Rebranding Data Centers | Dario's Stumble | Jensen's Crackdown | Upcoming F&O Events

Chris Lehane is back to rebrand data centers, Anthropic and OpenAI are hitting inflection points, how much China is too much, and upcoming Founders & Operators community events.

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Chris Lehane is doing it again. Silicon Valley’s policy fixer-in-chief who has helped companies like Uber, Airbnb and Coinbase navigate controversy, is back at it.

His latest challenge may be the boldest one yet: Managing and navigating the data center backlash. Just in time for the midterms, OpenAI is publicizing a new approach to its data center and energy policy. And crucially, there’s a growing realization that the term has become somewhat toxic from a political perspective, so they’re proposing a new term: compute campus. Which, in turn, is already facing backlash.

In our experience navigating controversy and political communications - DM or chat with Stephan in person for details - the ship has sailed. It is late in the timeline to try and turn around the public perception of data centers, and it will take more than one actor and a marketing campaign to achieve this. Plus a reframe or renaming works best when there’s enough substance, and you have enough momentum, credibility and messaging power to pull it off.

But if there’s someone who knows how to do this, and has done it before, it’s Chris. Let’s see if the new term ‘compute campus’ will prevail.

Imagine you ran the New York City Marathon this past weekend, you’re doing well, and then at kilometer 41 just before the finish line, you stumble.

That’s not quite what happened to Anthropic yet, but we’re close. Yesterday’s Q3 numbers that were strategically pushed to land when they landed are… still very solid, but the growth momentum is stalling, and the Q2 to Q3 story is way less compelling than the Q1 to Q2 story. Revenue grew 47% quarter over quarter, down from 144% in Q2. And this wasn’t just a bigger-base effect: Anthropic added $5.4 billion in quarterly revenue, compared with $6.8 billion the quarter before. Still exceptional growth, but a considerably less compelling acceleration story heading into the IPO.

The window for the Anthropic IPO is narrow - slotting it in before Thanksgiving, or in the (realistically) two weeks between Thanksgiving and the holidays will be tight and does not leave much room for error. So keep an eye on this one. As we argued last week, it feels like we’re at an inflection point for the AI story, and the AI trade. Much of the macro and vibes is riding on the Anthropic IPO, so the stakes are higher than ever.

This is underlined by the reported struggles of OpenAI to raise its latest funding extension, and undershooting its initial funding goals. This is not a code red, but it’s more than a fire drill, and our F&O risk indicator is firmly in the yellow-orange zone as of this week.

From a policy perspective, the US doesn’t want China to have access to cutting-edge AI or chips. But there’s a lot of demand and a lot of money to be made here, so guess what happens?

The real world is a bit murkier and more complex than the ideal policy world. Giving China access to latest generation Nvidia chips in the cloud or otherwise is a great business to be in, and it is thriving in Singapore and other countries in the region. So much so that Nvidia is now going out to rein it in, by pushing soft guidance that any vendor should only sell a maximum of 50% of their capacity to China. On the surface, that reads like a ‘win’ from a US policy perspective. But 50% is still a decent share, and means continued access.

One of the biggest unknowns of the AI trade is how much of it is actually riding on clandestine or open Chinese demand. The Financial Times deemed it worth a headline that TikTok effectively bootstrapped NScale in its early days, and its prominent role in the NScale story was not a publicly known fact before their reporting.

We like to claim US AI dominance but in spite of the political rhetoric much of the AI story, and the trajectory of marquee US companies, is still riding on Chinese demand. Actually cutting off that demand is not a policy option in the short run, would be hard to enforce, and it’s clear that private sector actors have limited incentive to forego the incremental revenue they can make here. We expect the brittle status quo to continue.

We welcome a large cohort of new San Francisco members. We’re excited to meet many of you on Thursday! You’re joining a vibrant community of 2,000+ founders, operators and investors that we launched in New York City back in April.

You’re welcome to request access to our WhatsApp community group chat where you can find each other and additional resources. The link is here. Please note that our approval policy prioritizes people we have met in person before.

If you’re interested in joining the team, shoot us a note at [email protected]. We promise that we’ll switch to a new domain in the coming days so there’s less of an NYC bias.

See you IRL on Thursday in SF or NYC,

Stephan, Jacqui & the F&O Team

PS: RegLayer is not raising, but Stephan is looking to connect with angels and early-stage venture funds in RegTech, GovTech and AI Infra. If this is you or someone you know, he’s at [email protected].