Venture Geopolitics Issue 31
20 Jan 2026
The EU unveiled plans for a new Cybersecurity Act to restrict the use of “high-risk” Chinese vendors across European technology supply chains. At the same time, China instructed local firms to stop using a range of Western cybersecurity providers, including VMware, Palo Alto, Fortinet, Check Point and CrowdStrike.
Cybersecurity, like other foundational technologies, is now sovereign infrastructure. It is embedded across operating systems, cloud platforms, AI pipelines, critical infrastructure and government networks, giving vendors privileged and persistent access to the most sensitive layers of modern systems.
For Europe and the UK, this raises a conundrum. Push back too hard on US technology and you risk retaliation, as Greenland has made explicit. Rely too heavily on American vendors and you inherit US foreign policy by default, limiting autonomy when values and security collide. Cut China out and you face higher costs, slower roll-outs and fragile replacements, a tension underscored this week by Mark Carney’s visit to Beijing and the UK’s approval of a controversial new Chinese embassy in London.
These constraints can feel insurmountable given how far globalisation has already run. But large problems are rarely solved all at once. The EU’s approach reflects that reality, with a three-year transition period built into the legislation to phase out high-risk suppliers and accept that dependency reduction is incremental rather than abrupt.
As Europe invests heavily in defence and security, it is making a pragmatic choice that it can no longer tolerate high-risk vendors in critical infrastructure, even if unwinding those relationships takes time. That tension is likely to sharpen through the year and, as it does, “sovereign” technology plays will move from the margins to the centre of the narrative.
IPOs / Publics
S&P dropped >2% - largest one-day fall since October - after Trump threatened tariffs on Europe over Greenland, pushing the VIX volatility index to its highest level since November (here)
Anthropic, OpenAI & SpaceX are taking steps that point to 2026 public listings. Bankers framing this as a potential reset moment for US tech IPO pipeline, with AI as centre of gravity (here)
Motive (fleet safety & operations software) delayed IPO marketing after a “technical issue” as scrutiny builds on fundamentals. It burned $74M in cash on $327M revenue in the first 9mo of 2025 & reports say it relies on ~400 human annotators in Pakistan to review crashes flagged by its AI (here)
Czechoslovak Group (defence & industrial equipment) announced plans for an Amsterdam listing. Could raise ~€3B at ~€30B, which would put it among the larger European IPOs in recent years (here)
Liftoff (mobile app advertising & monetisation) filed for an IPO despite continued losses. Reported $25.6M net loss on $491.6M revenue for the 9mo ended 30 Sep (here)
Chancellor Reeves says cutting red tape for firms listing their shares on the London stock markets is “reinvigorating” the City. Remarks coincide with the financial watchdog introducing new rules in the UK’s capital markets. Changes cut prospectus-to-listing from 6 working days to 3 & allow larger follow-on raises without a new prospectus; the structural issues (research coverage, liquidity, risk appetite) are still there, but it’s movement in the right direction (here)
TSMC’s record Q4 profit reinforced where the AI hardware cycle is concentrated. ~$16B profit (+35% YoY) & said high-performance computing is now 58% of revenue (here)
ASML passed $500B market cap because TSMC’s capex plans translate directly into demand for ASML’s tools. If TSMC builds more leading-edge capacity, it needs more extreme ultraviolet lithography machines - & ASML is effectively the bottleneck supplier (here)
Microsoft changed how it approaches data-centre builds after local backlash on power pricing. Committed to cover full power costs, avoid local tax breaks, replenish water & fund worker training after residents linked new capacity to 12-16% electricity price increases (here)
Google is pushing Gemini deeper into consumer workflows. Gemini can turn recent emails into task lists & “Personal Intelligence” can connect Gemini to Gmail, Photos & Search history via user controls. Nb, see Tunguz note on moving from the to-do list to the done list - a concept I enjoy (here & here)
Demand for Google’s Gemini AI models has surged, with monthly API calls rising from 35bn to 85bn between March & August after the release of Gemini 2.5 (here)
Amazon became the first customer for a new US copper mine, linking AI buildout to basic industrial inputs. This is the first new US copper source in more than a decade (here)
Big Dogs
OpenAI agreed a multi-year compute deal with Cerebras (AI chip company) for up to 750MW (here)
OpenAI disclosed compute scaled ~3x from 2023-2025 as annualised revenue rose from $2B to $20B (a near 1:1 correlation). It is a rare public datapoint on the current relationship between frontier model economics & infrastructure intensity (here)
OpenAI sent RFPs to US manufacturers for data-centre, robotics & consumer-device components. Bloomberg frames this as a broad product expansion that reaches beyond model deployment into hardware & supply chain execution (here)
OpenAI will test ads inside ChatGPT for US Free & Go users & is targeting low billions of ad revenue in 2026. Pushes the business model closer to mainstream consumer internet economics, not just subscriptions & APIs (here)
OpenAI is on track to launch first consumer hardware device in H226. It signals a bet that distribution & interface matter as much as model quality (here)
OpenAI invested in Sam Altman’s Merge Labs (brain-computer interfaces, competitor to Musks neuralink) in a $250M seed at $850M. The 2025 trend of circular deals continues… (here)
OpenAI signed a new 3-year agreement with ServiceNow. Will supply the company with intelligence models to power fresh AI agents & voice applications (here)
OpenAI confirmed that it will roll out age prediction & verification globally (here)
Anthropic launched new corporate tools, reviving concerns it may compete with its own ecosystem. Per Business Insider, the worry is simple: once a model provider moves beyond the API & into packaged enterprise features, it shifts from supplying capability to owning workflows, putting downstream software companies in a structurally weaker position (here)
Sequoia is preparing to invest heavily in Anthropic in a round reported at ~$350B, more than 2x its valuation 4 mo earlier. Reporting suggests round is led by GIC & Coatue with ~$1.5B each & may include up to $15B from Microsoft & Nvidia. Sequoia has previously backed xAI & OpenAI - VCs typically do not fund direct competitors (here)
Thinking Machines Lab (Mira Murati’s AI startup) lost 2 co-founders back to OpenAI as internal turmoil spilled into public view. CTO Barret Zoph was reportedly fired for performance issues & for speaking with competitors (& a workplace relationship) & two researchers (Luke Metz & Sam Schoenholz) then resigned; the exits included 2 of the company’s 6 co-founders & followed third co-founder, Andrew Tulloch, leaving for Meta in the autumn. The events reportedly rattled investors & could complicate a funding round that has been described as aiming for a $50B valuation despite the company having shipped only 1 product so far (here)
ElevenLabs (voice AI) is in talks to raise at ~$11B only months after a $6.6B secondary. The company has said it surpassed $330M in ARR & the rapid repricing shows how quickly markets reward distribution in “voice as interface” (here)
Venture Capital
Prototype Capital raised €15M for a third fund with an explicit European sovereignty-through-industry thesis. Andreas Klinger frames it as “a community of extremely ambitious people who want to actively change Europe for the better”. “Europe invented industry… the cradle of precision manufacturing… leaders in automation & robotics & yet… we sell out our best tech to China. We export our best founders & most of our investment money to the US. That’s insanity”. His argument is that the next trillion-euro companies in robotics/manufacturing should be built in Europe (he points to ABB Robotics being sold to SoftBank & Arduino being acquired by Qualcomm as warning shots). The fund is built to invest across the vertical supply chain based on the view that once supply chains migrate they do not return. Incidentally, Ursula von der Leyen gave EU Inc a shout-out at Davos this week - well done, Andreas! (here)
Plural, a VC funded founded by exited entrepreneurs & angel investors Taavet Hinrikus, Sten Tamkivi, Ian Hogarth & Khaled Helioui 4 years ago, is raising its third fund which could reach up to €1B. Plural’s portfolio includes European ‘frontier’ bets, including Proxima Fusion, Helsing, Labrys, Phasecraft & Oriole (here)
Verdict Capital is reportedly raising $250-300M for early-stage investing with an AI focus. It is being formed by Niko Bonatsos (ex-General Catalyst) & Michael Fertik (here)
The UK innovation economy reached $1.3T in enterprise value, with VC funding at $23.6B in 2025. Dealroom says funding rose 35% YoY, the first growth year since 2021, driven by 36 mega-rounds ($100M+) that made up more than half of all capital raised; fintech represents ~1/3 of total ecosystem value & deep tech ~20%. The UK raised more VC than Germany, France, Switzerland & the Netherlands combined & produced one of only 18 $2B+ global rounds in 2025 when Revolut raised $2B at $75B. The ecosystem has now crossed 200 unicorns, with 16 new UK unicorns in 2025 (here)
Regulation
China opened consultation on a law regulating “anthropomorphic” AI services - effectively regulating emotional simulation as a safety domain. The draft (“Interim Measures for the Administration of Humanized Interactive Services Based on AI”) goes beyond abstract principles: it limits what anthropomorphic systems can generate & promote (from things that endanger national security/damage national reputation, to violent content to inducements around self-harm, fraud, or seeking sensitive information), requires providers to run algorithm-mechanism review, scientific/tech ethics review, content review & security & data protection programmes & makes providers explicitly responsible for user harm linked to emotional manipulation & vulnerability. It also includes specific obligations for minors & elderly users (including a minor mode) & sets penalties, signalling that this is meant to be enforceable (here & here)
The European Commission has published its first draft Code of Practice for marking & labelling AI-generated content. Part of the EU’s wider AI regulatory framework, it signals where transparency, attribution & accountability will show up in digital products using AI outputs - clearer provenance, UX changes around disclosure, more emphasis on data lineage (here)
US Senate passed the DEFIANCE Act again, giving victims of non-consensual sexual deepfakes a right to sue creators & hosts. The point is liability: it targets both the generator & the distributor, & it is moving through Congress alongside broader scrutiny of image-generation tools (here)
US Congress moved to override Trump’s proposed 22% cut to federal science spending, including a threatened NASA science reduction. NASA’s large missions (including Roman & Dragonfly) avoided a proposed 75% cut to science budgets (here)
UK ministers will consult on an under-16 social media ban & tighter rules on mobile phones in schools. This continues the shift toward age-based restrictions as a design & compliance problem for platforms (here)
Researchers are treating large language models like complex organisms to map why they fail & how they misbehave. The practical implication is governance: interpretability work is being used to explain hallucinations, identify internal failure pathways & make model behaviour legible to regulators & enterprise buyers (here)
Venture Geopolitics
Europe’s response to US pressure over Greenland is divided. EU officials are weighing options ranging from reviving tariffs on €93bn of US goods to deploying the never-used ‘anti-coercion instrument’, which could target US tech & financial services. Fears of provoking Washington - critical to Ukraine’s defence - have exposed splits, with Italy & Hungary urging restraint while France warns of “unprecedented consequences”. The anti-coercion tool is the sharpest option, with the potential to hit major US tech firms through market restrictions, but officials currently lean toward de-escalation (here)
The US & Taiwan agreed a chip reshoring package tied to tariff reductions, framed as the largest such deal to date. Washington would cut tariffs to 15% from 20% & Taiwanese companies would commit $250B into US semiconductor manufacturing, with another $250B in Taiwanese credit guarantees for smaller firms. The political tension in Taiwan is whether moving capacity offshore erodes the island’s strategic leverage (here)
Beijing is effectively blocking Nvidia’s H200 chips & suppliers have paused related component work. Nvidia expected large Chinese demand after signs sales might be allowed, but China’s customs stance & supplier response show how export controls are now fought on both sides (here)
Chinese AI developers are warning that export controls are widening the gap by shaping where compute can be accessed. Firms describe having to rent more compute outside China, accept fewer chips & slow model ambitions relative to US labs over a 3-5 year horizon (here)
Canada’s prime minister visited Beijing to stabilise trade exposure as US pressure rises. Mark Carney arrived in China on Jan 14 seeking to reopen trade channels as pressure from Donald Trump grows & ~70% of Canadian exports still go to the US. The Canadian government says the aim is to reduce reliance on the US while keeping security limits in place, describing a “new geopolitical environment” & a need to diversify trade, with Foreign Minister Anita Anand saying Canada wants non-US trade to grow by 50% over the next decade (here)
The UK has approved China’s new London mega-embassy, with judicial review likely & disclosure fights anticipated. Residents are preparing to push for disclosure of messages & meeting records involving senior ministers, citing security concerns & the site’s proximity to major data cables, while government security services say risks are manageable (here)
Prediction markets are becoming embedded in US political discourse. Donald Trump Jr. is advising both Polymarket & Kalshi, while Trump Media & Technology Group plans to launch its own betting-style product. Per The Atlantic - “America Is Slow-Walking Into a Polymarket Disaster” - these markets are increasingly cited by media outlets as implied probabilities, despite thin liquidity, limited regulation & exposure to manipulation. Examples include headlines referencing odds such as a 36% “chance” of the US annexing Greenland, collapsing the distinction between prices, forecasts & political reality & raising concerns that gambling signals are being treated as insight rather than speculation (here & here)
Qatar & the UAE joining Pax Silica links Gulf states into US-led semiconductor & AI hardware coordination. The point is supply chain integration - the Middle East is being wired into the hardware side of AI, not only into financing (here)
Geopolitics is altering corporate investment decisions in a measurable way. Economist research suggests US firms now direct ~69% of capex domestically (vs 44% in 2016), while cross-border sales growth has weakened & companies increasingly favour politically aligned jurisdictions even at the cost of efficiency (here)
At the WEF, Ursula von der Leyen argued today’s permanent geopolitical shocks (comparable to the 1971 collapse of Bretton Woods) require a permanent shift toward European independence, reducing structural dependencies in energy, defence, technology, finance & trade. She positioned this as a strategic opportunity already underway: diversification of supply chains; the EU–Mercosur trade agreement creating the world’s largest free-trade area (31 countries, 700M+ people, ~20% of global GDP); expanded trade deals with Mexico, Indonesia, Switzerland; advanced negotiations with Australia & India. To anchor competitiveness, she alluded to plans for a single EU-wide corporate regime (“EU Inc.”) enabling firms to register anywhere in the Union within 48 hours, alongside construction of a Savings & Investment Union to deliver deeper, more liquid capital markets & lower-cost funding for scale-ups, SMEs & innovation. On defence, she cited a surge of up to €800B in spending by 2030, a 3x of European defence-industry market value since 2022. On Ukraine, she condemned Russia’s continued attacks, announced a €90 billion EU loan for 2026–27, reaffirmed the immobilisation of Russian assets & stressed that peace requires Ukrainian strength. She concluded with Arctic security: full solidarity with Greenland & Denmark, opposition to allied trade tariffs, a major EU investment push in Greenland, expanded Arctic defence capabilities (including icebreakers), closer cooperation with NATO partners & the preparation of a new European security strategy reflecting a changed global order (here)
Strategic Sectors
AI
The IMF warned global growth is increasingly exposed to a narrow US-led AI investment cycle. It raised its 2026 global growth forecast to 3.3% but flagged correction risk if productivity & profitability expectations do not materialise, noting the share of US output linked to tech investment is at its highest since 2001 (here)
AI adoption is uneven across countries & is being shaped by state promotion, product availability & model supply. Microsoft AI for Good estimates ~16% of the world’s working-age population used genAI monthly by end-2025, with UAE & Singapore above 60%, South Korea showing rapid recent growth & DeepSeek dominating chatbot usage in China (89%) & appearing heavily in sanctioned states like Russia & Iran (with censorship constraints) (here)
Notable deals: Etched raised ~$500M (specialised inference chips for LLMs); Replit is reportedly in talks for ~$400M (AI coding & app building); Parloa raised $350M (customer service AI agents); Deepgram raised $130M (speech recognition & text-to-speech); Listen Labs raised $69M (AI-run customer research interviews); webAI raised a “high double-digit” round (local, privacy-focused AI on devices); Higgsfield raised $80M (AI video creation & editing) & Nvidia put $150M of $300M into Baseten (infrastructure for enterprises to integrate ML & AI models into pre-existing processes) (here)
Energy
US grid operators are receiving data-centre power requests that dwarf recent approvals, pushing companies toward off-grid generation. ERCOT (Texas’s grid operator) has received requests totalling >226GW of data-centre demand by 2030, versus a system that approved a tiny fraction of that level just a few years ago; the response is firms looking at gas turbines & private generation to avoid multi-year grid queues (here)
The White House is pushing PJM to run an emergency auction that forces data-centre operators to fund new generation capacity. PJM is the largest US electricity market (67M people across 13 states) & has the country’s highest data-centre density; the proposal is for 15-year contracts that could support ~$15B of new capacity, aimed at stopping residential bills rising as AI demand grows (here)
The UK government took a £25M stake in Kraken to encourage a London listing rather than New York. Kraken is the utility software business spun out of Octopus Energy, valued at $8.65B & the move reflects how government is trying to keep high-growth “infrastructure software” anchored in UK public markets (here)
Coal generation fell in both India & China in 2025 for the first time since 1973. India cut coal power ~3% & China ~1.6% as solar, wind & storage additions outpaced demand growth across two countries responsible for ~40% of global CO₂ emissions from fossil fuels (here)
Cybersecurity
Brussels is preparing a Cybersecurity Act to phase out “high-risk” Chinese suppliers from EU critical infrastructure. The aim is to make security measures mandatory after years of voluntary guidance, with Huawei & ZTE frequently cited. The under-the-hood reality is that Europe is trying to unwind dependencies after letting cost & speed win for a decade & the trade-off is immediate - alternatives can be more expensive, replacement timelines are slow & the EU is trying to reduce exposure to both China & the US at the same time (here)
China is reportedly also telling local firms to stop using specific Western cybersecurity vendors. Reuters reports Chinese authorities flagged US & Israeli providers including VMware, Palo Alto Networks, Fortinet, Check Point & CrowdStrike reinforcing that cybersecurity tooling is now treated as a strategic dependency rather than an IT choice (here)
WhatsApp phishing links were used to hijack accounts & gain surveillance access across the Middle East. The campaign targeted high-profile Gmail & WhatsApp users & enabled credential theft, account takeover & access to location, audio & photos (here)
Iran’s attempted near-total internet shutdown exposed the limits of state control when parallel infrastructure exists. During recent unrest, authorities tried to cut connectivity, but smuggled Starlink terminals - enabled after sanctions eased in 2022 - allowed pockets of communication the state could not fully police, despite efforts to jam GPS signals. The episode mirrors a broader pattern: when centralised systems become unreliable or politicised, users route around them. In Pakistan, households have done so economically rather than digitally - solar imports reached ~22GW in 2024, nearly half of national generation capacity, as consumers opted out of a grid charging ~27 rupees per kWh in favour of rooftop solar costing roughly a third. In both cases, resilience emerged bottom-up, through alternative infrastructure rather than reform of the core system (here & here)
Notable deals: Armadin raised $165M (automated red-teaming), Aikido raised $60M at $1B (unified developer security across code, cloud & runtime); WitnessAI raised $58M (AI security & governance for enterprise AI operations); Novee raised $51.5M (AI-agent continuous penetration testing) (here)
Defence
Defense Unicorns raised $136M at $1B+ to push software updates into disconnected military systems. The core issue is making critical systems patchable in environments that cannot rely on constant connectivity (here)
Russia is targeting Kyiv’s heating & power infrastructure to impose winter disruption. Schools are expected to close until February, showing how energy systems become civilian constraints in modern conflict (here)
Robotics
Manufacturing is at a software-driven inflection point where robots can learn & adapt across tasks rather than repeat fixed routines. There are ~4.7M industrial robots globally but only 177 per 10,000 manufacturing workers; the near-term question is whether advances in simulation & autonomy reduce the “sim-to-real” gap enough to widen deployment beyond high-volume automotive lines (here)
Notable deal: Mytra raised $120M to automate heavy material movement inside warehouses & industrial sites. Material handling remains one of the clearest ROI cases for robotics because it replaces repetitive labour & reduces safety incidents (here)
EVs
Germany opened a €3B EV subsidy scheme to all manufacturers, including Chinese automakers. The immediate goal is demand support after prior subsidy changes whipsawed the market, but the geopolitical implication is that Europe is experimenting with openness & price competition rather than pure defensive tariffs (here)
Crypto
The Clarity Act stalled after Coinbase CEO Brian Armstrong withdrew support, exposing a fight over stablecoin rewards & regulatory control. The bill was meant to split oversight between the SEC & CFTC, but the draft reportedly expanded regulator powers & data access; the flashpoint is “rewards” paid on stablecoins, whiccch banks are lobbying to restrict as deposit-like competition, while crypto firms argue that banning them would entrench incumbents & weaken adoption (here)
Goldman Sachs chief executive David Solomon said the bank is actively exploring both stablecoins and tokenisation. He added that Goldman is also looking into prediction markets, with a particular focus on products regulated by the CFTC (here)
Space
UKs Open Cosmos won Liechtenstein’s Ka-band spectrum licence after Thiel backed Rivada missed a payment, in a rare European example of hard-nosed space-industrial execution. The rights were previously held by Rivada but when Rivada missed a payment, Liechtenstein re-tendered the licence. Open Cosmos (EF 2015, UK-founded satellite company) beat US- & China-linked rivals. Ka-band capacity is valuable for high-speed broadband & secure data links - a story of European sovereignty (here)