Welcome to Cautious Optimism, a newsletter on tech, business, and power.
Wednesday! I spent most of yesterday on a train to attend a gathering in New York City with media and startup folks. Felt like old times. As did I, after arriving home at midnight, only to enjoy the dogs and children waking up far too early. Never fear, even misbehaving mammals can’t stop CO. Onward! — Alex
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Things That Matter
Two interesting startup rounds: CodeRabbit was built to tackle the code reviews and corrections required by the use of AI tools to write software. That is turning out to be a good bet, with its ARR reaching $15 million after growing 20% per month before it raised a $60 million Series B at a $550 million valuation (TechCrunch). Sure, we worry a little about overbuilding data center capacity on a global basis and some current private-market valuations, but a startup growing as fast as CodeRabbit from its current base is a breakout hit, no matter the date or cycle.
The second round that I can’t stop thinking about is Groq’s new $750 million investment. You might think, with all the handwringing about the world spending too much on compute — here’s an example of the genre — that investors would slow down on backing companies that are building capacity to meet AI compute demand. Nope. Not only did Groq raise nine-figures for its inference-and-chips business, it actually reopened its round after raising $600 million to let in more backers.
And as we always hear, the company is compute-constrained: “The company has expanded its capacity by more than 10% in the last month and all of that is already in use,” Bloomberg reports.
Corruption Watch/The TikTok deal: After (seemingly illegally) pushing back the Congress-set date for a forced divestment or ban of TikTok in the United States, it seems that a deal has been reached. As we wrote yesterday, it appears that the United States blinked on its demand for control of the algorithm that powers the popular social video service as part of its demands.
What we do know is that, as expected, Oracle will play an important role in how Tiktok runs once it is (partially) severed from its current Chinese parent company, taking a stake alongside a16z. That’s great news for Oracle, which currently helps run the service in the United States. That it won’t be banned, and that Oracle will (presumably) retain its provider status, is important news for the database and cloud giant (its shares rose on the news).
Larry Ellison, co-founder of Oracle and current CTO, is the father of David Ellison, who is reportedly working to install a more administration-friendly leader into CBS News, which he controls. Ellison’s media assets have proved (embarrassingly) friendly to administration demands.
Smells a bit off? Could be nothing, but this is the problem with mixing transactional presidents and supine business interests. You get a mess, and less press freedom as a wonderful side benefit.
And speaking of big deals between the Trump-affiliated and the White House, this reeks.
StubHub prices IPO: Unlike many IPOs we’ve seen this year, the ticketing provider did not raise its range, and it did not price above its proposed interval. Instead, it priced at the midpoint of its $22 to $25 range ($23.50), giving it a fully-diluted valuation of $9.5 billion. Given the company’s modest growth and sticky losses, a run-rate multiple of around 5.7x seems more than fair. Let’s see how it trades today.
Netskope raises range: Cybersecurity IPO candidate Netskope pushed its range up from $15 to $17 per share, to $17 to $19. At the midpoint of its raised range, Renaissance Capital pegs its worth at $8.5 billion (Bloomberg puts its non-diluted worth at $7.3 billion). That’s an ARR multiple of 12.0x, which given Netskope’s positive operating cash flow, ARR growth (+33% YoY), and recent push into the browsing space (Island is also hot, recall), seems not-inexpensive, but also not too high to cause fear.
If Netskope prices inside its raised range — let alone above it before trading tomorrow — its debut will be another example of an expensive ZIRP-era valuation ($7.5 billion set in 2021 for the cybersecurity company) over the transom in good shape.
China wants to see its chip dividend
We’ve written before that Nvidia is having a miserable year in China. After changing American policy forced it to stop selling its China-purposed H20 chips in the country, Nvidia had to take a multi-billion dollar writedown, and told investors that tens of billions of dollars worth of revenue would shrivel on the vine.
Then Nvidia went to the White House, and after agreeing to a 15% cut of its revenues in China, was given the green light to sell its detuned chips to the country. Its troubles were not yet over. After the United States said go ahead, the Chinese government kicked up a fuss about Nvidia chips, saying in effect that they could not be trusted. Nvidia protested.
It may not have mattered. Orders for Nvidia’s RTX6000D chip (based on its newer Blackwell architecture) were proving muted even before today’s news as Chinese companies waited to see if their H20 orders would go through. Here’s the FT: