Venture Geopolitics Issue 24
02 December 25
Washington added an equity stake in xLight, a semiconductor-tools startup chaired by former Intel CEO Pat Gelsinger, to its growing portfolio of AI and other strategic assets. Meanwhile, President Trump signed the Genesis Mission executive order, a plan to merge national-lab computing with federal scientific datasets and give firms unprecedented access to sovereign data, effectively turning AI research into a state-directed industrial project.
With increasing federal investment in strategic companies and AI models trained on government archives, the world’s largest capitalist economy is starting to appear remarkably centrally planned!
Public / IPOs
Markets bounced back. Rise wasn’t driven by AI across the board, but strength in specific names (Broadcom, Google). Retail investors started buying the dip, especially in Bitcoin & Nasdaq. Fed tone softened on December rate cut, adding to rebound
Quiet IPO market (thanksgiving)
Rapidus (Japanese state-backed chipmaker) targeting a 2031 IPO as Tokyo accelerates efforts to onshore semiconductor capacity (here)
Nvidia pushed back on viral fraud claims with a detailed memo insisting it is “not Enron” (here)
Nvidia will take $2B stake in Synopsys (chip design tools) as part of multiyear partnership to accelerate compute-heavy engineering workflows (here)
Amazon testing 30-minute delivery for essentials in Seattle & Philadelphia under “Amazon Now” (here)
Amazon & Google launched a joint multicloud networking service enabling customers to create private, high-speed connections across clouds in minutes. Meaningful step toward interoperable cloud infrastructure (here)
Apple’s AI chief John Giannandrea stepping down after 7 years; will advise through spring. Replacement is Amar Subramanya, a highly regarded Microsoft exec who spent 16 years at Google (here)
Apple in (another) regulatory bind as India moves to require a mandatory govt security app on all new phones (here)
Shopify suffered significant Cyber Monday outage that locked merchants out of admin & POS systems on a $14B-sales day (here)
Meta announced WhatsApp will become interoperable with other apps (as required by EU’s Digital Markets Act). Rollout over next few months. Not all messengers will participate though (e.g. Signal for obvious reasons) (here)
Fact of the week from Azeem Azhar: AI-related stocks have driven 75% of S&P 500 returns & 79% of earnings growth since ChatGPT’s launch 3 years ago (here)
Big Dogs
OpenAI declared a “code red” to improve ChatGPT quality amid threat from Google, delaying initiatives (including ads!) (here)
OpenAI taking equity stake in Thrive Holdings (IT & accounting roll-up backed by Thrive Capital), which is buying & modernising mid-market services firms. As Matt Levine notes, if AI models commoditise, distribution beats model quality. Owning a PE platform with thousands of SME clients lets OpenAI embed its tools directly into the workflows where cost-cutting lands fastest (here and here)
OpenAI filed its legal response in the Raine lawsuit, arguing ChatGPT was not causal in the teenager’s death, pointing to repeated crisis-line prompts & broader risk factors. The case is being watched closely because courts may define the first boundaries of AI duty-of-care (here)
Polymarket won CFTC approval to reopen in the US via intermediated brokers - a major regulatory milestone for prediction markets (here)
Meanwhile, Robinhood will challenge Polymarket & Kalshi via a new CFTC-licensed exchange with Susquehanna (here)
Black Forest Labs (foundation AI image models) raised $300M at $3.25B (here)
Quantum Systems (dual-use drones) raised €180M, tripling its valuation to >€3B as Europe leans harder into defence tech (here)
Pennylane (accounting software from France) reportedly raising up to $200M led by TCV at $4.25B (here)
Harmonic (math-focused AI model) raised $120M at $1.45B (here)
Venture Capital
Carta Q3 review (here)
- Cash raised ↑ 5% YoY; ↑ 48% vs 2 years ago
- Funding spread surprisingly even: Series A = 25% of dollars, Series C = 20%
- Seed = 40% of rounds but 9.4% of capital
- Number of rounds ↓ 13.6% YoY — more cash into fewer companies overall
- Seed valuations hit a median $16M (↑ 14% YoY), Series A hit $49.3M record
- Down rounds fell to 17%, lowest in nearly 3 years
UK Budget 2025 for founders (here)
(1) Higher EIS/VCT limits & gross asset thresholds — more headroom for capital-intensive sectors
(2) EMI pool sizes rise, option timelines lengthen, admin burdens ease
(3) Govt launches a Call for Evidence on Tax Support for entrepreneurs
Nb, 16k millionaires worth $92B have left the UK in 2025 — a striking datapoint for policymakers thinking about long-term capital formation (here)
Unicorn formation remains brisk: >80 new tech unicorns YTD according to PitchBook/Crunchbase (here)
In other financing news, 9 chapter 7 bankruptcy filings for companies with $100M+ of liabilities in 2025 (a far more punitive form of bankruptcy vs Chapter 11). This is the 4th highest reading ever (Bobby Molavi, Goldman Sachs)
Venture Geopolitics
Trump formalised the “Genesis Mission” (here), a federal initiative treating AI compute as strategic industrial capacity. Two core pillars:
(1) Co-locating AI clusters with new nuclear & renewable power rather than stressing existing grids
(2) Building an American Science & Security Platform to integrate federal scientific datasets for AI training
China is installing industrial robots at 9x US rate. Ports now run 88% of key equipment autonomously. China’s strategy is clear: automation as industrial security (here)
Chinese open-source AI models are quietly becoming default for many Silicon Valley startups. Cost, permissive licensing & speed are beating US closed models (here)
New York’s personalised-pricing law forces retailers to disclose when AI sets individual prices, targeting hidden algorithmic scoring built from loyalty data, browsing history & device fingerprints. Dynamic pricing is efficient economically but politically radioactive, and this law is likely the first step toward broader guardrails on consumer-facing AI decisioning (here)
MIT estimates AI could automate 12% of US jobs with existing capability (here)
UK–EU defence loan scheme negotiations collapsed after the EU requested €4–6.5B plus €150–250M in admin fees for UK participation. UK rejected a 35% cap on non-EU components, pushing for 50% to secure co-equal partner status. The breakdown is less about money and more about who gets to be a system-level integrator in Europe’s defence stack (here)
Swiss Data Protection Officers warn govt agencies off AWS, Google Cloud & Microsoft 365 due to lack of E2EE, opacity & the US Cloud Act. While unrealistic, encryption-sovereignty is becoming a mainstream government concern (here)
US govt will invest $150M into xLight (semiconductor tools) — the third federal equity position in a private startup. Washington is increasingly putting itself on cap tables, blurring industrial policy & venture norms (here)
Strategic Sectors
AI
McKinsey & BCG froze pay for new grads as AI threatens consulting’s pyramid model (here)
HSBC signed deal with Mistral to integrate models across financial analysis, translation & AML (here)
AI-safety advocates are raising $50M for bipartisan PACs to counter anti-regulation campaigns backed by major Silicon Valley investors like a16z. It signals a shift from think-tank debates to electoral pressure as both sides recognise that AI policy may be shaped as much by political spending as technical expertise (here)
Per Goldman Sachs “in the aggregate, it’s not yet time to worry about the inability of these [AI] companies to access capital…our work suggests the core hyperscalers can add around $700B of financing before their net debt load is > 1x 2026 EBITDA”
Global revenues for AI coding tools now >$3.1B — roughly 2% of global software engineer pay (here)
Traffic for “vibe coding” tools rebounding after a summer dip, led by Cursor; meanwhile, automation incumbents like Zapier & N8N seeing flat/down traffic (here)
Cybersecurity
SEC voluntarily dismissed its SolarWinds fraud case after courts gutted most claims tied to its 2020 supply-chain breach. It’s a blow to the SEC’s attempt to expand liability for cybersecurity disclosures and suggests regulators still lack a durable legal theory to pursue CISOs over complex, state-linked intrusions (here)
NATO considering more proactive cyber responses, including pre-emptive defensive strikes. Legal & ethical framework here will shape NATO posture for years (here)
Beazley, one of the largest cyber insurers, is pulling back as ransomware claims surge & premiums fall. Loss ratios have spiked across the sector, showing actuarial models can’t keep pace with geopolitical volatility, AI-enabled intrusions & attacker professionalism (here)
Energy / Climate
Iran signals it may relocate its capital from Tehran due to overcrowding & water scarcity (here)
Iceland declared potential Atlantic Ocean Current System (AMOC) collapse a national-security threat — the first state to give climate this designation (here)
Norway growing frustrated with Europe’s reliance on its hydropower as Germany resists regional electricity price splits. This imbalance is fuelling domestic backlash as Norway exports cheap stability while importing European prices. Long-term fix: more grid-scale storage across Europe (here)
Defence
European Space Agency (ESA) approved a €1.2B programme to build a European space-defence network, funding satellites, early-warning sensors & secure communications designed to reduce reliance on US systems. The initiative responds to rising orbital congestion & Russian jamming activity. Europe wants sovereign detection, tracking & resilience in orbit, shifting space from a scientific domain to a strategic defence layer (here)
EU & NATO are exploring a continental drone wall using radar, acoustic sensors, RF jammers & lasers to counter rising drone incursions. With sightings & attacks increasing across Eastern and Northern Europe, the vision is always-on, layered defences that operate more like ambient infrastructure than discrete military assets (here)
Space
Great summary of first issues deploying data centres in space: insufficient power, impossible cooling, radiation risk, oversized solar arrays & crippling latency (See here)