How Investors Are Rethinking Moats and Budgets in AI

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VCs are increasingly skeptical of moats based purely on model performance. Instead, defensibility in AI is coming from deep workflow integration, proprietary data, switching costs, and economic outcomes that are hard to replicate. Vertical AI startups in regulated or operationally complex industries are seen as having stronger long-term advantages than horizontal tools.

On budgets, investors expect spend to increase—but sharply concentrate. Enterprises are likely to cut underperforming tools and double down on a small set of AI vendors that prove mission-critical. CIOs are expected to push back on vendor sprawl, reallocating experimentation budgets into AI systems that deliver measurable ROI and institutional advantage.

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AI is a bubble trust me