Will this year be the "darkest hour" for AI startups? Silicon Valley giants enter predatory mode

Famous venture capitalist Marc Andreessen said in 2011 that "software is eating the world," and by 2026, it seems that Silicon Valley giants are set to "consume" AI startups. In the past few years, the AI startup boom has spawned nearly 40,000 companies, but now, the realities of economic laws are starting to take effect, and the entire industry is undergoing a major reshuffle.

On January 8, Parmy Olson, a Bloomberg columnist focused on technology, published a new article pointing out that two hurriedly concluded deals before the New Year reveal the latest strategies of the giants: on one hand, they are circumventing antitrust scrutiny through "hiring and licensing" deals to "invisibly" acquire competitors in the European and American markets; on the other hand, they are directly targeting high-quality AI assets globally. A typical case is NVIDIA's non-exclusive licensing agreement worth $20 billion with chip startup Groq on December 24, which is essentially a "backdoor acquisition" aimed at acquiring technology and talent.

At the same time, Meta acquired AI startup Manus for about $2 billion in December, highlighting the intention of Silicon Valley giants to eliminate potential competition and integrate advanced technologies through mergers and acquisitions. As market confidence in AI startups wavers, large tech companies are seizing this opportunity to acquire key talent and intellectual property at a lower cost during the "fire sale" of startups.

Parmy Olson believes that this trend signals an acceleration of "Darwinian" survival of the fittest. Although spending by U.S. companies on generative AI software is expected to surge to $37 billion by 2025, driven by pressure on return on investment (ROI), only a few winners will continue to survive, while a large number of homogeneous weaker players will be swallowed by the giants. This consolidation will help tech giants weather the market storm and further solidify their dominance in the AI field.

Return of Business Logic: From Blind Expansion to Survival of the Fittest

In the past few years, the financing boom in the AI sector has led to a large number of homogeneous competition. Data from Menlo Ventures shows that U.S. companies' spending on generative AI software reached $37 billion in 2025, far exceeding the previous year's $11.5 billion. However, this massive expenditure is scattered across a myriad of tools, leading to severe market fragmentation.

Parmy Olson believes that as enterprise customers face pressure to demonstrate substantial returns on investment, the market will experience intense consolidation in 2026. This model was seen in the cloud software industry from 2020 to 2021, when a large number of similar companies ultimately triggered a wave of private equity-driven acquisitions. Now, the same script is playing out in the AI sector: when dozens of startups attempt to solve the same pain point, and ultimately only two or three can capture market share, the remaining weaker players will inevitably become acquisition targets. For tech giants, this is an excellent opportunity to acquire technology and talent at a low price.

"Quasi-Merger" Game: Acquiring Under the Guise of Licensing

In order to bypass regulatory obstacles, Silicon Valley giants have designed a complex trading structure. The transaction between NVIDIA and Groq is a typical case: NVIDIA pays fees to obtain technology licenses and integrates Groq's chip designs into future products, while some of Groq's executives join NVIDIA.

Parmy Olson believes that this operation technically avoids triggering antitrust scrutiny directly, but effectively achieves the goal of eliminating potential competitors and acquiring core assets.

As early as 2024, Microsoft set a precedent with a $650 million licensing deal, bringing the CEO and core team of AI startup Inflection under its wing. Subsequently, Alphabet's Google reached a similar collaboration with Character.AI worth $2.7 billion, and Amazon also absorbed the startup Adept through "acquisition-style hiring." Entering 2025, Google again spent $2.4 billion to acquire the assets and talent of AI code startup Windsurf.

Although the Federal Trade Commission (FTC) and the Department of Justice are investigating these "seemingly acquisition" transactions, this "quasi-merger" model is expected to continue thriving after President Trump signed an executive order in December 2025 signaling a potential softening of antitrust enforcement.

Hunting Globally: The Inevitable Fate of Startups?

The merger and acquisition landscape in the global tech industry is changing. Multinational tech giants are beginning to focus on innovative companies with a more global background.

Industry insiders point out that innovation is no longer limited to specific regions, as promising tech companies are emerging worldwide. Meanwhile, a new generation of AI entrepreneurs is demonstrating a broader international perspective. They often have cross-cultural backgrounds and are more familiar with global market rules and business environments. Many startups adopt a global layout from their inception, such as establishing headquarters in neutral regions, creating favorable conditions for future acquisitions by global platforms.

Parmy Olson analyzes that, theoretically, some companies with technological advantages in specific fields, such as those developing large language models, may become potential supplementary targets for large tech groups. However, the reality is that the leading structure of the global tech industry is relatively stable, and even currently leading AI startups find it difficult to shake the market dominance of existing tech giants in the short term. At this stage of industry development, established giants that control resources, ecosystems, and markets still play a dominant role in integration and mergers.

After three years of experimentation and exploration, enterprise clients are gradually concentrating their budgets on a few core suppliers. As market trends shift, a large number of struggling startups worldwide will have to seek a way out, while the vested interests in Silicon Valley are ready to enjoy this "feast." For investors, this means that the market's alpha returns will further concentrate on leading tech stocks, while the investment risks in startups will significantly increase.