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Q2 was the quarter the game board shifted. The generative AI landscape, once wide open and full of hopeful experimentation, is now clearly being shaped by the hands of a few dominant players. The race to build foundational models has cooled slightly. What’s emerged instead is a scramble for control of distribution, platforms, and the end-user experience.
Microsoft continued to tighten its grip on OpenAI, embedding GPT more deeply into Azure and co-selling integrations that make it hard for enterprise customers to look elsewhere. Google isn’t sitting still either. Claude and Gemini are now baked into Workspace and Android, giving Google native reach into daily workflows. And not least, NVIDIA moved beyond GPUs. Through targeted investments and partnerships, it’s quietly becoming the ecosystem’s power broker.
The idea that GenAI startups could plug into these platforms as neutral infrastructure is fading. APIs are changing, product roadmaps are colliding, and platform owners are picking favourites. All something you can feel in the AI startup funding trends. The biggest rounds this quarter didn’t go to the companies with the flashiest tech. They went to the ones best positioned to own relationships, distribute at scale, or plug in deep. Grammarly’s $1B non-dilutive raise is a bet on its user base. AI21 and Cohere pulled in capital because they offer flexibility and stack control, not just raw model horsepower.
If you’re a founder, you're now navigating someone else’s terrain. And depending on how you build, you might be doing it with a platform that’s also building something just like yours.
This shift is creating a new strategic layer for startups. Going back to the metaphor I just used before, it’s about choosing your terrain. Are you aligning with Big Tech, competing at the edges, or carving out an entirely independent track? We’re seeing more founders think in these terms. Leaning into hybrid infra, doubling down on go-to-market strategy, or going deep in verticals where incumbents can’t easily follow.
For investors, Q2 sharpened the lens on what resilience looks like in GenAI. Platform dependency is becoming an operational risk rather than theoretical, and distribution is now the differentiator. The best teams this quarter understood where they sat in the stack and how to stay relevant when the platforms shift underfoot.
Europe might be playing a quieter hand, but it’s a smart one. With the EU AI Act finalised and digital sovereignty back on the agenda, some of the most interesting plays are coming from startups that embed AI into regulated or trust-sensitive sectors. We’ve seen activity in public services, industrial tooling, and health data. Places where speed isn’t the only currency and control still matters. Mistral’s rumoured raise and a number of earlier-stage efforts across France and the Nordics hint at growing ambition in this space.
The narrative is changing. If Q1 was about proving the tech, Q2 was about showing you can survive the terrain. And maybe, just maybe, shape a little bit of it yourself.
(Sources: Crunchbase, TechCrunch, Reuters)
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