Zach DeWitt: VCs in 2016 Refused to Invest in Hardware, While VCs in 2026 Begin to Reject Software
Zach DeWitt: The trend of VC investment has completely reversed.
Noted investor Zach DeWitt pointed out that VCs in 2016 refused to invest in hardware, while VCs in 2026 are starting to reject software.
This comparison vividly reflects the significant shift in venture capital preferences over the past decade.
Market mechanisms show that VC capital is accelerating its shift from pure software SaaS to AI hardware, robotics, energy infrastructure, and embodied intelligence. This trend drives funding towards hard tech projects like NVIDIA, Figure, xAI, and SpaceX, putting pressure on traditional pure software early-stage projects.
Source: Public Information
ABAB AI Insight
Zach DeWitt's observation is very accurate. Around 2016, the market was still at the tail end of the mobile internet boom, where software had near-zero marginal costs and rapid expansion, making it a favorite among VCs; by 2026, with the explosion of large models, robotics, and the intelligence of the physical world, hardware has become the new scarce resource and moat. Hardware infrastructure such as computing power, sensors, actuators, and energy has become the bottleneck for AI implementation, leading capital to quickly shift towards "soft-hard integration" or even pure hardware projects.
In terms of capital pathways, top VCs are allocating more funds to areas that require massive upfront investments but can create extremely high barriers once successful (such as chips, robotics, satellites, batteries), while pure software projects face intense competition and are easily replicable, leading to a significant compression of valuation logic.
Essentially, this reflects capital concentration: the "light asset high growth" logic of the software era is being replaced by the "heavy asset high barrier" logic of the hardware era, with the underlying mechanism being AI's transition from the virtual world to the physical world, which must rely on real-world infrastructure to complete the loop.
ABAB News · Law of Cognition
A decade is a cycle, and VCs are always chasing the most scarce link.
When software becomes cheap, hardware becomes the new pricing power.
The real trend shift is not the technology itself, but the capital moving from "easily replicable" to "hard to replicate."