The Hidden Economics Powering AI

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Jan 26, 2026

David George, a16z General Partner focused on growth-stage AI and enterprise software, outlines how AI reshapes private markets. He discusses why companies stay private longer. He covers massive AI infrastructure capex, falling model costs and rapid capability gains. He explores pricing and monetization experiments, durable use cases, and how portfolio construction adapts to this new AI landscape.

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Rapid Cost Declines And Fast Model Improvement

AI input costs fell >99% in two years while model capabilities doubled ~every seven months.
David George says this combination creates an infrastructure and quality tailwind for many new companies.

AI As A Foundational General Purpose Tech

David George compares AI to electricity or Wi‑Fi in its pervasive economic impact.
He expects AI will create far more market value than the prior mobile+cloud cycle.

Demand Scaled Far Faster Than Prior Waves

AI reached massive global distribution far faster than search did, aided by cloud and smartphones.
David George views this fast demand signal as de‑risking forward growth for AI companies.

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In this episode, Jen Kha, Head of Investor Relations, and David George, General Partner, discuss how late-stage private markets are evolving as AI reshapes scale, capital intensity, and growth timelines. They explain why AI-driven companies are staying private longer, how infrastructure spending is changing return profiles, and what this moment means for durability, value creation, and long-term outcomes in private markets.

Timecodes:

0:00 — Introduction

04:21 — The Market Opportunity for AI

26:48 — Pricing, Monetization, and Cash Burn

43:15 — Companies Staying Private Longer

51:30 — Portfolio Composition and Construction

57:18 — Team Culture and Collaboration

Resources:

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Not an offer or solicitation. None of the information herein should be taken as investment advice; Some of the companies mentioned are portfolio companies of a16z. Please see https://a16z.com/disclosures/ for more information. A list of investments made by a16z is available at https://a16z.com/portfolio.

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