AI is already one of the largest capital allocation themes in global technology markets. Infrastructure spending is accelerating. Foundation model developers are rising at scale. Data center expansion continues to outpace most other categories.
Yet despite this intensity at the model layer, we believe consumer and entertainment AI remain structurally early.
This may sound counterintuitive. After all, ChatGPT reached mainstream adoption in record time. Image generation tools have tens of millions of users. AI video tools are raising capital at aggressive valuations. But when you look closely at consumer and entertainment products, the story is more nuanced.
The most important layers of the stack are still underbuilt.
This blog is produced based on our latest Consumer AI Report (2025–2026). For a deeper analysis of the consumer AI landscape, model dynamics, and founder insights shaping our perspective, read the full report here.
Today, the majority of AI capital continues to flow into:
These investments are essential. But they sit upstream of where long-term consumer value is created.
In consumer markets, durable companies are rarely defined by raw technical capability alone. They are defined by distribution, experience design, community formation, and cultural relevance.
In AI, we are still early in building that layer.
The constraint is infrastructure maturity
Across conversations with founders building in consumer AI, a consistent pattern emerged. The limiting factor is not imagination or end-user demand. It is infrastructure maturity.
Inference costs remain meaningful, particularly in video. Latency continues to constrain real-time interaction at scale. Workflow complexity limits mainstream adoption.
In other words, demand exists. Product ambition exists. The bottleneck is cost and performance at scale.
Historically, when infrastructure constraints ease, adoption does not move incrementally. It inflects.
We expect that when inference costs decline further and generation latency becomes negligible, certain consumer categories will move from niche to mainstream rapidly.
Consumer AI is already economically real in select categories. However, the experience layer is still underdeveloped relative to the model layer.
In entertainment and consumer markets, model ownership alone rarely creates a durable advantage. Instead, defensibility emerges through:
These layers remain early.
We see clear signals that AI is shifting from being perceived as a tool to functioning as an interface. Characters, avatars, and interactive systems are changing how users relate to software. This is not a productivity transition. It is a behavioral one.
The companies defining that layer are only beginning to form.
Calling consumer AI “pre-hype” does not imply limited attention. It reflects a structural mismatch between capital concentration and long-term opportunity.
Infrastructure is being aggressively funded. Experience-led consumer platforms are comparatively undercapitalized.
We believe the next category-defining consumer companies will be AI-native from inception. Many are being built today by founders navigating real constraints around cost, speed, and distribution.
As infrastructure continues to mature, these companies will not need to create demand. They will meet the demand that is already present.
From a capital allocation perspective, that asymmetry is meaningful.
Consumer and entertainment AI are still early relative to their long-term economic potential. That is precisely what defines a pre-hype opportunity.
This blog is produced based on our latest Consumer AI Report (2025–2026). For a deeper analysis of the consumer AI landscape, model dynamics, and founder insights shaping our perspective, read the full report here.
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