How Silicon Valley will eat its AI competitors in 2026
A loss of confidence in AI could lead to a fire-sale for startups and accelerate consolidation among Big Tech
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VENTURE capitalist Marc Andreessen famously declared in 2011 that “software is eating the world”. This year, Silicon Valley will be looking to feast on artificial intelligence (AI), as the relentless hype that has driven the creation of nearly 40,000 AI startups crashes into the cold logic of business economics.
US companies spent US$37 billion on generative AI software in 2025, up from US$11.5 billion the year before, venture capital firm Menlo Ventures reported. But much of that spending was done for a motley array of tools.
With pressure mounting to show a meaningful return on investment, 2026 will herald a Darwinian thinning as a few AI winners continue selling, even as weaker players get gobbled up by large technology firms.
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