Hi {{first_name}}!
Welcome to the week when the US government realized that the best way to outdo China in capitalism is to become China, and Palantir's stock surged 600x earnings, apparently because math died sometime in 2024.
If you thought the free market was having a moment, wait until you hear about Uncle Sam's shopping spree and the $3T we're spending on AI infrastructure that nobody knows how to monetize.
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Here's what's moving markets and making headlines:
🎯 BLUF: Bottom Line Upfront
US Govt Goes Shopping: Trump admin wants to use $11B of CHIPS Act money to buy Intel equity after the stock cratered 50%
$3T AI Infrastructure Bonfire: Tech world committed to spending $3T on data centers, while 42% of businesses abandoned AI pilots as average ROI sits at a pathetic 5.9%
Palantir Defies Gravity: Hit $430B market cap trading at 600x earnings (vs Nvidia's peak of 65x), needs 40% growth for 5 straight years just to justify current valuation
China's Open-Source Chess Move: While the US burns billions on proprietary models, China's flooding the market with free AI that punches above its weight
Cognition Hits $10B Valuation: AI coding startup where employees "literally live at work" raised $500M at nearly $10B after acquiring Windsurf's scraps
🏛️ The US Government Wants to Own Intel Because Capitalism is So 2019
Photo by René DeAnda on Unsplash
🎯 Uncle Sam Goes Shopping for Chip Stocks
The Trump admin is in talks to buy a stake in Intel using the CHIPS Act funding. The nearly $11B of it that was already promised to Intel would be used to acquire equity in the struggling chipmaker whose stock has cratered 50% since January 2024.
The Drama Timeline:
Last Week: Trump demands Intel CEO Lip-Bu Tan resign "immediately" after Senator Tom Cotton flagged his investments in Chinese companies
Monday: Tan meets Trump at the White House for damage control
After Meeting: Trump calls Tan's story "amazing" and says they'll work together
Thursday: News breaks that the government wants to buy Intel shares
Market Reaction: Intel stock jumps 7%, giving it a $105B market cap
The Real Backstory: Intel spent billions trying to build a foundry business, but has no major customers and terrible chip yields. Their CEO was hired to turn things around, similar to his tenure at Cadence, but instead of fixing the company, he's having to explain to Trump why his Malaysian birth and past investments don't make him a Chinese spy.
💸 This Summer's Government Shopping Spree
Intel isn't even Trump's first rodeo in the "capitalism with Chinese characteristics" playbook:
Nvidia & AMD Deal: Lifted China export bans in exchange for 15% of their China revenues (because nothing says free market like protection money)
MP Materials: Defense Department dropped $400M to become the largest shareholder of a rare-earths producer
US Steel: Approved Nippon Steel's takeover in exchange for a "golden share" that gives the government veto power
Intel: Now seeking an ownership stake to "secure national security" in semiconductors
The Bigger Picture: As the WSJ's Greg Ip put it, "capitalism in America is starting to look like China." One tech analyst defended it to CNBC, saying, "We don't want government to intervene and own private enterprise, but this is national security." This overlooks the irony that China's stance is literally the same for every state-owned enterprise.
💰 The $3T AI Infrastructure Boom That Nobody Can Afford
📉 Plot Twist: AI May Not Be Making Money
The AI boom has triggered what might be history's largest infrastructure buildout, with companies on the hook for $3T in data centers, supercomputers, and power plants. Tech giants, including Microsoft, Google, Amazon, and Meta, will burn through $400B in 2026 after spending $350B this year.
Here's The Irony: Companies are spending $61.9B on generative AI in 2025 (up 94% YoY), but virtually nobody's making money from it:
42% of businesses abandoned their AI pilot projects by the end of 2024, up from 17% the year before
Average ROI: A pathetic 5.9% according to IBM
McKinsey's Finding: 80% of companies use AI, 80% say it hasn't improved profits
The "Productivity Paradox": Just like PCs in the 1980s, everyone's buying it but nobody knows why
The only winners? Big Tech companies are showing "early returns" through vague "efficiencies" that Wall Street pretends to understand.
🐉 Meanwhile, China Is Open-Sourcing Its Way to AI Dominance
While America burns trillions on proprietary models, China is releasing its models for free:
Alibaba's Qwen3 just beat some of OpenAI's models in reasoning, math, and coding
DeepSeek's R1 dropped in January, completely free and crushingly good
Chinese firms are flooding the market with open models while US companies lock theirs behind paywalls
The Geopolitical Chess Move: This seems to be China hedging against future sanctions by making sure its AI is already embedded everywhere. When half the world's developers are building on your free models, good luck sanctioning that.
🎯 Palantir: The $430B Meme Stock That Govt Contracts Built
📈 Trading at 600x Earnings Because Math is Dead
Palantir just hit a $430B market cap, making it worth more than 99% of the S&P 500 while trading at:
600x earnings (for context, even Nvidia at peak hype was 65x)
120x sales (historically, anything over 30x underperforms the market)
Rule of 40 Score: 94 (impressive until you realize it needs to maintain this for a decade to justify the price)
To grow into its valuation at Google's peak multiple (22x sales), Palantir needs to 5.6x its revenue, which requires 40% annual growth for five straight years with zero hiccups.
🕵️ The Palantir Mafia: Silicon Valley's New Shadow Network
Forget the PayPal Mafia, as there's a new Palantir alumni network running the Valley, and they learned to code in war zones:
350+ companies founded or funded by Palantir alumni
Names like Garry Tan (Y Combinator), Joe Lonsdale (8VC), and Barry McCardel (Hex) are pulling strings
They coordinate on Signal, recruit at Halloween parties, and do deals at river retreats
Why They're Different: Palantir's "forward-deployed engineers" are embedded with the CIA and oil rigs, learning to build software in hostile environments. Now they're applying that same energy to startups in defense, govtech, and other sectors too boring for normal VCs.
Reality Check: Palantir's stock is up 5x because investors think AI + government contracts = infinite money printer. But at 600x earnings, they're betting Palantir becomes the Matrix: omniscient, omnipresent, and running everything.
⚡ Startup Quick Hits: From Living at the Office to Wiring Your Brain
💻 Cognition's $10B Valuation Comes with Sleepovers: The AI coding startup raised $500M from Founders Fund at a nearly $10B valuation, which is a casual 2.5x jump from $4B in March. CEO Scott Wu proudly announced his team "literally live where we work" and "do our best work late into the night," as they just cleaned house with Windsurf.
🎯 Cohere Hits $6.8B & Throws Shade at Consumer AI: The Toronto-based LLM maker raised $500M led by Radical Ventures and Inovia Capital, jumping from $5.5B to $6.8B valuation in just a year. Cohere is focused on the enterprise market and even took a swipe at OpenAI and Anthropic for selling "repurposed consumer models."
🧠 OpenAI Backs Brain Chip Startup: Merge Labs is raising $250M at an $850M valuation with OpenAI leading. Altman will be a co-founder alongside Worldcoin's Alex Blania, but won't handle day-to-day operations. Back in 2017, Altman wrote that humans must either merge with AI or become "the biological bootloader for digital intelligence."
⚡ VC Quick Hits: From Woodworking YouTubers to War Profiteering
🪓 Slow Ventures Invests $2M to a Woodworking Guy: The firm deployed its first investment from its $60M Creator Fund into Jonathan Katz-Moses, a woodworking YouTuber with 600K followers and 75M views who sells his own line of tools. Slow partner Billy Parks flew to Santa Barbara to visit his 30,000-square-foot shop, convinced that it would bring in venture-scale returns.
📊 Ex-OpenAI Researcher Launches $25M Fund to Stalk GitHub Commits: Jenny Xiao's Leonis Capital raised $25M to back AI researchers before they've built anything sellable, using in-house software to creep on GitHub contributions and academic papers like a technical talent stalker. The fund is backed by insiders from Nvidia, OpenAI, and Anthropic.
🤖 xAI Co-Founder Ditches Musk to Start AI Safety Fund: Igor Babuschkin is leaving xAI to launch Babuschkin Ventures, focused on "AI safety research" and helping humanity flourish. Babuschkin says he learned two "priceless lessons" from Elon: be fearless and have maniacal urgency. Nothing says "AI safety" like ditching as an xAI co-founder after the PR nightmare.
💣 Porsche & Deutsche Telekom Anchor €500M Defense Fund: DTCP is raising a €500M fund for European defense tech, with Porsche's holding company dropping its cute "dual-use only" restriction to go full military-industrial complex. European military spending is surging, and nothing says "luxury sports cars" like investing in companies that make things that go boom.
💸 In Other Bay Area Funding News
Here's a roundup of notable recent funding rounds across various sectors in the Bay:
🤖 AI & Machine Learning
Matic: Raised $77.3M for their AI-powered indoor robots.
Tahoe Therapeutics: Raised $30M led by Amplify Partners to build AI models of human cells for drug discovery.
Citizen Health: Raised $30M Series A led by 8VC for their AI health advocate platform.
Parallel: Raised $30M Series A led by Khosla Ventures to help AIs efficiently interact with the web.
Dashtoon: Raised $13M Series A led by Peak XV Partners for their generative AI storytelling platform.
Refold AI: Raised $6.5M Seed led by Eniac Ventures & Tidal Ventures for their AI integration platform.
Create: Raised $5.5M Series A led by Bessemer for converting plain English into fully functional apps.
🏥 Healthcare & Biotech
Kriya Therapeutics: Raised $313M Series C for gene therapies targeting ophthalmology, neurology, and metabolic diseases.
Medallion: Raised $43M led by Acrew Capital for their network management platform.
Spirair: Raised $12.8M for minimally invasive solutions treating nasal septum deviation.
💼 Enterprise Software
XOPS: Raised $40M Seed led by Activant Capital & FPV Ventures for autonomous IT operations.
Squint: Raised $40M Series B led by TCV & The Westly Group for their manufacturing intelligence platform streamlining factory operations.
Hyphen: Raised $25M Series B with backing from CAVA & Chipotle for automating culinary operations.
Laurel: Raised Series C funding led by Workday Ventures for AI timesheet automation for legal and accounting firms.
Soraban: Raised Series A led by Altos Ventures, building an admin AI assistant for accounting firms.
💰 Fintech
Cache: Raised $12.5M Series A led by First Round Capital for their brokerage service.
The Fintex Group: Raised $5M for payment solutions helping SMBs navigate the financial maze.
Mesh: Raised funding for their crypto payments network, creating a connected ecosystem for Web3.
🚀 Other Notable Rounds
Total Deals: 24, totaling $1.19B
Please note that we're still working on building our data pipelines to identify pre-seed rounds as they come.
📈 IPO Watch
Via filed confidentially for an IPO after raising $110M at a $3.5B valuation in 2023. The transit software startup powers on-demand shuttles for 650+ cities in 30 countries.
Gemini filed for IPO on Nasdaq under ticker GEMI, despite posting a $282.5M loss on $67.9M revenue in H1 2025. The Winklevoss twins' crypto exchange follows Circle's successful debut.
🤝 M&A Activity
Anthropic acquired Humanloop in an acqui-hire, nabbing the three co-founders and a dozen engineers from the prompt management platform that served Duolingo and Vanta.
Workday acquired FlowiseAI, an open-source platform for building customizable AI chatbots and agents to enhance its HR offerings.
Workato acquired xMAD.ai, a frontier AI agent research company focused on advancing LLM technology for enterprise automation.
Square acquired Tola, combining accounts payable, receivable, and cash flow management into their payments ecosystem.
Race acquired Atherton Fiber, a fiber optic network provider serving homes, schools, and public buildings.
Click Labs acquired Evermile, using AI agents to automate 70% of daily retail tasks.
Creatify AI acquired Gala Labs, an AI creative strategy platform that operates within Slack to monitor creative effectiveness.
Motiv Electric Trucks merged with Workhorse Group, combining forces in the commercial EV space for vehicle and aerial logistics solutions.
Landbase acquired Ad Auris, a narration tool that transforms written content into audio for publishers.
🌟 Editor's Note
At Startup Intros, our mission is to bring the latest founder-investor news straight to your inbox, keeping you ahead in the fast-paced world of Silicon Valley. Our free weekly newsletter delivers curated insights, deals, and trends to help you navigate the startup ecosystem.
Stay tuned for our upcoming paid daily newsletter, packed with deeper dives, plus weekly spotlights on top VCs, investors, and founders, and practical tips for raising your next round.
💭 Parting Thoughts
So there you have it: America's spending $3T on AI that doesn't make money, the government's buying tech companies like it's Black Friday, and a woodworking YouTuber just got venture funding because why the hell not.
When Palantir trades at 600x earnings and the solution to China's tech dominance is "let's become China," you know we've officially entered the "hold my beer and watch this" phase of late-stage capitalism.
Till next time,
Dev Chandra
CEO @ Startup Intros
Associate @ Context VC
LinkedIn: /in/devchandra
Tim Hsia
Investor @ Context VC
Co-Founder @ Startup Intros
LinkedIn: /in/timhsia
P.S. Raised this week, and we missed you? Want to be featured? Have tips or funding questions? Reply or DM us as we’re here to help.
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