Dec 22, 2025 · 30m · y-combinator
The Truth About The AI Bubble · Y Combinator
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In this episode of The Light Cone Podcast, Y Combinator partners analyze the major AI trends and unexpected developments of 2025. They examine changing model preferences among founders, debate the AI infrastructure bubble, analyze power constraints, and discuss how ultra-lean teams are scaling in a stabilized AI economy.
Statements from this episode (27)
Hu: Anthropic surpasses OpenAI as top API for YC applicants
“And, shockingly, in this batch, the number one API is actually Anthropic. It came out a bit more than OpenAI, which who would have thought?”
Hu: Anthropic saw over 52% growth among YC applicant tech stacks
“They had this hockey stick with the growth over 52%.”
Friedman: Vast majority of founder AI use cases are not coding
“The vast majority of the use cases people are using it for though is not coding.”
Hu: Google Gemini adoption in YC batch rose to around 23%
“I think last year was probably single digit percent, or even like two, three percent, and, ah, now for winter 26 is about 23%.”
Taggar: Gemini is more accurate than Perplexity for real-time queries
“Personally, I found it was better than all the other tools for that, and it was better than Perplexity on it, too. Like, Perplexity would be fast, but not always accurate, and Gemini was not quite as fast as Perplexity, but was always pretty accurate if I aske…”
Garry Tan: ChatGPT Remains a Step Behind Perplexity for Web Search
“I'll use perplexity for fast web searches or things that you know, I know is like a research task because I think ChatGPT is still like a little bit of a step behind for searching the web.”
Garry Tan: AI Memory Is Becoming a Moat for Consumer Products
“I think memory is turning into an actual moat for like that consumer experience.”
Tan: Gemini will never match ChatGPT's personality
“And I don't expect Gemini to ever have The personality that I would expect from ChatGPT. It just feels like a different, like, entity, you know.”
Taggar: LLMs cannot be trusted without heavy prompting in high-value transactions
“I still don't trust the models enough to be accurate without lots of Prompting. And it's a high value transaction, so you don't want to, like, get incorrect data out of it.”
Diana Hu: Series B AI startups are orchestrating and arbitraging models
“Startups are doing as well, they are actually arbitraging a lot of the models. I had some conversations with a number of founders where before they might have been loyalists to, let's say, OpenAI models or Anthropic, and I just had some conversations recently …”
Taggar: Model commoditization sets up AI app startups for fantastic year
“Gemini surge, especially over the last few months, just feels like it returns us to a world of where exactly that, like the models are all essentially commoditizing each other. And it's just like the application layer and the startups are going to set up to ha…”
Tan: Still a long-term investor in Nvidia despite increasing competition
“You know, I think I'm still a long-term buy and hold, honestly, but for the moment, people are like, oh, well, Gemini's so good, and all the, you know, nobody seems to be NVIDIA only now, and everyone's buying AMD, and everyone's, you know, and TPUs are workin…”
Diana Hu: AI's future Google- and Facebook-scale startups have not started yet
“Startups like the future Facebook or the future Google are yet to be started because those come in in the deployment phase, because right now I think these things, things are still getting built up.”
Tan: Boom Supersonic is using jet engines to power AI data centers
“Boom supersonic, instead of making supersonic jets right now, is on this good quest to create enough power for a bunch of these
AI data centers that are being built right now.
They use jet engines and even those like are so bad, you know, the supply chain for …”
Tan: Environmental lobby abuses CEQA to halt innovation and housing
“In California we have CEQA, which is totally abused by the environmental lobby to stop all innovation and building housing, by the way.”
Tan: Fusion is the only path to gigawatts of power in space
“And if they do it, it's actually the only path to gigawatts of energy up there in space.”
Friedman: AI model training is becoming a common skill set
“I think we are absolutely going through that right now. Yes. Like where it's going from being a very rare skill set to a more common one.”
Hu: A YC startup's 8B model beat OpenAI on healthcare benchmarks
“There's this particular YCE startup that told me that they collected the best data set for healthcare. And they ended up performing better than OpenAI and a lot of the benchmarks for healthcare with only eight billion parameters.”
Tan: GPT-4 wiped out YC startups' RL fine-tuning lead over GPT-3.5
“You know, we've also had YC companies where, ah, they had something that beat OpenAI, ah, you know, GPT-III.V and they were doing fine-tuning with RL, but then, ah, yeah, GPT-IV and then, ah, GPT-IV came out and, ah, you know, basically blew their fine-tuning …”
Tan: Vibe coding cannot yet ship 100% solid production code in 2025
“Knowing what we know, I mean, yes, vibe coding is not, you know, completely usable and trustable for you know, a hundred percent of your coding period. Like this, you know, it is not true that you can like ship a hundred percent solid Production code today as …”
Taggar: Incremental model gains make finding AI startup ideas difficult again
“The models themselves have incrementally improved this year, but there haven't been like major steps forward that have shaken everything up, which is, has a knock on effect. Many episodes ago, we talked about how it was It felt easier than ever to pivot and fi…”
Tan: Enterprise incompetence slows down dangerous AI fast takeoff
“Well, it turns out that 90% of enterprises don't know how to do You know, IT, let alone AI. It's weird to say that that's a good thing, but in the context of fast takeoff, like that is a real break on the ability of this new, really insane technology from actu…”
Tan: ARC Prize joins Y Combinator's Winter 2026 batch
“The ARK AGI prize is you know, gonna come in and do the winter 26 batch as a non-profit.”
Taggar: Post-Series A AI startups still require traditional hiring to scale
“Yeah, like, post-series A, it actually largely feels, like, the playbook is the same, and the companies might be smaller for the same amount of revenue, but it Feels it's entirely because they hit the revenue so fast and there's still just bottlenecked on how …”
Tan: Harvey and Open Evidence are overcapitalized 'foie gras' startups
“I think they're like, there might be a case of two foie gras startups, like one being Harvey and the other one being open evidence, right?”
Taggar: Rising AI software expectations force startups to maintain pre-AI hiring levels
“AI is going to reduce the cost of, like, producing the time to produce things, and so then the expectations from your users and customers will just go up, and you'll need to keep hiring more people to satisfy, like, the growing expectations. I feel like this y…”