AI is Impacting Everything: Notes from Foley and Lardner’s 2026 Outlook Roundtable
What the firm's partners are seeing in AI, exits, regulation and why 2026 may not unlock the market as fast as people hope
What’s Inside
AI is reshaping Silicon Valley deal flow
How PE and venture firms see the exit window heading into 2026
Regulatory tension emerging around the administration’s new AI Action Plan
Foley & Lardner hosted its annual media roundtable yesterday in Palo Alto, and this year’s conversation made one topic impossible to ignore. AI is shaping everything across Silicon Valley.
But the long-term impact remains hard to pin down. Some of it is real company formation. Some of it is just repositioning. And some of it is companies explaining job cuts or strategic shifts through an AI lens even when AI isn’t the root cause.
The panel was moderated by Partner Tom Carlucci and included Partners Natasha Allen, Louis Lehot and Brian Wheeler.
I submitted a question ahead of time about the rise in early-stage AI startups and the corresponding pickup in office and lab leasing in Silicon Valley. I asked how much of this demand reflects genuine company formation and how much is rebranding to stay relevant amid the AI wave.
Lehot answered first. He pointed to a “generation’s worth” of early-stage companies that raised capital over the last few years, saying that capital spending on rent and talent will continue over the next 24 months. But he added a caveat.
“Whether all those companies are able to raise the next round is what I think is in sincere doubt,” he said.
I then raised question of how many large tech companies are announcing layoffs and attributing those cuts to AI, including HP and others. Lehot and Wheeler both said the reductions are not being driven by AI productivity gains.
I asked if that amounts to AI washing. They agreed, and Lehot said most of these cuts are simply workforce reduction, not automation.
That exchange, for me, captured the dynamic of 2025. AI has reshaped strategy and deal flow. AI companies are receiving more than half of all venture funding this year. But the stories many companies tell about AI often outpace what is happening operationally.
As Lehot put it, the demand for space and talent is real, but we need to separate genuine AI growth from companies reframing themselves around AI to stay in the conversation.
A Slower Reset for Exits
Meanwhile, Wheeler offered the clearest assessment of the broader investment environment.
From the private equity side, he said that the IPO market did not deliver what many expected heading into the year. Yes, there were some positive signs, such as from Circle, Chime, Figma and Klarna, among others.
But the optimism from the spring and summer never translated into sustained liquidity.
Wheeler said PE firms are preparing for a slower reopening of the exit window in early 2026, and he noted that continuation funds have become a core tool for managers who have no realistic path to a public listing anytime soon.
Lehot echoed similar themes for the venture market. LPs remain focused on DPI, as he emphasized at last year’s roundtable. Most firms are not calling capital at the pace they want, and the backlog of companies waiting for exits continues to grow.
Nothing in the discussion suggested a sharp break from last year’s tone. If anything, the partners reinforced the view that patience and caution still define exits.
Regulation Still Isn’t Settled
The roundtable also included a discussion on regulation, sparked in part by the administration’s AI Action Plan and the broader debate about federal versus state rules.
Allen warned about the operational burden of state-by-state rules and the risk of uneven standards that slow innovation and adoption. She focused on the challenge facing any company operating across multiple jurisdictions and the practical need for consistency.
Lehot pushed the conversation toward clarity. Even if imperfect, he said, predictable rules are better than ambiguity. He also questioned whether heavy, early regulation would slow growth before companies have figured out viable business models.
Their disagreement wasn’t sharp. It reflected the uncertainty of the moment. The only clear point was that the regulatory path is unsettled and the stakes are high.
After, as I walked out of the downtown Palo Alto building and crossed University Avenue, the takeaway from the roundtable was clear. AI is shaping every conversation, but not always in the way companies describe.
The exit markets remain slow. Continuation funds are becoming normal. And regulation, along with the lingering effects of perhaps another shutdown after the new January deadline, may complicate the emergence of real momentum in 2026.
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