They can and most likely will release something that vaporises the thin moat you have built around their product.
This feels like the first time in tech where there are more startups/products being subsumed (agar.io style) than being created.
As they should if they're doing most of the heavy lifting.
And it's not just LLM adjacent startups at risk. LLMs have enabled any random person with a claude code subscription to pole vault over your drying up moat over the course of a weekend.
Edit: I guess the competition between them keeps them honest and forces them to release their best models so they don't lose face.
Are you saying this based on some insider knowledge of models being dramatically more capable internally, yet deliberately nerfed in their commercialized versions? Because I use the publicly available paid SOTA models every day and I certainly do not get the sense that their impact on the software industry is being restrained by deliberate choice but rather as a consequence of the limitations of the technology...
There will always be a market for dedicated tools that do really specific things REALLY well.
This means the smaller niches become viable. You can be a smaller team targeting a smaller niche and still be able to pull of a full SaaS product profitably. Before it would just be too costly.
And as you say, the smaller niches just aren't interesting to the big companies.
When some new tech comes along that unlocks big new possibilities - like PCs, the Internet, Smartphones (and now Agentic Chat AI) - the often recited wisdom is that you should look at what open green fields are now accessible that weren't before, and you should run there as fast as possible to stake your claim. Well there are now a lot of small pastures available that it are also profitable to go for as a small team/individual.