the company’s pivotal role in driving the AI revolution on Wall Street. OpenAI, known for developing advanced AI models like ChatGPT, has garnered significant attention and investment capital, solidifying its influence in the tech landscape. Malik further explained that the expansion of research coverage into the private sector is crucial for supporting institutional investors, who are increasingly interested in private company developments. These companies are often at the forefront of technological innovations, disrupting traditional industries and creating new market dynamics. For example, AI and software firms are rapidly becoming integral to sectors like healthcare, finance, and retail. Institutional investors need comprehensive information to assess the potential impact of these private firms on existing public companies and broader economic trends. The shift towards private company research is part of a broader adjustment in the financial industry. As more startups delay IPOs, investors are compelled to track their progress at earlier stages. This change in strategy is driven by the recognition that private companies, particularly those in the tech and innovation sectors, are shaping the future of various industries. Understanding their growth, technologies, and market strategies is essential for both public and private investors to navigate the evolving financial landscape. Private markets are now seen as a critical component of the overall economy, and their influence is expected to grow. For instance, SpaceX, Tesla, and Uber have all significantly impacted their respective industries while remaining private for extended periods. These companies have attracted substantial amounts of capital, fueling their development and innovation. As a result, financial institutions like JPMorgan are adapting to meet the needs of their clients by offering more detailed and insightful research on private firms. The expansion of JPMorgan’s research capabilities into private markets underscores a significant trend in the financial industry. The bank’s leadership recognizes that staying ahead of market changes requires a comprehensive view of both public and private company performance. By providing structured and insightful reports, JPMorgan aims to help its clients better understand and invest in these influential private firms. Industry experts generally view JPMorgan’s move positively, as it addresses a growing gap in the financial market. Private company investments are becoming increasingly important, and thorough research can help investors navigate the complexities and risks associated with these ventures. JPMorgan’s reputation for rigorous analysis and deep industry knowledge positions it well to provide valuable insights into the private market space. As the financial industry continues to evolve, the expansion of research into private companies is likely to become a standard practice, further blurring the lines between public and private investment sectors. JPMorgan Chase, founded in 1799 and headquartered in New York City, is a leading global financial services firm. It offers a wide range of products and services, including investment banking, commercial banking, asset management, and private banking. The bank’s commitment to innovative research practices, such as covering private companies, aligns with its mission to provide cutting-edge solutions and services to its clients. This move highlights JPMorgan’s adaptability and forward-thinking approach in the rapidly changing financial landscape.