Venture Capital In the Age of AI: Standing On the Shoulders of Giants (and GPUs)

Over the last half century, venture capital investment outcomes have been driven primarily by successive waves of technological innovation that expanded the frontier of computing. Semiconductors, personal computing, the internet, mobile, and cloud each produced a small number of companies that accounted for a disproportionate share of returns in the industry at large. While the timing and magnitude of outcomes varied across macroeconomic cycles and interest rate regimes, the underlying pattern has remained consistent.

Unlike previous technology cycles, AI’s emergence comes in an environment of mature digital infrastructure, widely accessible frontier technology, and abundant private capital—allowing companies to reach significant scale without early public listings. These factors have accelerated the pace of company formation and adoption, altered the timing, and amplified the dispersion of venture outcomes. This paper draws on our recent research and market data to analyze how AI is transforming venture capital. It references lessons from prior innovation cycles to explain the increasing scale and concentration that set this cycle apart, and how allocators can approach it.

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