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Venture capitalist Chamath Palihapitiya warned that AI-native startups could face growing competition from foundational model developers as companies such as OpenAI and Alphabet Inc.’s Google expand into software applications and workplace tools.
AI Giants Threaten AI-Native Startups
On Monday, in a post on X, Palihapitiya argued that falling artificial intelligence costs were changing where companies could generate value, shifting the focus from selling AI model access to owning the applications built around the technology.
“As the cost of the marginal token approaches zero, the value is not in selling tokens,” he wrote.
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He added, “It is very clearly in moving up the stack and owning the application layer.”
He predicted that AI-native businesses operating in legal services, sales and customer service could be among the first to face disruption.
“The first victim will not be established SaaS but AI Natives that spend heavily on the labs now,” Palihapitiya said.
He argued that foundational model companies already had visibility into how these businesses operated through the data and workflows processed by their models, making it easier to identify opportunities for competing products.
AI Giants Move Into Software Workflows
Palihapitiya also highlighted the growing integration of AI into everyday workplace applications.
He pointed to “the Google Doc editing flows in OpenAI” and “the google drive/doc integration into chats,” describing both as “very good.”
Its very interesting to note the pace of application features from the foundational model companies. As the cost of the marginal token approaches zero, the value is not in selling tokens. It is very clearly in moving up the stack and owning the application layer.
The first…
— Chamath Palihapitiya (@chamath) November 2, 2026
See Also: Avoid the #1 Investing Mistake: How Your ‘Safe’ Holdings Could Be Costing You Big Time
AI’s Impact on Markets and Investment Strategies
Earlier this month, Palantir Technologies Inc. CEO Alex Karp said Wall Street had yet to understand AI’s limitations, warning that standalone language models offered “limited value” and could become “agents of chaos.”
He argued that businesses needed Palantir’s technology to make AI work in real-world operations.
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Macro investor Raoul Pal warned that investors had roughly four years to strengthen their financial positions before AI reshaped financial markets and investment strategies.
He cautioned that investors could eventually find themselves “competing with agents.”
In September, BlackRock urged investors to focus on physical infrastructure rather than software as AI adoption accelerated.
The firm highlighted growing demand for chips, data centers and electricity, arguing that cheaper AI models could commoditize the model market.
Photo courtesy: Shutterstock
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