There's no one-size-fits-all strategy when it comes to VC investments in the booming AI sector.

State of play: Large language model companies are still making headlines for raising piles of cash at eye-popping valuations, but it also appears a growing number of VCs are slinging some of their checks in other directions.

The big picture: At Upfront Ventures' annual confab in Los Angeles this week, a number of top VCs took the stage to share their thoughts on investing in AI.

Zoom in:

• General Catalyst: "We've decided not to invest too much at the [foundational] language model layer, to focus much more on … how do these models interface with different verticals? So what are the modern vertical [software as a service] companies gonna look like, and what are the modern vertical business function companies gonna look like," explained CEO Hemant Taneja.
• Menlo Ventures: "In the near term, it's that it's more about picks and shovels. So really the surrounding infrastructure that helps everyone build at the application layer," said partner Matt Murphy. "You have to be really careful about getting into a crowded category … [and] things that feel like a bolt-on … like if generative AI didn't exist, this application shouldn't be built."
• Lightspeed Ventures: Partner Nicole Quinn said that "on the application layer, it generally starts with entertainment, companionship, escapism.…And then once it reaches critical mass at that point, you then move to the more utility sides of applications … an AI financial manager, or an AI interior designer or a travel planner … and so when we're sifting through, that's when we get excited." She and fellow partner Mike Mignano later warned that big corporate investors don't have the same incentives and investment models as traditional VCs, making those funding rounds and their valuations tricky.
• Founders Fund: "Anything not AI," partner Brian Singerman replied when asked about contrarian areas worth investing in. He compared the current wave of self-proclaimed AI startups to the pre-IPO internet companies of the dotcom era. He cautioned that many startups today aren't really AI companies, but rather are just using the tech.

The bottom line: As in any technologic boom, some will dive in to plant their flag in what they see as the companies that will control how the industry evolves, while others will focus on clever applications once the froth dissipates.

Yahoo CEO (and turnaround veteran) Jim Lanzone shared some thoughts on the company's M&A strategy:

On Yahoo's acquisitions:

Everything we've done so far, it's been on the smaller end … about $30 million in … common stock, which is a community platform for Yahoo Finance, [that's] the biggest we've done so far. But we've actually been in the game for much larger deals that … we weren't the highest bid for.

I would look at two ways for us. One is categorically: What are other categories that are adjacent to what we do today, where Yahoo is the trusted guide, and these categories or other ones that we could also participate in or that we already do, but just that we could be much larger in.…

The other is: What can accelerate our product roadmaps? So you won't really see us doing acqui-hires, like we're not in the position or don't really believe in doing that just to bring on talent.… But to bring on products that can accelerate our roadmap by a year or more — we're very interested in that. And we've done a couple of those. We have more I think that we will be announcing shortly like those; those are the two main buckets for us.

On an IPO down the line:

I don't think we need to think too far ahead about what the exit strategy is. We kind of just got here, and our focus [is] on how do we get everything moving here the way that we believe in.… I think good things will happen. And we're not writing that next chapter yet.

I will say I don't think it's healthy for us to worry about [what] these trillion-dollar companies [are] doing.… We were bought for $5 billion.… We are still top five, or hundreds of millions of users a month. We have a footprint that's, you know, very unusually big.

• Inside the funding frenzy at Anthropic, one of A.I.'s hottest start-ups (NYT)
• How Yahoo sparked a renaissance under new owners (Axios)
• Humanoid robots draw millions from Bezos, OpenAI and more (Axios)

As usual, the Upfront Summit was chockful of celebrity entrepreneurs.

• Question: What products (aside from their entertainment endeavors) do the following folks have businesses in: Lady Gaga, Cameron Diaz, Jonathan Van Ness, Katy Perry? (Answer at the bottom.)