Why Big Tech wants to gobble AI startups like Manus: The logic of industry consolidation

Subscribe to enjoy similar stories. 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, as the relentless hype that’s driven the creation of nearly 40,000 AI startups crashes into the cold logic of business economics. US companies spent $37 billion on generative AI software in 2025, up from $11.5 billion the year before, according to venture capital firm Menlo Ventures.

But much of that spending has been across a motley array of tools. With pressure mounting to show a meaningful return on investment, 2026 will see a Darwinian thinning as a few AI winners continue selling while many weaker players get gobbled up by large technology firms. When a swathe of startups seek to solve the same problem but only two or three manage to capture the market, some of the rest could become acquisition targets.

The same pattern occurred with cloud software, leading to a wave of private equity-driven acquisitions in 2020 and 2021. Two deals hastily wrapped up before New Year offer clues to how that may play out with AI: Silicon Valley’s biggest companies will look to China to buy AI startups outright and scoop up Western firms through stealth acquisitions. The key in both approaches will be to cleverly avoid the ire of regulators by trying not to trigger outbound investment rules when they buy Chinese firms and by using hiring-and-licensing deals—known in the industry as acqui-hires—to avoid antitrust scrutiny when they grab competitors in the US and Europe.