Open-source AI push could create troubles for venture capital
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Illustration: Aïda Amer/Axios
Venture capital might have a concentration problem.
The big picture: VC funds have invested hundreds of billions of dollars into a small group of frontier AI labs.
- OpenAI and Anthropic alone received over 60% of all VC dollars committed to U.S. startups in the first half of 2026, according to PitchBook.
- The promise to limited partners has been cash-on-cash returns — it's about the "access," not the "picking" — after years of diminished distributions. Mega-IPOs on the horizon.
Zoom in: The easy ROI narrative is under pressure from a sudden U.S. tech industry affinity for open-source models, or at least open-weight models, which threatens OpenAI and Anthropic's market dominance.
- The first major crack came two weeks ago, after China's Moonshot AI released its powerful (and cheaper) Kimi K3 model.
- The next was Nvidia CEO Jensen Huang telling Axios that "open-source models that are excellent should be used," which he followed by signing a public letter in support of open-weight models. Other signatories included Microsoft, Meta and Andreessen Horowitz — all of which likely see open-source as demand drivers.
- OpenAI and Anthropic have pushed back, arguing that open-source could prove dangerous, only to be attacked on social media as advocates for regulatory capture.
Market reax: Then there is SpaceX, whose AI story is getting an increasingly dour reception from Wall Street.
- The company's stock closed Friday down 49% from its all-time intraday high, 23% below its first trades, and 15% below its IPO price. And shares opened even lower Monday.
- SpaceX is a momentum comp for OpenAI and Anthropic, and right now it's moving in the wrong direction.
Flashback: Hugging Face CEO Clem Delangue, whose company was recently attacked by an OpenAI agent, said last year at Axios BFD that the U.S. tech industry was sleeping on Chinese open-source models and that the "LLM bubble" was close to bursting.
Yes, but: We've seen this movie before, or at least the trailer.
- When China's DeepSeek emerged in early 2025, I suggested that it could be an "extinction-level event" for VC firms that went all-in on frontier AI labs.
- Since then, both OpenAI and Anthropic have released much more powerful models and massively increased their revenues. So if you want to brand me the Chicken Little of Sand Hill Road, you've got standing.
The bottom line: Limited partners have been very patient with venture capital, and tolerated unprecedented concentration, but that could change if frontier fortunes don't materialize. Or even if the grand slams are downgraded to doubles.
