MS Venture Vision Who Is Heading for the Exit

M August 20, 2026 08:05 PM GMT

US Thematics | North America Morgan Stanley & Co. LLC Foundation

Venture Vision: Who Is Heading

Equity Strategist VC-backed exits YTD exhibit idiosyncratic and thematic strength Qingyi Huang Equity Strategist rather than a broad re-opening, diverging from the industry mix

of the current unicorn universe. Even with potential macro Jasper Lin Equity Strategist easing, we anticipate structural business model re-rating to

continue to bifurcate unicorns. Wen Zhang, CFA Equity Strategist

Key Takeaways AI Compute Infrastructure themes lead in both IPO and M&A proceeds even after excluding SpaceX, AI- End-User Applications lead in Strategic M&A deals

Technology verticals, the majority of the unicorn backlog, are most heavily under- represented in IPOs YTD

Companies in technology verticals that intersect with AI-Enabler themes are seeing greater momentum than peers of similar age within the unicorn universe

AI-related language is both the fastest growing innovation in prospectus summaries and risk factor category in S-1 filings since 2021

Venture-backed exits have meaningfully improved in 2026, but the headline numbers substantially overstate the breadth of the reopening. IPO and M&A markets can absorb exceptionally large, high-quality or strategically important assets, and there is clearly a public and strategic bid for companies tied to AI, infrastructure, defense/space, power and selected biotech. While we believe the macro backdrop and cyclical elements can continue to present hurdles for execution timing, structural shifts are transforming what companies may choose to undertake M&A or an IPO.

The SaaS vertical captures over 50% of existing unicorns by count, while tech- related verticals are substantially under-represented in IPOs YTD relative to their share of existing unicorns by count. However, we are seeing thematic tailwinds boost momentum within verticals for unicorns that contain overlap with AI themes. Among 5–15-year-old companies in CloudTech & DevOps, SaaS, and Big Data, companies captured by the AI & Tech Diffusion taxonomy have median valuation ages of approximately 0.7–1.2 years, compared with roughly 3.0–4.3 years Morgan Stanley does and seeks to do business with for non-AI-themed peers in the same verticals. The effect is therefore not simply companies covered in Morgan Stanley Research. As a result, explained by AI companies being younger: established companies of similar investors should be aware that the firm may have a conflict of interest that could affect the objectivity of Morgan Stanley operating vintage are being repriced substantially more recently when they sit at Research. Investors should consider Morgan Stanley the intersection of an active investment theme. Research as only a single factor in making their investment decision. Public equity performance is an important signal for receptiveness of any new For analyst certification and other important disclosures, refer to the Disclosure Section, located at the end of this companies going public. Our equity strategists believe we are in a transition from an report.

early-to-mid cycle marked by a broadening among stocks leading equity indexes into sectors besides direct AI capex beneficiaries. Meanwhile, our economists do expect the Fed to remain on hold this year, leaving financial conditions restrictive enough that rates and event-driven volatility are likely to remain relevant to the timing and pricing of new issuance. Yet the present market for certain sectors is better understood not simply as reopening contingent on an accommodating macro, but as undergoing a repricing of business-model durability. For many VC-backed companies, the more fundamental challenge is that their product offering, cost structure, competitive position and addressable market are being rewritten simultaneously.