Y Combinator, based in San Francisco, is experiencing unprecedented growth and profitability among its current batch of startups, largely due to the adoption of 'vibe coding.' This technique, coined by OpenAI co-founder Andrej Karpathy, involves using artificial intelligence (AI) to generate a significant portion of the code. CEO Garry Tan, a Y Combinator alum, notes that about 25% of the startups have had 95% of their code written by AI, utilizing tools like Cursor or Windsurf and models such as Claude 3.7. This approach has enabled these companies to achieve substantial revenue, reaching up to $10 million with teams of less than 10 people. The current Y Combinator batch, with around 80% of its companies focusing on AI, is growing at a rate of 10% per week. This growth spurt is attributed to the ability of AI to automate repetitive tasks and generate new code, allowing startups to develop software more efficiently. The shift towards AI-driven development comes at a time when the tech industry is moving away from the growth-at-all-costs mindset of the zero-interest-rate era, with companies like Google, Meta, and Amazon focusing more on profitability and undergoing multiple rounds of layoffs. Tan suggests that 'vibe coding' could allow even those with minimal coding experience to build sophisticated applications, potentially democratizing technology development. However, challenges remain, such as the need for human intervention in debugging and the potential for AI-generated code to become unmanageable as projects grow. Despite these hurdles, Y Combinator's network effects and its history of funding over 5,3000 companies, worth more than $800 billion in total, with over a dozen public and more than 100 valued at $1 billion, position it well to continue leading in the AI-driven startup landscape.