How AI Is Rewriting the Power Law of Venture Capital

AI is fundamentally reshaping venture capital and institutional asset allocation as the power law becomes more extreme than in previous decades. Unlike traditional software paradigms, capital now directly compounds competitive advantage by fueling compute-intensive frontier models. Success in this environment requires firms to operate across the entire stack, from pre-seed to late-stage, to secure access to category-defining companies. The "middle" of the venture market is increasingly untenable, forcing a consolidation toward specialized early-stage boutiques or large-scale, multi-stage platforms. Beyond software, AI’s impact on labor, energy, and physical infrastructure suggests that the next generation of massive market-cap companies will emerge from categories that barely exist today. Investors must prioritize access, selection, and aggressive position sizing in these winners, as the performance dispersion between top-tier firms and the broader market continues to widen significantly.