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AI Infrastructure Build-Out Is Bringing Silicon Back to the Valley
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Good day. The technology that gave Silicon Valley its name had fallen out of fashion with venture capitalists focused on software and internet technologies. Now a wave of innovations and a surge in AI data-center construction are funneling billions into hardware.
Late-stage and venture growth deal value in semiconductors reached $5.3 billion in the U.S. last year, more than tripling the total from 2023, according to a recent report from Deloitte. This year is already on track to surpass that with $2.3 billion in deal value through the end of March.
“We are in the biggest supercycle I've ever seen in my 40 years” working with semiconductors, said Umesh Padval, managing partner at Seligman Ventures. “This is 100 times bigger than any of the hardware cycles before."
On Monday, networking infrastructure firm Upscale AI announced a $190 million Series A extension round led by Premji Invest. Seligman was among the investors, along with Nvidia, Salesforce Ventures and others.
Fueling growth in VC infrastructure investments are advancements in semiconductor architecture that promise to bring down AI’s energy costs, and spending on physical data centers. Phil Inagaki, managing partner and chief investment officer at Xora Innovation, said data-center spending could total a trillion dollars in 2027.
Xora is focused on “optical interconnect,” a technology that uses light to exchange information between chips, processors and stacks of servers. Incumbent technology relies on copper, which is less efficient.
“If these technologies go optical there's going to be massive, massive adoption,” Inagaki said.
It’s bullish expectations like these that have drawn investors in and driven up revenue multiples nearly as fast as investment volume.
Seligman’s Padval believes the current cycle has another two or three years to play out, and that it will continue to push down the cost of computing power. That “will translate into applications which we have not even imagined,” he said.
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And now on to the news...
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A quantum-computing demonstration. ANGEL GARCIA/BLOOMBERG NEWS
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Quantum orders. President Trump accelerated his efforts to boost the burgeoning quantum-computing industry, signing a pair of executive orders aimed at speeding the development of advanced quantum computers and mitigating the security threats they present.
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One of the orders the president signed Monday directs federal agencies to work with the private sector and academics to deploy a quantum computer powerful enough to conduct scientific research by 2028.
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Trump signed a second executive order directing agencies and government security experts to prepare for quantum systems that can evade standard encryption more quickly than previously anticipated.
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16%
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The decline in SpaceX stock on Monday. The company closed Monday at $154.60—below where the stock ended its first day of trading.
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SpaceX Strikes $6 Billion Deal With AI Startup for Data-Center Space
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Reflection AI, a $25 billion-valuation startup building a network of open-source AI models, has agreed to rent data-center capacity from SpaceX, following similar agreements with Anthropic and Google. The deal will give SpaceX $150 million a month in revenue, starting July 1, through the end of 2029, according to a person familiar with the matter. If completed, the deal would be worth $6.3 billion. Either company may end the contract with 90 days’ notice after the first three months. Backed by Nvidia, Reflection is establishing itself as an
alternative to the growing number of sophisticated Chinese open-source artificial-intelligence models.
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SoftBank-Backed Robot Maker Gears Up for Hong Kong IPO
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Chinese robotics company Coowa is gearing up to go public in Hong Kong, people familiar with the matter said, joining the wave of robotics and tech companies raising capital in the city. The SoftBank Group-backed company’s valuation stood at more than $3 billion after it raised more than $600 million in its latest funding round, the people said. Shanghai-based Coowa plans to file the IPO application within the next two to three months, they added. Founded in 2015, Coowa develops embodied AI robots for urban environments.
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Correction: Thea Energy is based in Kearny, N.J. A New Money item in the May 29 newsletter incorrectly said it is based in Switzerland.
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WSJ Sports: The Next Sports Economy
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WSJ Sports: The Next Sports Economy will bring together investors, team owners, executives and advisers at Jazz at Lincoln Center’s Frederick P. Rose Hall in New York July 15-16 for conversations on the forces transforming the business of sports. Join leaders from across finance, media, ownership and operations as they sit down with WSJ reporters to explore the future of investment, governance and value creation across the global sports landscape.
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People
Inspired Capital promoted Annie Shapiro to partner. Prior to joining the firm, she was director of marketing at Namely.
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Groq, a San Jose, Calif.-based AI inference cloud company, fetched $650 million in new growth capital from investors including Disruptive. The company plans to move its headquarters to San Francisco soon.
Peregrine Technologies, a San Francisco-headquartered AI data integration platform, scored $250 million in Series D funding from investors including Sequoia Capital and XYZ Venture Capital at a $6.8 billion valuation.
Fomo, a New York-based trading platform that helps simplify access to on-chain markets, raised $75 million in Series B funding. Index Ventures led the round, which included participation from Union Square Ventures and Benchmark.
Isometric, an agentic certification provider for the industrial economy, snagged $40 million in Series A funding led by AVP. The company has offices in London and New York.
Probook, a New York-based AI operating system for home services businesses, landed $40 million in funding. This includes a $34 million Series A round led by Andreessen Horowitz, with additional support from Sequoia Capital.
Tsuga, a Paris-based enterprise observability startup, secured $35 million in Series A funding. Singular led the investment, which included contributions from General Catalyst, DST Global Partners and others.
Solius Labs, a Bainbridge Island, Wash.-based personalized UVB light therapy device developer, collected a $23 million Series A investment led by Lauder Partners.
Superlight, a commercial electric vehicle manufacturer, nabbed $21 million in Series A funding co-led by Engine Ventures and 2150. The company is based in the U.K. and Seattle.
Tenet Security, a Wilmington, Del.-based startup focused on securing autonomous AI agents, emerged from stealth with $6 million in seed funding from investors including The Westly Group and MizMaa Ventures.
TurboFlow, an on-chain trading startup, closed a $6 million seed round led by Pantera Capital.
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Chiwetel Ejiofor in a scene from A24’s hit movie ‘Backrooms.’ A24/AP
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