Welcome to Cautious Optimism, a newsletter on tech, business and power.
Friday! Bad debt concerns are rattling banking stocks following a strong showing by American financial institutions, business lobby groups are starting to show signs of life in the face of expensive executive orders, and domestic shares have started the day lower after falling yesterday. The markets remain richly priced, but trade tensions could be accumulating weight on future gains. On that cheery note, let’s get reading! — Alex
📈 Trending Up: One-party state rule for me, not for thee … AI skills … gaming … the AI-ification of the operating system … bootlicking … building your own power plant … Reddit’s search dreams
📉 Trending Down: Rule of law … freedom of generation … personal privacy … teenage digital freedom … Wikipedia traffic in the AI era … press freedom
Things That Matter
AI is shaking AWS: Leaked Amazon documents seen by Business Insider indicate the company’s cloud service, AWS, is having a hard time in the AI era. AWS remains a popular source of storage and traditional cloud products, but startups are more often than not heading elsewhere to meet their AI needs. Here’s BI:
Among Y Combinator’s 2024 cohort, 59% reported using more than three AWS services, down by more than four percentage points from 2022, according to the document from March. Meanwhile, 88% of these startups were using OpenAI’s models and 72% were using Anthropic’s. Only 4.3% said they were using AWS’s Bedrock developer tool, which gives access to various AI models.
Sure, the data is a bit dated, but it’s worth asking if Amazon has closed the gap with Anthropic and OpenAI in the last year. For fun, what’s Amazon’s homegrown AI model lineup called? Don’t know? See here.
Selling storage and compute makes for great business. But it must sting to see upstarts like CoreWeave and other neoclouds raking in spend from companies that were once largely your customers. Perhaps this is why AWS revenue increased 17.5% in the second quarter while Azure’s sales (a big OpenAI provider) rose more than twice as fast.
So much for the spying: It’s a bit surprising to see Deel, an HRtech unicorn, raising another $300 million. The new round, led by Ribbit, a16z and Coatue, values the startup at $17.3 billion, far higher than its prior valuation and a smidgen more than its arch-rival Rippling.
The two companies’ rivalry has grown beyond dollar-measuring and market share. Earlier this year, Rippling accused Deel of hiring a spy to collect sensitive information about how Rippling positions itself, and even trying to use internal information to poach customers. The allegations seemed airtight, pointing to executive-approved behavior that blasted straight through any conceivable moral threshold.
But I suppose if the underlying asset is performing well enough — Deel crossed the $100 million/monthly revenue milestone in September, and reports 15%-17% EBITDA margins — even a CEO accused of corporate espionage won’t deter investors.
Founder-friendly, indeed.
Greater unity in the Union? The EU is working to create a bloc-wide set of rules that would allow startups to incorporate once, digitally, and play by a flat set of regulations across the Union. There’s some risk of the initiative falling apart, but I’d bet you lunch that the EU will pull it off in 2026 as expected.