Venture
Collective
DVC presents
STATE OF AI
The Operating Manual for the AI Revolution
A 20-minute compressed walk through the full stack — where money flows, who wins, what changes.
This runs today.
A day in the life — already automated
Tech cycles
The price of intelligence is collapsing
Every platform made one scarce input cheap. AI makes custom software cheap enough to give every workflow its own brain.
How software gets built
Same software arc. · New cost curve. · Very beginning.
The Stack · 1 of 3
Five layers. One economy.
$60B at the top generates ~$700B of buildout below (Big 4 2026 midpoint; up to $725B at top end).
Revenue vs Margin · 2 of 3
Same stack. Two lenses.
Revenue grew everywhere. Margins didn't follow. The top earns software economics. The bottom earns utility.
Forces on the Stack · 3 of 3
Two forces. One stack.
Down: commoditization. Up: personalization. The moat moved up.
Tap a state to switch lenses
Application layer
The user never sees the model.
Whoever owns the application picks the model. Distribution > intelligence.
Model layer · 15 frontier models
Frontier broke into three races.
Commodity. Specialist. Restricted.
Capability vs. cost
Smarter AND cheaper.
Every prior cycle: more power = more cost. AI inverted that. Embed intelligence everywhere.
Infrastructure & Energy
Software demand. Industrial buildout.
Hyperscaler CapEx tripled in two years. Microsoft signed a 20-yr PPA for a targeted Three Mile Island restart. Google builds SMRs. NVIDIA uses equity to anchor preferred infrastructure partners (DSX as the reference architecture).
Hyperscaler Capital Expenditure
Agent anatomy
It's not one product. It's a new stack.
47 companies across 7 layers, plus an emerging control plane above them: governance, agent registries, permissions, observability, and evals. $1B+ raised. Most didn't exist 18 months ago.
Vibe coding
Code is becoming a throwaway artifact.
42% of committed code is AI-generated or significantly AI-assisted. 72% of developers who tried AI use it every day. Lovable hit $400M ARR. The roofing company runs AI agents now.
Source: SonarSource 2026 State of Code Developer Survey (42% AI-authored code, 72% daily use among triers). Stack Overflow 2025 — 51% daily — as secondary signal.
Business models · usage is the engine
Per-token beats per-seat when AI does the work.
Anthropic 3× in 4 months on per-token API. Perplexity +50% in a month after Computer. Usage is where revenue scales with value.
Charge for the work. Anthropic: $30B+ run-rate, 3× in 4 months, ARPU $16.20/mo — per-token. Perplexity: ~$420M ARR after Computer (per-task). OpenAI: 900M WAU, only 5.6% pay — subscription distributes; usage captures.
Outcome is the direction. Hybrid usage is the reality. Subs are a floor. Anthropic ARPU $16.20/mo vs OpenAI $2.20, Google $1.10. Coatue: only 3.8% of traditional SaaS spend is consumption-based so far. Orb: most agent companies are on hybrid pricing today.
Source: Counterpoint Research, Anthropic, Perplexity, OpenAI, Coatue C:\Takes, Orb 2026 State of AI Agent PricingServices disruption
$1.5T of services. Mapped.
Sequoia's framework. Outsourced × Intelligence = autopilot territory. DVC plays across nearly every quadrant.
Outsourced × Judgement — AI augments, humans decide
Outsourced × Intelligence — ripe for full automation
Insourced × Judgement — hardest to automate
Insourced × Intelligence — automation coming fast
How founders attack the $1.5T services map
Three angles. Pick one.
SaaS to incumbents. Vertical agentic. Agentic rollup. The market structure picks the strategy — not the founder.
Physical AI
It already left the screen.
$38 trillion labor market in play. Slower than software people think. Faster than industrial incumbents hope.
Key learnings
Six things we now believe.
After mapping the stack: where value is shifting, what's structural, and where today's leaders are most exposed.
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01
Intelligence got cheap. The stack didn't.
Inference fell 99.6% in 36 months. The application surface around the model — distribution, memory, tools, eval — is still being invented.
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02
The bottleneck moved to atoms.
Compute, power, memory, distribution. ~$700B of 2026 hyperscaler CapEx for ~$60B of app revenue. Whoever owns the scarce input prices the cycle.
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03
Pricing is unbundling from seats.
Per-token, per-task, per-work-unit beat flat seats when the agent does the work. Outcome pricing is where AI margin actually shows up.
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04
Agents and vibe coding shipped.
42% of committed code is AI-authored or AI-assisted. Cursor, Claude Code, Lovable, Devin are revenue lines, not demos. Software creation is a new workflow.
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05
Coalitions, not empires.
Three stacks now define the frontier. OpenAI / Microsoft / Oracle / AWS: exclusivity reset, multi-cloud assembly, no single protector. Anthropic / Amazon / Google / SpaceX / Cursor: diversified compute and distribution, with a competitor (xAI) already inside the tent. Meta: separate, vertically controlled. Everyone gets stronger; everyone gets more exposed.
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06
Physical AI is next — and slower.
$38T labor market in play, but latency, safety, and regulation gate the timeline. Mobility and logistics first; humanoids in controlled environments before open-world.
You are not late to a trend. You are early to a restructuring of the global economy.