ALL INPredictions
Last updated Nov 29, 2025
Prediction
Sacks
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Sacks @ 01:04:45Right
aimarketsventure
In the period after July 2023, there will be additional M&A activity in AI tooling and infrastructure, with acquired companies generally commanding high valuations relative to their current revenues, driven by strategic value to large infrastructure providers assembling end‑to‑end AI toolchains.
I think for sure there's going to be more M&A, and I think the valuations will be high, not because these companies have a lot of revenue yet, but because it's very strategic for these big infra companies to assemble the end to end Toolchain.View on YouTube
Explanation

Evidence since July 2023 matches Sacks’ prediction of continued AI tooling/infrastructure M&A at high valuations driven by strategic value to large infra providers:

  • Databricks → Tabular (data lakehouse infra, June 2024): Databricks agreed to buy data-management startup Tabular to strengthen its open data-lakehouse and AI stack. Reports put the price at over $1 billion, with later reporting saying Databricks "reportedly paid nearly $2 billion" while Tabular had only about $1 million in ARR, implying an extremely high revenue multiple. The deal was explicitly framed as part of the Databricks–Snowflake battle over data formats and AI infrastructure, i.e., strategic toolchain assembly, not current revenue. (techcrunch.com)

  • OpenAI → Rockset (vector search / real‑time analytics infra, June 2024): OpenAI acquired Rockset, a real‑time search and database analytics company whose tech (vector search, real‑time indexing) is being integrated directly into OpenAI’s infrastructure to improve ChatGPT and enterprise AI capabilities. Rockset had raised about $105M and was an infrastructure/tooling company rather than a large revenue business, and OpenAI described the deal in clear strategic terms (strengthening its platform) rather than as a revenue play. (reuters.com)

  • OpenAI → Windsurf and io (2024–2025): Reports describe OpenAI’s acquisition of AI coding tool Windsurf for around $3 billion and hardware/AI-device startup io (Jony Ive’s company) for about $6.4–6.5 billion, despite io not yet having shipped products. These are framed as large, strategic acquisitions to deepen OpenAI’s end‑to‑end AI product stack (coding tools plus hardware/device layer), again reflecting high valuations driven by strategic positioning rather than current revenue. (timesofindia.indiatimes.com)

  • Snowflake → Crunchy Data (Postgres for AI agents, 2025): Snowflake agreed to acquire PostgreSQL specialist Crunchy Data for about $250 million, explicitly to enhance Snowflake’s ability to help customers build AI agents on their data. This follows Snowflake’s earlier acquisition of AI-search startup Neeva and mirrors Databricks’ acquisitions, underscoring that major data/infra platforms are buying key components to complete their AI toolchains. (wsj.com)

  • Pattern of high multiples and strategic positioning: Earlier landmark deals like Databricks’ 2023 acquisition of MosaicML (announced just before the podcast but closed after) at $1.3B on roughly $20M revenue (~65× multiple) were already seen as unusually rich and explicitly justified as strategic for generative‑AI infrastructure. Subsequent deals (e.g., Tabular’s billion‑plus valuation on roughly $1M ARR) continued this pattern of large infra providers overpaying on revenue multiples to secure critical AI tooling components. (cbinsights.com)

Overall, from mid‑2023 through 2025 there has indeed been substantial, ongoing M&A in AI tooling and infrastructure, led by major data/AI platforms (Databricks, Snowflake, OpenAI) buying strategic components at very high valuation multiples, exactly in line with Sacks’ reasoning. Hence the prediction is best classified as right.