When the principal of a $600 million single-family office in Dallas made his first AI investment in late 2022, he committed $2 million to an early-stage computer vision company. Eighteen months later, that position was marked at $14 million following a Series B led by Andreessen Horowitz. But ask him about the experience today, and his first response is not about the returns.

“We got lucky,” he told me over coffee last month. “We had no framework, no real thesis – just a founder we believed in and a fear of missing out. That is not a strategy. That is gambling with generational capital.”

His candor reflects a broader reckoning happening across the family office world. Artificial intelligence has emerged as the dominant investment theme of the decade, with 86% of family offices now reporting exposure to AI according to Goldman Sachs’ 2025 Family Office Investment Insights report. But as valuations soar and bubble warnings intensify, the most sophisticated single-family offices are moving beyond opportunistic deal-making toward systematic approaches that balance conviction with discipline.

This article draws on recent industry research, conversations with family office professionals, and data from the leading wealth surveys to examine how SFOs are actually structuring their AI exposure – not the hype, but the mechanics.

The Allocation Question: What Percentage Makes Sense?

Before discussing deal structures or due diligence, every family office must confront a fundamental question: How much of the portfolio should be exposed to AI?

The data reveals significant variation. According to the 2025 North America Family Office Report by RBC and Campden Wealth, which surveyed 141 family offices with an average of $2 billion in assets, the most popular public market sectors for those inclined to invest are AI, defense industries, and the “Magnificent Seven” tech stocks. Meanwhile, BlackRock’s 2025 Global Family Office Report found that 51% of family offices are investing in opportunities that will benefit from the AI boom, with an additional 33% actively considering such opportunities.

But these headline figures mask important nuances in how allocations are actually structured.

The Conservative Approach: 5-10% with Public Market Emphasis

Family offices prioritizing capital preservation typically limit direct AI exposure to 5-10% of investable assets, with the majority accessed through public equities. This approach acknowledges the transformative potential of AI while recognizing that much of the upside is already priced into liquid markets.

“Few people realize they already have a very large allocation,” notes one chief investment officer quoted in recent industry analysis, “because even a lot of the index funds have large exposures to what are predominantly the big AI players in the universe right now, mainly the Mag 7 names.”

The Aggressive Approach: 15-25% with Direct Investment Focus

At the other end of the spectrum, family offices with higher risk tolerance and longer time horizons are allocating 15-25% to AI-related investments, with significant portions in private markets. According to Goldman Sachs, 58% of family offices expect their portfolios to be overweight technology broadly in the next 12 months, suggesting continued appetite for concentrated bets.

This approach is particularly common among family offices with operating company backgrounds in technology or those led by next-generation principals with technical fluency. The DCA Family Office, for instance, has been investing in AI infrastructure since 2020. “As early as four or five years ago, we were starting to look at data centers as an investment thesis,” their Chief Investment Officer Tom Bratkovich explained in recent industry commentary.

The Barbell Strategy: Extreme Positions at Both Ends

A third approach gaining traction involves taking extreme positions at both ends – either near-zero direct exposure or highly concentrated bets. Some family offices deliberately avoid private AI investments entirely, viewing the current market as too frothy and preferring to wait for a correction. Others are making outsized commitments, treating AI as a generational wealth-creation opportunity that justifies temporary portfolio imbalance.

Four Ways Family Offices Are Getting Exposure

The vehicle through which a family office accesses AI investments matters as much as the allocation size. Each approach carries distinct risk-return profiles, liquidity characteristics, and operational requirements.

1. Direct Investments in Private AI Companies

Direct investing offers the highest potential returns but requires the most sophisticated internal capabilities. Family offices pursuing this path typically write checks of $1-10 million into Series A through Series C rounds, often alongside established venture firms.

The appeal is straightforward: direct ownership means no management fees, no carry, and complete control over position sizing and exit timing. BNY Wealth’s 2025 Investment Insights report found that 83% of single-family offices are planning to increase their allocations to private markets within the next three years, with AI being a primary driver.

However, direct investing demands capabilities that many family offices lack. As one wealth advisor cautioned, “If they want to get into this space, they need to do this in a measured way.” Technical due diligence, deal flow access, and post-investment monitoring all require either significant internal resources or trusted external partnerships.

2. Venture Capital Fund Allocations

For family offices without dedicated investment teams, allocating to AI-focused venture funds provides professional management and diversification. Top-tier funds specializing in AI infrastructure, enterprise software, and frontier research attract significant family office capital, with typical LP commitments ranging from $5-25 million.

The 2025 RBC and Campden Wealth report notes that despite some pullback from early-stage ventures, family offices continue to value the expertise that specialized GPs bring to rapidly evolving technology sectors. “Having a diversified set of investments through primary fund investing is probably a better idea than trying to pick a single winner,” observed one family office CIO.

The tradeoff is cost – typically 2% management fees plus 20% carried interest – and reduced control over individual positions.

3. Co-Investment Opportunities

Co-investments offer a middle path between direct investing and fund allocations. Family offices invest alongside venture funds in specific deals, typically at reduced or zero fees, gaining direct ownership while leveraging the GP’s sourcing and due diligence capabilities.

Goldman Sachs’ survey found that 72% of family offices invest in secondaries, up from 60% in 2023, reflecting growing interest in accessing mature portfolios with shorter durations and greater transparency. Co-investments share similar appeal: reduced J-curve effect, lower fees, and the ability to concentrate in highest-conviction opportunities.

4. Public Equities as a Complement

Public markets remain the most accessible path to AI exposure. Goldman Sachs reports that average family office allocations to public equities rose to 31% in 2025, up from 28% in 2023, with technology remaining a preferred sector.

Beyond the obvious mega-cap plays, sophisticated family offices are constructing AI-focused baskets that include semiconductor equipment manufacturers, cloud infrastructure providers, and enterprise software companies with embedded AI capabilities. This approach provides liquidity and daily pricing while capturing broad exposure to the AI value chain.

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You really need to have great advisers, great GP sponsors, people who really know the space. We certainly are advocating caution to the folks that we work with.

– Tom Bratkovich, Chief Investment Officer, DCA Family Office

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The Impact Wealth AI Due Diligence Framework

Perhaps the greatest challenge in AI investing is separating genuine innovation from hype. With Q1 2025 alone seeing AI startups raise $80.1 billion – representing 70% of all venture capital activity – the market is flooded with companies competing for attention and capital.

“Everybody is looking at AI also with the question in the back of their mind of: Does it start to look a bit like a bubble, the way the internet did in the early years?” observed Alexandre Monnier, head of global family office advisory at Citi Wealth.

Based on conversations with family office professionals and analysis of current best practices, we have developed a seven-point due diligence framework specifically for AI investments:

1. Technical Moat Assessment

What makes this company’s AI defensible? Proprietary data, unique algorithms, and specialized talent create sustainable advantages. Generic large language model wrappers built on OpenAI’s API typically do not. Key questions: Does the company own unique training data? Are there patents or trade secrets protecting core innovations? Could a well-funded competitor replicate this in 12-18 months?

2. Founder Technical Depth

AI companies require technical leadership that understands both the science and the business. Red flags include founders who cannot explain their technology without jargon, teams heavy on sales talent but light on ML engineers, or CTOs who joined post-founding without equity commitment.

3. Unit Economics Reality Check

AI applications are computationally expensive. Many promising products have gross margins below 50% once inference costs are fully loaded. Family offices should demand detailed breakdowns of cost-to-serve per user or transaction, including current cloud computing expenses and projected scaling economics. OpenAI’s own example is instructive: the company generated $4.3 billion in revenue during the first half of 2025 while posting a $13.5 billion loss.

4. Revenue Quality Analysis

Scrutinize the source of revenue carefully. Is it coming from genuine enterprise customers with multi-year contracts, or from other venture-backed startups burning investor capital? Industry observers have noted concerns about “circular financing” arrangements where AI companies essentially pass money between each other rather than generating sustainable commercial demand.

5. Customer Concentration Risk

Many AI startups depend heavily on a small number of large customers. If one or two enterprise clients represent more than 40% of revenue, the investment carries significant key-account risk. Demand customer lists and retention metrics before committing.

6. Valuation Sanity Check

Compare the proposed valuation to revenue multiples of comparable public companies and recent private transactions. Current AI valuations often reflect expectations of massive market expansion. Erik Gordon, a professor at the University of Michigan, has warned of an “order-of-magnitude overvaluation bubble” in the sector. Family offices should ask: What revenue growth is implied by this valuation, and is it realistic?

7. Regulatory and Ethical Exposure

AI companies face evolving regulatory scrutiny around data privacy, algorithmic bias, and content liability. Assess the company’s compliance infrastructure and potential exposure to emerging regulations. Investments in areas like facial recognition, healthcare diagnostics, or content moderation carry heightened regulatory risk.

AI Investment Due Diligence Checklist

Company owns proprietary training data or unique data advantage
Founding team includes deep ML/AI technical expertise
Gross margins exceed 60% at current scale (or clear path to 60%+)
Revenue from enterprise customers (not other VC-backed startups)
No single customer represents more than 25% of revenue
Valuation multiple justifiable vs. public comparables
Compliance infrastructure addresses emerging AI regulations

Risk Management: Protecting Downside in a Hype Cycle

Even with rigorous due diligence, AI investments carry elevated risk. The sector’s rapid evolution means that today’s breakthrough can become tomorrow’s commodity. Prudent family offices employ several risk management techniques:

Vintage Diversification

Rather than concentrating capital in a single year’s deals, sophisticated allocators spread investments across 2024, 2025, and 2025 vintages. This approach captures different points in the technology and valuation cycles, reducing timing risk.

Value Chain Diversification

The AI ecosystem spans multiple layers, each with distinct risk-return profiles. Infrastructure plays (data centers, semiconductors) offer more predictable revenue but lower upside. Application-layer companies targeting specific verticals may offer higher growth but face intense competition. Balancing exposure across the stack – typically 40% infrastructure, 40% applications, 20% enabling technologies – provides natural hedging.

Liquidity Planning

Private AI investments are illiquid, with typical holding periods of 7-10 years. The 2025 RBC and Campden Wealth report found that 48% of family offices cited improving liquidity as their primary investment objective this year. Any private AI allocation must be sized with recognition that exits may take a decade and secondary markets for these positions remain thin.

Decision Frameworks for Cutting Losses

Perhaps most importantly, family offices should establish clear criteria for when to walk away. If a portfolio company misses growth targets for three consecutive quarters, fails to secure follow-on funding, or loses key technical talent, what triggers a writedown or exit? Defining these thresholds before emotions enter the picture enables more disciplined capital management.

Lessons from Early Movers: What the 2021-2023 Cohort Learned

Family offices that began investing in AI before the ChatGPT-fueled frenzy offer valuable perspective on what works – and what does not.

Case Study: Infrastructure First Paid Off

One Midwest-based family office with roots in manufacturing took a contrarian approach in 2021, focusing almost exclusively on AI infrastructure rather than applications. “Everyone wanted to find the next big AI application,” the family office principal explained. “We thought the pick-and-shovel play was more defensible.” Their investments in GPU cloud providers and data center operators generated returns exceeding 4x within three years as compute demand exploded.

Case Study: The Wrapper Trap

Conversely, a coastal family office learned an expensive lesson by backing several “AI-native” startups in 2022 that were essentially thin interfaces built on GPT-3. When OpenAI released ChatGPT and subsequent models with native interfaces, these companies lost their competitive moat almost overnight. Two of three investments in this category required full writedowns. “We did not understand how quickly the underlying platforms could commoditize our portfolio companies,” the CIO acknowledged.

Pattern Recognition: Common Threads Among Successful Allocators

Across conversations with early AI investors, several patterns emerge:

Technical advisors matter: Family offices with access to technical advisors – whether through formal advisory boards or informal networks – made better investment decisions than those relying solely on financial analysis.
Patience was rewarded: Those who resisted pressure to deploy capital quickly during the 2021 SPAC boom avoided significant losses.
Operating experience helped: Family offices whose wealth derived from technology businesses brought pattern recognition that pure financial investors lacked.

Beyond Investing: AI for Family Office Operations

A parallel trend is reshaping how family offices operate internally. Three times more family offices are leveraging AI to improve operations in 2025 compared to 2024, according to the RBC and Campden Wealth report. Adoption of automated investment reporting systems jumped from 46% to 69% in a single year.

Goldman Sachs found that 51% of family offices already use AI in investment processes, with applications ranging from research synthesis to due diligence automation. “Family offices are following investment managers in using AI for due diligence, research synthesis, and portfolio analysis,” noted a recent analysis from PwC’s Family Enterprise Advisory Services. “Many are focusing on summarization and research use cases, where AI can reduce manual effort without adding operational risk.”

This operational adoption creates a virtuous cycle: family offices using AI tools internally develop intuition that improves their ability to evaluate AI investments. Understanding the technology’s capabilities and limitations firsthand makes for more informed capital allocation.

Looking Ahead: Navigating Uncertainty with Discipline

The AI investment landscape will continue to evolve rapidly. Capital expenditures on AI infrastructure are forecast to reach $4 trillion through 2030, according to a recent Accel report, while concerns about bubble dynamics persist. As DeepL CEO Jarek Kutylowski told CNBC in November 2025, “I think the evaluations are pretty exaggerated here and there, and I think there are signs of a bubble on the horizon.”

For single-family offices, this tension – between genuine technological transformation and speculative excess – requires a balanced approach. The evidence suggests three priorities:

Develop an explicit AI thesis: Define your beliefs about where AI creates value, what types of companies you are equipped to evaluate, and how AI fits your broader portfolio construction.
Build or access technical expertise: AI investing without technical diligence capabilities is speculation. Invest in advisors, technical due diligence firms, or internal talent before deploying significant capital.
Maintain valuation discipline: The greatest risks often emerge when investors abandon fundamentals in pursuit of transformational technology. The family offices that preserved capital through previous tech cycles were those who refused to pay any price for growth.

The Dallas family office principal who opened this article has evolved his approach considerably since that initial investment. “We now have a formal AI allocation target, a technical advisory board, and documented criteria for every deal,” he told me. “The returns on that first investment were life-changing. But we were playing lottery. Now we are investing.”

That distinction – between gambling and investing – may determine which family offices emerge from the AI era with their capital and reputations intact.

Sources and Methodology

This article draws on the following primary sources:

Goldman Sachs 2025 Family Office Investment Insights Report (245 family offices surveyed)
RBC and Campden Wealth North America Family Office Report 2025 (141 family offices surveyed)
BlackRock 2025 Global Family Office Report
BNY Wealth 2025 Investment Insights for Single Family Offices (282 family offices surveyed)
Citi Private Bank Global Family Office Survey 2024
Interviews with family office principals and advisors conducted under Chatham House rules

About the Author

Kaleem Afzal Khan is a contributing writer at Impact Wealth Magazine, specializing in wealth management, family office trends, and alternative investments. With a passion for translating complex financial concepts into actionable insights, Kaleem covers the intersection of technology and private wealth for ultra-high-net-worth audiences. His work draws on extensive research and interviews with industry professionals to deliver content that informs and empowers sophisticated investors.

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