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With fears growing of an investment bubble in artificial intelligence infrastructure, the next phase of AI growth will come from private software companies already creating massive gains in productivity, according to Robert Smith, CEO of Vista Equity Partners.

The soaring valuations of Nvidia, Meta, Microsoft, Alphabet, OpenAI and other hyperscalers and large-language models have dominated the debate over AI opportunities and risks. Yet some of the biggest investment opportunities in AI will be in non-public enterprise software companies that are using specific agents, or “agentic AI,”  to perform company tasks, according to Smith, who’s also the founder and chairman of Vista.

“AI has sucked a lot of the oxygen out of the air for a lot of investors and pulled them into the Mag 7,” Smith told CNBC. “Those hyperscalers are now starting to build out the infrastructure and capability. Some may argue they’re overvalued in some respects. But the [next] wave will be the application providers. And that’s typically been the way that these cycles have played out. The application providers usually get the lion’s share of the economic rent long term, once the technology has been diffused into those markets and diffused into those technologies. That’s really where we are in the cycle.”

Vista’s aggressive bet on applications and agentic software highlights one of the fastest-growing corners of the AI trade and alternative investments. Unlike the AI infrastructure sector — which includes dozens of publicly traded companies, hyperscalers and LLMs — the vast majority of companies creating AI applications are private. Smith said 97% of enterprise software companies are private.

Vista aims to take the lead in the corporate agentic revolution. The private equity firm, with $100 billion in assets under management and over 90 portfolio companies specializing in enterprise software, has created an “agentic factory” to deploy AI across its companies and transform their businesses. Smith said 30 of Vista’s companies are generating revenue from converting to agentic AI, and another 30 or 40 will convert in the coming months.

“Over two and a half years ago, we built out the infrastructure,” Smith said. “Now we have the right partners to do it with: the hyperscalers, who have capacity and technological capability that we can then infuse into each of our companies to make this a reality.”

One example is a Vista portfolio company called SimplePractice. The company’s software helps mental-health professionals, using agents to record sessions, transcribe and draft notes. Another of Vista’s companies, called Reslinc, helps companies assess their potential tariff exposure and meet regulatory requirements.

Vista’s approach challenges the theory that AI will “eat software,” as Nvidia CEO Jensen Huang famously predicted in 2017. While it may weaken many software-as-a-service companies and allow companies to code and perform many software tasks themselves, agentic AI will accelerate the growth of enterprise software tools that can perform tasks with high levels of accuracy, Smith said.

“AI will enable enterprise software to eat services,” he said.

The gains in productivity and profits from agentic AI are already apparent. Vista’s portfolio companies are seeing productivity gains of 30% to 50% in writing code, Smith said. Some tasks that take a person hours to do can be done in seconds with AI, he said. He said 20 cents’ worth of “inference,” or running an AI model, can lead to up to $10 in savings.

While some jobs will be eliminated, of course, Smith said others will be created or reinvented.

“All knowledge workers will be affected in some way,” he said. “Some, there will no longer be that job category. For some, it will be a hyper accelerant of their capabilities. I tell people, AI is not going to replace the job in some businesses, but the person using AI will replace your job.”