The artificial intelligence boom is pushing the long-standing "spray and pray" approach of the venture capital industry to its breaking point.

Estimates suggest that Anthropic's upcoming IPO could value the company at $2 trillion, SpaceX is slated for a similar $2 trillion valuation at its IPO in June this year, and OpenAI is deliberating a private fundraising round that would peg its worth at $1.2 trillion, with a public listing targeted for next year. The combined valuation of these three firms alone is on track to easily surpass the $5 trillion mark.

According to data compiled by Jay Ritter, a professor emeritus at the University of Florida's Warrington College of Business, the 3,365 tech companies that went public between 1980 and 2025 had a combined market capitalization of $4.1 trillion on their first trading day. The estimated worth of these three AI companies now exceeds that entire 45-year cumulative total of tech IPO value.

This extraordinary concentration of wealth is profoundly reshaping capital flows and the competitive dynamics within the VC sector.

In the first half of this year, just three firms—Andreessen Horowitz, Founders Fund, and Thrive Capital—raised approximately $25 billion combined, accounting for nearly one-third of all new capital entering the US VC market during that period. For the majority of smaller venture firms, missing out on these key investments means being completely shut out of returns on a generational scale.

Meanwhile, the entire VC industry is mired in a liquidity crunch. Capital raised from new funds has been shrinking since 2021, a significant amount of money is locked up in "unicorn" assets with inflated valuations, exit channels are narrow, and the structural divergence within the industry's ecosystem is becoming more pronounced.

Unresolved Unicorn Bubble Creates Indigestion for VC

The astronomical valuations of AI giants arrive against a backdrop of general "indigestion" within the VC industry.

Following the Federal Reserve's rate hikes starting in November 2021, numerous unicorns that depended on a low-interest-rate environment to support their high-growth valuations have fallen into difficulty.

The stock market's waning interest in high-growth tech assets outside of AI has forced most unicorns to avoid going public at lower valuations. According to PitchBook data, based on the latest funding valuations, the total worth of private unicorn companies globally has reached a staggering $5.3 trillion. The IPOs of Anthropic and OpenAI will help absorb some of this massive valuation backlog, but whether the remaining assets can actually be converted into returns for investors is still a question mark.

Jay Ritter has pointed out that the way VC funds value their holdings lacks transparency, granting them considerable leeway. Underperformers can maintain their historical book value while winners are marked to market, leading to a systematic overstatement of overall returns.

Magnet Effect of Top Firms Intensifies Industry's Winner-Take-All Trend

Capital is rapidly consolidating among a select group of elite firms.

In the first half of this year, Andreessen Horowitz, Founders Fund, and Thrive Capital collectively raised about $25 billion, representing nearly one-third of all new capital in the US VC market during that span.

These firms typically employ a strategy that blends early-stage and growth-stage funds, leveraging their scale and brand appeal to consistently attract institutional investors.

Once the proceeds from AI giants' IPOs are tallied, the narrowness of the winner's circle is expected to intensify pressure from outside capital vying to enter these top-tier funds. For most small and mid-sized VCs, lacking the capital to participate in mega funding rounds and finding it difficult to hedge effectively through diversification, their very survival logic is being fundamentally challenged.

AI Disruption Hits Private Equity, VC Seizes Opportunity to Reposition

The AI boom has also handed VCs a narrative to launch an offensive against private equity (PE).

Jen Kha, a managing partner at Andreessen Horowitz, recently argued in a post that PE has historically claimed a larger share of investor allocations, but the super returns generated by AI companies "are fundamentally altering this equation."

She also warned that AI's disruption of the enterprise software sector could put immense pressure on PE, with some firms that rely on cash flow stability for their "software company buyout and consolidation" strategies already posting notable losses.

However, this narrative has yet to be backed by data. Despite the surge in AI investment enthusiasm, new capital flowing into VC funds has broadly contracted since 2021. A large amount of money remains trapped in older portfolios, unable to be recycled, and limited partners have not universally raised their overall allocation to VC. Whether VCs can successfully reposition themselves through the AI supercycle remains to be seen.

Can AI's Wealth Effect Spread? It May Decide VC's Long-Term Viability

Whether the current extreme concentration will permanently alter the operational logic of VC is still a matter of debate.

Some argue that the early benefits of AI are highly concentrated among chip makers, foundational model developers, and cloud platforms, suggesting a somewhat cyclical phase.

As the broader tech ecosystem around AI infrastructure matures, a wave of startups focused on specific applications is expected to emerge, potentially spreading AI's wealth effect across a wider array of investment areas.

If this diffusion effect materializes, the traditional VC model of "broad placement, where a few winners cover multiple failures" could be partially restored. But if value creation in AI continues to be dominated by a handful of platform-level companies, then "betting on the right horse" will completely replace "diversification" as the only viable survival rule in the VC industry.