All the AI circus you can fit in a single tent
Welcome to Cautious Optimism, a newsletter on tech, business, and power.
Monday! Welcome back, it’s going to be a good one. This week, we’re on the receiving end of a host of banking earnings, so expect to see a blizzard of headlines about bank performance and what their CEOs have to say about the economy and AI more generally.
Keeping venture drama coverage to a minimum, the Sequoia fracas concerning its investor Shaun Maguire and his views concerning the Israel-Hamas war is not unique. Over the weekend, Khosla investor Keith Rabois got into it with portfolio company CEO Amjad Masad. You can read the thread here, but by the end Rabois accused Masad of being a terror supporter, said that his firm’s investment in Replit made him “embarrassed,” and declined to quit in protest, rejoindering that he would donate his portion of Khosla profit from Replit to the IDF.
Masad’s father was a Palestinian refugee, for reference. All this is to say that founder friendliness sure looks different in 2025 than I anticipated. (I interviewed Masad earlier this year, for what it’s worth.) Now, to work! — Alex
📈 Trending Up: Immigration … oh no, what will the West do … predicting human cognition … economic diplomacy … media criticism … stablecoins … agentic adoption? … Chinese stimulus … Ukrainian arms … F1 on Apple? …
📉 Trending Down: Clean governance … inflation in India … life insurance? … early-career gigs … private equity performance? … taking things seriously … chip leaks to China? …
Is that a trend?
More clones of popular software? Here’s a CapCut clone, here’s a Grammarly clone. The former is open-source-ish, while the Grammarly clone will cost you $30, once. As AI-powered code generation improves, expect to see more of this. And as it becomes easier to install apps on your mobile device sans an application store giving you permission? Roll-your-own apps for non-connected tasks — things that require, say, operating from inside a social network — could ding incumbent revenue. But that’s ok. We want more competition, not less!
The kids love AI? Survey data indicates that two-thirds of kids in the UK use AI chatbots, and a good portion of those youths lean on AI as a friend of sorts. I presume that similar uptake will occur everywhere AI is available at low-cost in local languages. So, in time, everywhere. We are already congregating and coupling-off less; I don’t see this trend, which does have some positives, helping resolve those issues.
All the AI circus you can fit in a single tent
Blending a series of news items into a single dish for you, here’s the state of play in AI land:
Windsurf kinda exited to Google after its much-awaited sale to OpenAI got stuck somewhere between life and death. Perhaps OpenAI’s current inability to iron out a new corporate structure was to blame. If so, then Satya Nadella-Sam Altman intransigence caused Google to snap up high-profile AI talent that could have instead landed inside Redmond’s sphere of influence.
Natasha Mascarenhas: Windsurf will keep $100 million on its balance sheet, pivot to the enterprise.
Villi Iltchev: Details his venture-view of the “Blitzhire” trend.
I interviewed Varun from Windsurf here, if you want to go back in a few months.
That Windsurf was mostly eaten by Google, but not entirely, is a continuation of a trend we’ve seen in recent quarters under which large tech companies do not invest, buy, or acquire their smaller AI rivals. Instead, they kinda invest, partially buy, and mostly acquihire from those companies, leaving behind a husk with some capital after ~buying out early backers.
You can’t keep blaming the exit market on Lina Khan, Silicon Valley. You won the election!
Meanwhile, xAI may be shipping in an entire power plant for its data center, which sounds expensive. That cost mixed with reports that xAI is burning $1 billion per month as it invests in servers and AI training make it plain that taking on OpenAI and Anthropic — both of which are further along in monetization terms than Grok’s parent — is painfully expensive.
So much so that SpaceX (Musk’s rocket company) may invest $2 billion into a coming $5 billion xAI round. On one hand, using surplus in one bucket to fill a deficit in another is logical. On the other, do SpaceX backers want their capital used to fund xAI? Hard to say, but hey that’s a governance question, and those are for losers.
And then there’s Kimi. Recall that earlier in the year we saw Chinese AI company DeepSeek drop a model that was so good, and so inexpensive, that the tech market as a whole worried that American AI was about to get shown-up, and that huge investments into computing power to undergird the AI moment was potentially wasted.
Well, domestic AI survived, and the buildout continues. But now we’re somewhat back to the beginning, as another Chinese AI company — this time, Moonshot AI, which wants to build the “optimal conversion from energy to intelligence” — dropped two new models in the Kimi-K2 family. It open-sourced both.
These models are so good that Perplexity is working to include them in its product. Other reviews are similarly bullish.
I doubt you can shake the snowglobe again in the same manner, but it’s worth noting that despite Grok 4 taking on the best from Anthropic and OpenAI, the AI race is hardly only being run by the United States.
What about Firefly Aerospace?
Don’t worry, our traditional S-1 teardown of the upcoming space IPO is coming. Tomorrow, if the news cycle behaves today. The gist, however, is that the launch/satellite company recently turned gross-margin positive, is growing quickly, and has a simply enormous order backlog.
It looks like a company that will provide retail investors with exposure to the space economy in a way that SpaceX — which remains private — does not.
Major shareholders include AE Industrial Partners and Astera Institute, with additional capital from DADA Holdings, GiantLeap Capital, and Human Element VC. I list those names to underscore that while the Firefly IPO is incredibly exciting, it’s also not a transaction that will help the trad Valley venture firms, as they were seemingly not too involved in backing the concern.
Hugs, good vibes, and may your Monday absolutely crush!