Presentation for the Boston College Investment Committee (Recorded September 24, 2026)
Key Macro Takeaways
1. Macro Shift: A Computation Revolution
Scale & Value Capture: The current AI wave is expanding beyond the conventional software Total Addressable Market (TAM) into the services TAM, which is roughly two orders of magnitude larger.
Adoption Velocity: Adoption is the fastest in tech history because distribution channels (global internet connectivity and ubiquitous smartphone adoption) are already in place.
Computation vs. Communication: Unlike previous waves (Internet, Cloud, Mobile) which changed how information is , AI represents a fundamental revolution in how information is —the first true shift in computation since the silicon revolution of the 1960s/70s.
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November 2022 (ChatGPT): Demonstrated the power of pre-training (System 1 thinking).
Late 2024 (OpenAI o1): Introduced test-time reasoning (System 2 thinking).
Fall 2025 (Claude Code & Opus 4.5): Marked the emergence of long-horizon autonomous agents. Sequoia views this as a discontinuous leap representing the arrival of AGI.
AGI Consensus: Sequoia published a blog in January 2026 claiming 2026 would be the year of AGI. Initially met with skepticism, it quickly became mainstream market consensus.
Structural Market Dynamics
Traditional Software ("Faster Horses") Long-Horizon AI Agents ("Cars")
"Faster Horses" vs. "Cars": AI shifted from software that merely accelerates human task speed ("faster horses") to autonomous systems that perform entire jobs end-to-end ("cars").
Crossing the Trust Threshold: Application platforms (e.g., Instinct, Muse) have transitioned from simple chat/task execution apps into trusted AI assistants capable of doing multi-step work independently.
Categorized Analysis of AI Dynamics
Impact on Main Street & Society
Healthcare & Education: Rural physicians gain immediate access to top-tier expertise via pocket assistants. Innovative educational models (e.g., Alpha School) point to hyper-personalized learning futures.
Labor Market Bifurcation: Blue-collar jobs are growing from data center expansion and physical infrastructure builds. Conversely, white-collar jobs are under intense pressure; professionals who adapt and leverage AI will thrive, while non-adapters face displacement.
The Bad & The Ugly (Risks & Headwinds)
Capital Expenditures: Hyperscalers have begun spending beyond their free cash flow, financing AI infrastructure buildouts through debt rather than cash reserves.
Psychological & Cyber Threats: Rise of cybersecurity vulnerabilities and emerging mental health concerns ("AI psychosis") driven by prolonged interaction with artificial entities.
Geopolitics & Wealth Disparity: Social media fearmongering surrounding AI safety is linked to state-sponsored actors in a cold war context. Rising wealth inequality from AI gains threatens to aggravate social tensions.
Dynamics Inside Frontier Labs
ASI & Recursive Self-Improvement (RSI): Frontier labs have moved past AGI and are actively targeting Artificial Superintelligence (ASI). Models are self-improving (RSI), driving fears of rapid capability "takeoff" and increasing focus on safety and alignment.
Token Competition & DeployCos: Labs are aggressively cutting token API prices to lock in enterprise usage. They are deploying massive internal consulting teams ("DeployCos") directly into Fortune 500 enterprises to implement bespoke solutions.
Infrastructure Constraints: Labs and startups remain severely compute-constrained. Domain focus is moving into custom silicon, continuous model learning, and scientific domains (e.g., math proofs and single-prompt drug candidate design).
Startup & Application Landscape
High-Value Knowledge Work: Giant verticals are forming around vertical-specific agent platforms across law, software engineering, cybersecurity, healthcare, financial services, and accounting.
"Owning Your Intelligence": Companies are actively migrating workloads off foundational models onto fine-tuned, post-trained open-source models to optimize their price-performance Pareto frontier.
Fast-Paced Operations: Application companies must reinvent their core stack roughly every four months due to shifting capability baselines. Winners adopt a "strongest link" culture (protecting top builders to innovate freely) and structure companies as networked agent ecosystems rather than traditional command hierarchies.
Valuation Disconnect ("The Two-Step"): Severe market froth has created a split valuation structure. In a sample of seven recent Sequoia investments, Sequoia invested at an average valuation of $110M post-money (as the company-building partner), while pure capital partners co-invested or marked up the same rounds to an average of $3.4B within 30 days.
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