What If AI Costs More Than The People It Replaces?

Author

Nicole Rojas
July 06, 2026

Welcome to AlphaInsights, 8alpha.ai’s weekly newsletter, your ultimate source for curated insights and key updates from the dynamic world of venture capital!

From billion-dollar rounds to market-defining shifts, we deliver the intelligence powering the global investment landscape, moving investors and innovators forward. At 8alpha.ai, we’re not waiting for the future of capital, we’re building it. Stay sharp, stay curious, and stay ahead.

STARTUPS

ROUNDS AND UNICORNS

  1. Joulent (Energy Infrastructure): Raised $1.75 billion in strategic funding from National Grid Ventures to expand energy infrastructure supporting AI data centers and other compute-intensive industries, reflecting growing demand for reliable power as AI deployment accelerates

  2. Together AI (AI Infrastructure): Secured $800 million in Series C financing at an $8.3 billion valuation to expand its open-source AI infrastructure platform, enabling enterprises to train and deploy large AI models without relying on proprietary systems

  3. LeapXpert (Enterprise Compliance Software): Raised $180 million in growth funding led by Riverwood Capital to strengthen its communications compliance platform, helping regulated industries securely monitor messaging across channels such as WhatsApp, SMS, and Microsoft Teams

  4. 8090 Solutions (Enterprise AI Software): Closed a $135 million funding round led by Salesforce to build enterprise software powered by coordinated AI agents under human oversight, targeting more reliable automation for complex business workflows

  5. Beeline Medicines (Biotechnology): Raised an additional $126 million to advance precision therapies for autoimmune and inflammatory diseases, bringing its total Series A financing to $426 million as it expands development of next-generation immunology treatments

Global venture funding reached a record $510 billion in the first half of 2026, surpassing the $440 billion invested during all of 2025. AI continued to dominate the market, with OpenAI and Anthropic raising a combined $217 billion, accounting for 43% of all global venture funding, while more than 70% of second-quarter investment went to AI-focused startups

  • The quarter also marked a strong recovery in liquidity, with 32 IPOs and 24 acquisitions valued above $1 billion, led by SpaceX's $75 billion IPO and its $60 billion acquisition of Cursor

  • Billion-dollar funding rounds are expanding beyond foundation models into AI infrastructure, defense, robotics, and healthcare

ECONOMIC SNAPSHOT

The U.S. economy added 57,000 jobs in June, well below expectations of 115,000 and down from a revised 129,000 in May, while April and May payrolls were revised lower by a combined 74,000 jobs. Despite slower hiring, the unemployment rate declined to 4.2% from 4.3%, suggesting the labor market remains relatively resilient. Following the report, markets pushed back expectations for the next Federal Reserve rate hike from October to December, while the U.S. dollar fell 0.7%

  • Job growth was strongest in professional services, healthcare, and social assistance

  • The leisure and hospitality sector unexpectedly lost 61,000 jobs, reflecting weaker-than-expected hiring despite the World Cup

 

Kevin Warsh’s biggest test as Fed chair may not be interest rates, but the Fed’s roughly $7 trillion balance sheet. Warsh has long criticized sustained quantitative easing, arguing that a large balance sheet suppresses volatility, lowers financing costs, and may enable excessive government borrowing. While the link between QE and fiscal deficits is debated, the broader concern is that too much central bank support shifts risk away from private markets and encourages complacency

  • Shrinking the balance sheet too quickly could reduce bank reserves, raise liquidity costs, and increase market instability

  • The key question is whether Warsh will reduce the balance sheet gradually or too aggressively

 

Companies are rapidly increasing AI spending despite mounting questions about its economic returns. Big Tech is expected to spend $740 billion on capital expenditures in 2026, up 69% from 2025, while AI agent software spending is projected to reach $207 billion, a 139% increase year over year. At the same time, more than 115,000 tech workers have been laid off across over 150 companies, as firms reallocate resources toward AI. However, evidence suggests the returns remain uncertain:

  • One study found that AI automation is economically viable in only 23% of roles, while enterprise AI usage still relies heavily on costly frontier models

  • Enterprise AI costs may rise 30%–50%, reinforcing concerns that AI spending is running ahead of economic returns

The Trump administration officially launched "Trump Accounts," a government savings program that provides $1,000 investment accounts for children born between January 2025 and December 2028. The accounts, established under the One Big Beautiful Bill Act, allow families and employers to contribute up to $5,000 annually, with funds invested by default in a diversified index fund and accessible at age 18 for education, home purchases, or starting a business

  • The program has attracted significant private support, including a $6.25 billion donation from Michael and Susan Dell to provide an additional $250 to 25 million low-income children

  • SpaceX President Gwynne Shotwell also pledged $350 million to support children in lower-income communities

 

Wall Street remains optimistic about the second half of 2026, supported by easing oil prices, resilient corporate earnings, strong liquidity, and continued AI investment. The S&P 500 posted its strongest quarter in six years, while analysts forecast the index could gain another 21% over the next 12 months, with JPMorgan raising its year-end target to 7,800. Upcoming earnings are expected to validate AI monetization, despite concerns over valuations and AI infrastructure spending

  • As a result, strategists increasingly recommend diversifying beyond megacap technology

  • Industrials, healthcare, materials, and small- and mid-cap companies are expected to benefit as AI adoption expands

 

IPOs & EXITS

OpenAI is reportedly considering delaying its IPO until 2027 as executives weigh concerns over market conditions, continued losses, and whether the company can achieve CEO Sam Altman’s reported $1 trillion valuation target. A delay could allow rival Anthropic, currently valued at $965 billion compared with OpenAI’s $852 billion, to become the first major AI company to go public and set valuation benchmarks for the sector

  • Analysts warn that postponing the IPO could raise broader questions about AI business models and delay other software listings

  • Meanwhile, OpenAI is shifting its strategy toward higher-margin enterprise products and tighter cost controls to strengthen its path to profitability

 

AI stocks experienced a sharp pullback in June as investors reassessed lofty valuations, with the Magnificent Seven losing 10% of their market value, about $2.3 trillion, their largest decline since March 2025. Despite the correction, investment in AI infrastructure remains robust, with the five largest hyperscalers expected to spend $713 billion on capital expenditures in 2026, rising to more than $1 trillion annually by 2029, supporting continued demand for chips and memory

  • Investors have increasingly rotated from hyperscalers toward semiconductor companies, with SanDisk up roughly 760%, Intel up 200%, and SK Hynix up 300% this year

  • While upcoming IPOs from OpenAI and Anthropic are expected to test investor appetite for AI, analysts believe long-term demand remains strong, even as higher interest rates and elevated valuations encourage greater selectivity across the sector

 

AI fuels record $200bn M&A boom in US power sector (Financial Times, 3 minute read)

The AI-driven expansion of data centers is fueling a record wave of mergers and acquisitions in the U.S. power and utility sector. Deal value reached $203.6 billion in the first five months of 2026, already 44% higher than the $141.7 billion recorded in all of 2025, while announced data center investment more than doubled to $151.5 billion from $68.7 billion a year earlier. Utilities are racing to raise capital and expand power generation and transmission infrastructure to meet surging electricity demand from AI

  • Analysts forecast that some power companies could see revenue grow by 50% to 100% over the next decade

  • However, the boom is attracting greater regulatory scrutiny as electricity prices have risen 9% nationally over the past year

  • Policymakers are increasingly concerned that AI infrastructure costs could be passed on to consumers

 

Global M&A activity reached a record $2.8 trillion in the first half of 2026, up 48% year over year, despite the total number of deals falling 9% to a six-year low of 24,000 transactions, reflecting a shift toward fewer but significantly larger acquisitions. Forty-seven mega-deals valued above $10 billion generated more than $1.3 trillion, accounting for nearly 50% of total deal value and marking the strongest first half on record for blockbuster transactions

  • Technology remained the largest sector, with $649 billion in announced deals

  • Cross-border M&A also rose 62% to $893 billion, supported by abundant financing, a more favorable regulatory environment, and strong demand for AI, infrastructure, and strategic scale

  • Bankers also reported growing momentum in corporate spin-offs and portfolio simplification as companies seek to sharpen their strategic focus and unlock shareholder value

8ALPHA.AI HIGHLIGHT

What a great evening at the Seattle Chapter: Startup Pitch Competition!

A huge thank you to everyone who joined us and helped make the event such a success. It was great to see founders, investors, operators, and community members come together to support and strengthen the Seattle startup ecosystem.

To the founders who took the stage, thank you for sharing your vision, your hard work, and the companies you're building. And to our judges, thank you for your time, expertise, and thoughtful feedback.

Congratulations to Cameron McCann and the team at Q-Immune for taking home the win!

A special thank you to our fellow hosts, LaFamilia Foundation and Awana, and to our sponsors Silicon Valley Bank, Hal9, Microsoft, Carta, and Perkins Coie for helping make this event possible.

We hope this was more than just a competition. We hope it sparked new conversations, meaningful connections, and future collaborations across the Seattle startup ecosystem.

Looking forward to seeing what comes next.

The Venture Model Is Broken. What Comes Next?

99% of deals don’t matter.

In Q1 2026, nearly $200B went into just five companies, with ~89% of deal value concentrated in AI.

At the same time:

  • Fund formation has dropped sharply

  • Exit activity remains limited

  • Liquidity is concentrated in a handful of large outcomes

From the outside, it looks like venture capital is back. But underneath, the reality is very different.

Fewer funds are being raised

Liquidity is still tight

And for most companies, access to capital hasn’t improved

This isn’t just a cycle, it’s a structural shift in how capital is allocated.

Watch Nicole Rojas, Head of Investment Operations at 8alpha.ai, break it down in our latest State of VC update. Explore funding and learn more at 8alpha.ai.

State of VC Report: The AI Power Law

“Every technological revolution has two halves: the bubble and the golden age that follows.”

Carlota Perez, economist and author of Technological Revolutions and Financial Capital (2002)

The stock market is at all-time highs, but inflation remains sticky and the job market is weakening. Ask around and you’ll hear the same refrain: the labor market feels tougher than ever. At the same time, the first wave of AI agents is “joining the workforce”. Imagine a software engineering agent capable of performing most tasks of a mid-level developer. Now imagine thousands. Extend that across every knowledge field, and the implications for productivity, and potential displacement, are profound.

What happens when the next round of layoffs hits? Add tariffs on top, and ask what happens if consumption weakens. Even the Federal Reserve admits it is unsure of what comes next.

Against this backdrop, venture capital in 2025 is not in recovery but in recalibration. The illusion of recovery is powered almost entirely by AI. Capital is flowing, but to fewer companies than ever. Outside AI, down rounds are rising, and nearly half the unicorn population hasn’t raised since 2022.

We are living in an AI bubble. Just four mega caps, Nvidia, Meta, Microsoft, and Broadcom, accounted for 60% of the S&P 500’s gains, with Nvidia alone responsible for more than a quarter. It’s a paradox. Yes, we’re in a bubble, but it’s also the future. We are witnessing what may be the most important technological shift in a generation. It’s hype layered on top of something undeniably real.

Uncertainty is the name of the game; not one single path forward, but divergent scenarios. Alpha will be earned through selectivity, by navigating volatility rather than avoiding it.

8alpha.ai is an AI fintech transforming cash-generating businesses into scalable, AI-powered companies. We provide revenue-based financing and hands-on AI transformation, delivering no zeros with unlimited upside. We’re the architects building financial infrastructure for the next generation of investors and startups.

Become part of our revolution.

Happy reading,

8alpha.ai’s Research & Investment Team