Silicon Valley's early-stage companies are experiencing significant growth, largely fueled by artificial intelligence (AI). Y Combinator, a renowned startup accelerator that has previously supported companies like Airbnb and Stripe, recently hosted its annual demo day in San Francisco. CEO Garry Tan reported that the current cohort of startups is growing much faster than those from previous years, expanding at 10% weekly for the past nine months. Tan attributed this remarkable growth to advancements in AI, which now allow developers to automate repetitive tasks and generate code through large language models. This has led to "vibe coding, " where AI handles substantial coding work—up to 95% of the code for about 25% of current YC startups has been written by AI. As a result, companies can operate efficiently with smaller teams, achieving significant revenues with fewer engineers. The pressure for rapid growth seen during the zero-interest-rate period is shifting toward a focus on profitability, especially among major tech firms like Google, Meta, and Amazon, which have cut jobs and slowed hiring.

Tan views this as an opportunity for startups, suggesting that talented engineers can find success outside large corporations. At the demo day, around 80% of the showcased companies were AI-focused, with many demonstrating actual commercial applications. Tan noted that investors could directly contact real customers to verify the daily use of these new software solutions. Founded in 2005, Y Combinator has invested in over 5, 300 startups, with a combined valuation exceeding $800 billion. With the rise of specialized incubators, Tan believes Y Combinator maintains a competitive advantage due to its vast network, which allows for flexibility in business ideas and strategies.