The recent Inflection AI fundraising news confirmed a hypothesis I had a while: for modern AI startups, the “data center is the new VC firm”. Why just rent out your silicon when you can have a nice slice of the equity? E.g., @natfriedman & @danielgross started a data center for funding startups. Perhaps the next generation of “founder-friendly” investors are those who can unlock massive compute infrastructure for their portfolios.
Taking this all the way down, TSMC should start a venture fund that controls how much silicon NVIDIA and other accelerator makers get which controls how many GPUs the data center provider, like Microsoft, gets. The higher up you go in the chain, the less moat you have, as it is relatively easier to start competition at the higher ends of the chain. So it would be a no-brainer for chip makers to get in the game. Some folks have already likened companies producing LLM and other large models to “foundries”. It makes sense for the actual foundries to capture value downstream.
As VC funds concentrate computing resources and funds begin to merge, we will end up in a winner-take-all situation. When that happens, it can become increasingly difficult to execute certain startups independently, not simply because of the compute demands but because a firm can turn down access to compute for your project because it conflicts with their current portfolio goals. This can lead to the American startup ecosystem becoming less competitive (more monopolistic) and can have direct effects on consumers.
I am mostly fiscally conservative, but in this case, I would advocate government oversight of access to private computing resources for small businesses to prevent stagnation that monopolies bring and foster competition. Regulation is one way to do that, but the government can also directly participate by investing and building national compute infrastructure for small businesses and taking equity from startups.
Typically government orgs are not great at executing infrastructure projects, but the US gov labs have proven capability in building and maintaining large-scale compute infrastructure. Doing this is not only critical for fostering future small businesses but also of paramount importance for sovereignty and national security. Another strong case for government involvement is the race for access to chip technology is already driven by strong geopolitical currents. It would sense the US government has a say and leverage its influence on an international stage.