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Silicon Valley’s earliest stage companies are getting a major boost from artificial intelligence.

Startup accelerator Y Combinator — known for backing Airbnb, Dropbox and Stripe — this week held its annual demo day in San Francisco, where founders pitched their startups to an auditorium of potential venture capital investors.

Y Combinator CEO Garry Tan told CNBC that this group is growing significantly faster than past cohorts and with actual revenue. For the last nine months, the entire batch of YC companies in aggregate grew 10% per week, he said.

“It’s not just the number one or two companies — the whole batch is growing 10% week on week,” said Tan, who is also a Y Combinator alum. “That’s never happened before in early-stage venture.”

That growth spurt is thanks to leaps in artificial intelligence, Tan said. 

App developers can now offload or automate more repetitive tasks, and they can generate new code using large language models. Tan called it “vibe coding,” a term for letting models take the wheel and generate software. In some cases, AI can code entire apps.

The ability for AI to subsidize an otherwise heavy workload has allowed these companies to build with fewer people. For about a quarter of the current YC startups, 95% of their code was written by AI, Tan said.

“That sounds a little scary, but on the other hand, what that means for founders is that you don’t need a team of 50 or 100 engineers,” said Tan, adding that companies are reaching as much as $10 million in revenue with teams of less than 10 people. “You don’t have to raise as much. The capital goes much longer.”

The growth-at-all-costs mindset of Silicon Valley during the zero-interest-rate era has gone “out the window,” said Tan, pointing to a renewed focus on profitability. That focus on the bottom line also applies to megacap tech companies. Google, Meta and Amazon have gone through multiple rounds of layoffs and pulled back on hiring.

While that’s shaken some engineers, Tan described it as an opportunity. 

It’s easier to build a startup, and the top people in tech don’t have to prove their worth by going to work at big tech companies, he said.

“There’s a lot of anxiety in the job market, especially from young software engineers,” Tan said. “Maybe it’s that engineer who couldn’t get a job at Meta or Google who actually can build a standalone business making $10 million or $100 million a year with ten people — that’s such a powerful moment in software.”

About 80% of the YC companies that presented this week were AI focused, with a handful of robotics and semiconductor startups. This group of companies has been able to prove earlier commercial use compared to previous generations, Tan said. 

“There’s a ton of hype, but what’s unique about this moment is that people are actually getting commercial validation,” he said. “If you’re an investor at demo day, you’ll be able to call a real customer, and that person will say, ‘Yeah, we use the software every single day.'”

Y Combinator was founded in 2005 by Paul Graham, Jessica Livingston, Robert Morris and Trevor Blackwell. The firm invests $500,000 in startups in exchange for an equity stake. Those founders then enter a three-month program at the San Francisco headquarters and get guidance from partners and YC alumni. Demo day is a way to attract additional capital.

The firm has funded more than 5,3000 companies, which it says are worth more than $800 billion in total. Over a dozen of them are public, and more than 100 are valued at $1 billion or more. More than 15,000 companies apply to get into the accelerator, with about a 1% acceptance rate.

More of these venture capital incubators have popped up throughout the past decade, and more capital has flocked to early stage startups. Despite the competition, Tan argued that Y Combinator has an edge thanks to its strong network. He pointed to the number of highly valued portfolio companies rising, and pushed back on the idea that specialized incubators were taking business.

“About 20 to 30% of the companies during YC change their idea and sometimes their industry entirely. And if you end up with an incubator that is very specialized, you might not be able to change into the thing that you were supposed to,” Tan said. “We think that the network effects and the advantages of doing YC have only become more bold.”

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Apple says Epic Games contempt ruling could cost ‘substantial sums’

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May 8, 2025

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Apple says Epic Games contempt ruling could cost 'substantial sums'

An Apple store in Walnut Creek, California, U.S., on April 30, 2025.

Paul Morris | Bloomberg | Getty Images

Apple is asking a court to pause a recent decision in its case against Epic Games and allow the iPhone maker to once again charge a commission on in-app transactions that link out for payment.

Last month, U.S. District Judge Yvonne Gonzalez Rogers in Oakland found that Apple had violated her original court order from the Epic trial, originally decided in 2021, that forced Apple to make limited changes to its linking out policy under California law.

Judge Rogers’ new ruling is more expansive, ordering Apple to immediately stop imposing its commissions on purchases made for iPhone apps through web links inside its apps, among other changes.

Apple is now looking to get a stay on that order, as well as another one from the case that prevents it from restricting app developers from choosing the language or placement of those links, until the entire decision can be appealed. Apple says that required changes in their current form will cost the company “substantial sums.”

“This is the latest chapter in Epic’s largely unsuccessful effort to use competition law to change how Apple runs the App Store,” Apple said in the emergency motion for a stay. The motion cites a previous order in the case that found that new linking policies would cost Apple “hundreds of millions to billions” of dollars annually.

If Apple succeeds, it will allow the company to roll back changes that have already started to shift the economics of app development. Developers including Amazon and Spotify have been able to update their apps to avoid Apple’s commissions and direct customers to their own website for payment.

Prior to the ruling, Amazon’s Kindle app told users they could not purchase a book in the iPhone app. After a recent update, the app now shows an orange “Get Book” button that links to Amazon’s website.

Epic also plans to introduce new software to allow app and game developers to easily link to their websites to take payments.  

“This forces Apple to compete,” Epic Games CEO Tim Sweeney said shortly after last month’s decision. “This is what we wanted all along.”

Apple said in the filing that “non-party developers are already seizing upon the Order to reduce consumer choice (and damage Apple’s business) by, among other things, impeding the use of” in-app purchases.

Rogers made a criminal referral in the case, saying that Apple misled the court and that a company vice president “outright lied” about when and why Apple decided to charge 27% for external payments. The real decision, the judge said, took place in meetings involving Apple CEO Tim Cook.

Wednesday’s filing from Apple doesn’t address Rogers’ accusations that the company misled the judge, but it does argue that the ruling was punitive. Apple’s lawyers also claimed that civil contempt sanctions can only coerce compliance with an existing order, not punish non-compliance.

Apple said earlier this week in a court filing it would appeal the contempt ruling.

“We’ve complied with the court’s order and we’re going to appeal,” Cook told investors on the company’s quarterly earnings call last week.

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Arm shares drop on weak forecast

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May 7, 2025

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Arm shares drop on weak forecast

Rene Haas, CEO of chip tech provider Arm Holdings, holds a replica of a chip with his company’s logo on it, during an event in which Malaysia’s Prime Minister Anwar Ibrahim officially announces a $250 million deal with the company, in Kuala Lumpur, Malaysia March 5, 2025.

Hasnoor Hussain | Reuters

Arm shares dropped more than 8% in extended trading on Wednesday after the chip-design company issued weaker-than-expected guidance for the current quarter.

Here’s how the company did in the fiscal fourth quarter compared with LSEG consensus:

  • Earnings per share: 55 cents, adjusted vs. 52 cents expected
  • Revenue: $1.24 billion vs. $1.23 billion

While Arm topped estimates for the quarter ended March 31, Wall Street is looking ahead to the company’s forecast for the first quarter.

Arm said revenue will be between $1 billion and $1.1 billion. The middle of the range is below the $1.1 billion average analysts estimated, according to LSEG. Earnings per share will be between 30 cents and 38 cents, while analysts were expecting 42 cents.

SoftBank controls about 90% of Arm, and took the company public in 2023. It now has a market cap of over $130 billion as of Wednesday’s close.

Arm designs the fundamental architecture upon which many chips are built, and sells licenses for its designs to companies such as Qualcomm and Nvidia, charging royalty fees on each sale they make. The company claims 99% of premium smartphones are powered by Arm technology.

Royalty revenue in the quarter rose 18% from a year earlier to $607 million.

Net income fell 6% to $210 million, or 20 cents a share, from $224 million, or 21 cents, in the year-ago quarter. Revenue jumped 34% from $928 million a year earlier.

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AppLovin shares pop on earnings beat as it announces sale of mobile gaming business

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May 7, 2025

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AppLovin shares pop on earnings beat as it announces sale of mobile gaming business

Thomas Fuller | SOPA Images | Lightrocket | Getty Images


AppLovin shares soared as high as 15% in extended trading after the company reported earnings and revenue that beat expectations and announced the sale of its mobile gaming business.

Here’s how the company did compared to LSEG consensus estimates:

  • Earnings: $1.67 per share vs $1.45 per share expected
  • Revenue: $1.48 billion vs $1.38 billion expected

AppLovin also agreed on Wednesday to sell its mobile gaming business to Tripledot Studios in a deal worth $400 million in cash considerations. The advertising tech company will also obtain  a roughly 20% ownership stake in Tripledot Studios, which makes mobile games like Sudoko Friends, Puzzletime and Solitaire Classic.”

The deal is expected to close in the second quarter of 2025.

AppLovin said second-quarter sales should come in the range of $1.2 billion to $1.22 billion, trailing analysts expectations of $1.38 billion.

The company reported first-quarter net income of $576 million, or $1.67 per share, up from $234 million, or 67 cents per share, in the same quarter of 2024.

AppLovin total costs and expenses for the first quarter came in at $820.55 million, representing a 14% increase from the previous year during the same quarter.

The ad-tech firm said in February that it had signed a term sheet to sell its apps business for “total estimated consideration” of $900 million, which included $500 million in cash.

AppLovin’s business has been split between advertising and apps, which is primarily made up of game studios that the company has acquired over the years. With the historic growth in its advertising unit, due to rapid advancements in artificial intelligence, the apps business had become much less important.

The company logged $1.16 billion in first-quarter advertising sales, up from the $678 million it recorded a year ago during the same period.

Sales of the company’s apps-related business for the quarter came in at $325 million, which was a 14% decline from the prior year.

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