- The AI market has crystallized into four defensible layers — Foundation Models, Inference Infrastructure, Developer Tools, and Vertical AI. Each layer has its own economics, moats, and valuation dynamics.
- Power is concentrating: a handful of foundation models at the core, an oligopoly of infra/tooling around them, and a long tail of $1–3B vertical winners.
- The structural forces shaping this market — stratification, barbell dynamics, healthcare-AI convergence, investor oligopoly, and funding-stage collapse — now define how AI value is created, captured, and defended.
For weekly analysis of these patterns and the 2025 AI value map, see:
https://businessengineer.ai/p/this-week-in-business-ai-the-2025
THE STRUCTURE: A FULLY-FORMED AI ECONOMY
AI is no longer an unstructured gold rush.
It is now a layered market, with capital, talent, and valuations clustering in predictable patterns.
At the center of the graphic sits the gravitational core:
Layer 1 — Foundation Models ($5–10B+ winners)
A small group of frontier players dominate:
- OpenAI
- Anthropic
- xAI
- DeepMind
- Mistral
This layer has:
- extreme capital intensity
- extreme defensibility
- extreme concentration
Winner-take-most dynamics rule here.
This is the “intelligence layer” the rest of the ecosystem orbits.
Layer 2 — Inference Infrastructure ($1–4B players)
Around the core sits the infra ring:
- Fireworks
- Baseten
- Modal
- Modular
- AnyScale
- Replicate
They solve the hard problem:
How does the world actually run models at scale?
This layer has:
- strong network effects
- deep technical lock-in
- rapid enterprise pull
- high gross margins
Infra is the new cloud.
And a young oligopoly is forming.
Layer 3 — Developer Tools ($1–4B players)
This band captures productivity, orchestration, reasoning frameworks, and AI-native dev stacks:
- Cursor
- LangChain
- Statisig
- Decagon (customer-facing dev workflows)
Tools here succeed because they:
- scale with adoption
- create workflow lock-in
- integrate horizontally
- ride the model innovation cycle
This layer is where 2023–2024 experimentation hardened into repeatable, defensible markets.
Layer 4 — Vertical AI ($1–3B+ players)
This is the outer orbit — the largest number of companies, the most fragmentation, and the strongest domain moats.
- Harvey (Legal)
- Hippocratic (Healthcare)
- Rad AI (Radiology)
- Abridge (Clinical Notes)
- Sierra (Sales)
- Many emerging verticals
These companies win by embedding deeply into industry workflows where:
- compliance matters
- data is privileged
- domain expertise is a moat
- switching costs are high
Vertical AI is where the bulk of future unicorns will come from.
THE FIVE PATTERNS SHAPING THE MARKET
The right panel of the graphic summarizes the five structural patterns that now govern the AI economy.
Let’s break them down.
1. The Stack Is Stratifying
We no longer have a flat, chaotic market.
We have clear layers, each with different economics:
- Foundation → infrastructure → tools → verticals
- Depth of defensibility increases as you move inward
- Number of winners increases as you move outward
This architecture is stable and strengthening.
2. The Barbell Distribution
Value pools concentrate at the extremes:
Left Extremity:
- Mega-cap foundations ($5–10B+) and infrastructure ($1–4B)
Right Extremity:
- Deep vertical specialists ($1–3B)
What’s missing is the middle:
generic wrappers, undifferentiated aggregators, horizontal AI platforms.
These get squeezed from both sides.
3. Healthcare-AI Convergence
Healthcare has become the largest and fastest-growing AI vertical, driven by:
- regulatory moats
- data intensity
- labor shortages
- clinical workflows ripe for automation
The result:
$1B+ healthcare AI companies are emerging at speed and scale unmatched in other verticals.
4. The Investor Oligopoly
A small group of elite firms — a16z, Sequoia, Lightspeed, Thrive, Index, Benchmark, GV, Tiger Global — now controls:
- 60%+ of AI unicorn capital
- most of the breakout deals
- the co-investment networks that shape valuations
This creates stability, but also intense concentration.
Dealflow accelerates.
Valuations fly upward.
The ecosystem self-reinforces.
5. The Collapse of Funding Stages
AI startups no longer follow:
Seed → A → B → C → Unicorn.
Now?
Seed/A → Unicorn in 6–18 months.
Why?
- AI massively reduces time-to-value
- capital concentrates in the top firms
- enterprises adopt fast
- infra and tools eliminate operational drag
The venture ladder has collapsed into a launchpad.
WHAT THIS MEANS — FOR FOUNDERS, INVESTORS, ENTERPRISES
The bottom panel of the graphic summarizes the strategic implications.
Let’s expand each.
For Founders — Pick Your Layer, Move Fast, Go Deep
The wrong move is trying to be everything.
The right move is choosing the layer where you have the natural advantage:
- Hardcore research? → Foundation
- Systems engineering? → Infra
- Workflow design? → Dev tools
- Domain expertise? → Verticals
And once a layer is chosen:
- accelerate
- specialize
- differentiate
- embed deeply
Shallow plays die fast in a stratified stack.
For Investors — Follow the Kingmakers, Bet on Extremes
Your edge now comes from:
- getting allocation from the ~10 firms that dominate the market
- investing in the extremes: models or verticals
- avoiding the horizontal middle
- spotting early signs of vertical PMF
The barbell is not a theory — it’s the map.
For Enterprises — The Stack Is Your Buying Guide
Enterprise AI decisions can now follow a clear mental model:
- Choose your foundation layer (model)
- Select your infra partners (inference, orchestration)
- Adopt dev tools that match your engineering culture
- Deploy vertical solutions that embed into workflows
The market is no longer chaotic.
Procurement strategy can now be modular and predictable.
THE STRATEGIC TAKEAWAY
AI is entering its most structured phase yet.
The chaos of 2022–2023 has been replaced by:
- clear layers
- concentrated power
- accelerated value capture
- faster unicorn formation
- deep verticalization
- investor oligopolies
This structure determines who wins, who survives, and where new value will emerge.
To stay ahead of the shifting architecture — unicorn creation trends, investor patterns, vertical breakthroughs — see the weekly breakdowns at:
https://businessengineer.ai/p/this-week-in-business-ai-the-2025
This is the new operating system of the AI market.
More Resources
