Axios Pro Rata: AI blues | Axios Pro Rata Summary

1. Key Themes

Theme 1: Political risk is entering AI investment math

Data center backlash now has electoral power

Democratic wins in states with heavy data center buildouts put physical capacity, and therefore AI growth projections, at risk.

"Democrats yesterday wrecked Republicans at the federal, state, and local levels. This includes governor offices in states with the most data centers under construction."

"In market leader Texas, Gina Hinojosa pledged to end data center-related tax breaks. Research firm SemiAnalysis suggests that her victory could lead to extended delays for up to 41% of data center capacity planned in the U.S. for 2028."

"In Georgia, Keisha Lance Bottoms campaigned on a statewide 'pause' for new data center construction. In Ohio, Amy Acton said she wants a conditional moratorium."

Valuations need to be re-underwritten, including for AI-adjacent sectors

The risk extends beyond pure-play AI companies.

"AI obviously isn't going away, but long-term projections of its unrestrained growth may be. Venture capitalists will need to account for this new environment, particularly when it comes to valuations."

"Not only for companies that are explicitly focused on AI, but also for AI-affiliated companies in areas like energy, health care, and defense tech — which may have its own problems, particularly if Pete Hegseth gets booted."

Markets are reacting, but with a gridlock offset

"The Nasdaq threw up on itself last night when it became likely that Hinojosa would win, but has since rebounded on the prospect of divided government gridlock."

Theme 2: Political donations carry a access cost for VCs

Partisan giving may limit VC influence with incoming officials

"A lot of top venture capitalists spent big money boosting Republicans this cycle, which means they'll struggle to get face time with incoming Democrats."

"If data center pushback is really a 'messaging' problem, as so many AI advocates believe, then there is an elevated risk that the VC message won't be heard."

Theme 3: The conglomerate and vertical-integration era is unwinding in health care

CVS splits into two public companies

"CVS Health today announced plans to split its health and pharmacy services businesses into two, independent public companies... This is the dismantling of a health empire that CVS has spent decades building, often through large acquisitions."

"CVS Health will be a health-care services company that includes insurance giant Aetna, value-based care group Oak Street Health, pharmacy benefit manager CVS Caremark, and at-home care group Signify Health."

"CVS Pharmacy will consist of the physical retail pharmacies, mail pharmacy, MinuteClinic urgent care, and health navigation and engagement platform Health100."

Regulatory outlook reinforces the trend

"The era of health-care vertical integration is in the rearview, with a Democrat-controlled Congress more than happy to put its foot on the gas."

"CVS rival Walgreens was broken up into five separate businesses by new owner Sycamore Partners, which then sold off the Boots pharmacy chain."

Theme 4: Capital keeps flowing to AI infrastructure and tooling

Large rounds for inference and AI observability

"Fal, an SF-based inference infrastructure startup, raised $1.3b at a $16b valuation. Bessemer Venture Partners led, joined by Nvidia, Sound Ventures, and T. Rowe Price."

"Traversal, an NYC-based observability and site reliability startup, raised $120m at a $1b valuation from Kleiner Perkins, Redpoint Ventures, Khosla Ventures, and Sequoia Capital."

Security for AI agents is getting acquired

"CrowdStrike agreed to acquire Fiddler AI, a Palo Alto, Calif.-based provider of software for monitoring AI agents, for $400m."

2. Contrarian Perspectives

The AI risk may be policy, not technology or demand. Most AI bull cases focus on compute, models, and adoption. Primack argues the binding constraint could be political permission to build physical infrastructure, and that investors are underpricing it.

"It's about how the investment math may have just changed for AI — which now dominates venture investments and returns."

His evidence is the SemiAnalysis estimate of 41% of planned 2028 capacity facing delays, plus explicit pause and moratorium pledges in Georgia and Ohio.

Don't wait out the politics. Primack avoids political despair and argues for continued investing while adjusting underwriting.

"The politics will change again, because they always do. But technology is moving too fast for investors to wait."

The "messaging problem" framing may be wrong or self-defeating. AI advocates treat data center opposition as a communications gap. Primack suggests that if it is one, the messengers have damaged their own credibility with the people they now need to persuade.

"A lot of top venture capitalists spent big money boosting Republicans this cycle, which means they'll struggle to get face time with incoming Democrats."

3. Companies Identified

CVS Health. Health care conglomerate. Splitting into two public companies by 1H 2028.

"The company said it expects the split to occur by the first half of 2028."

Walgreens / Sycamore Partners. Pharmacy chain broken up by its new owner, as a parallel case study.

"Walgreens was broken up into five separate businesses by new owner Sycamore Partners, which then sold off the Boots pharmacy chain."

Fal. Inference infrastructure startup raising at scale.

"raised $1.3b at a $16b valuation."

Traversal. Observability and SRE startup with a unicorn valuation and a top-tier investor syndicate.

"raised $120m at a $1b valuation from Kleiner Perkins, Redpoint Ventures, Khosla Ventures, and Sequoia Capital."

Revolut. British neobank with a $115b secondary valuation.

"completed a secondary deal led by Glade Brook Capital Partners at a $115b valuation."

CrowdStrike / Fiddler AI. Security leader buying AI agent monitoring.

"agreed to acquire Fiddler AI... for $400m. Fiddler had raised nearly $100m."

Sequoia Capital. Closing its London office.

"saying it plans to keep investing in Europe but no longer requires a 'local presence.'"

Phaze. Remote access to human and AI workers, a16z-led seed.

"raised $8.75m in seed funding, per Axios Pro. A16z led."

42AI. Behavioral AI models for financial institutions, Israel-based.

"raised $62.5m in seed funding from firms like Infinity Group."

EloElo. Indian microdrama app.

"raised $80m in Series C funding from Hornbill Capital and NBCUniversal."

Kraft Heinz coffee unit / One Rock Capital Partners. Carve-out of Maxwell House and Gevalia.

"agreed to buy a 70% stake in Kraft Heinz's coffee unit, including Maxwell House and Gevalia, at an enterprise value north of $650m."

Helen of Troy / Empower Brands and MTY Food Group / Foodtastic. Hostile bids after rejected offers.

"plans to launch a hostile takeover bid for Helen of Troy after two offers were rebuffed"; "made a hostile bid for Canadian restaurant franchisor MTY Food Group for around C$1b, after two prior offers were rejected"

The Andersons / Harvestone. Ethanol consolidation.

"agreed to sell Harvestone Low Carbon Partners, owner of three corn-based ethanol biorefineries, to The Andersons for $915m."

YMTC. Chinese chipmaker pausing its IPO.

"has put its Shanghai IPO on hold, per Reuters."

Ballistic Ventures, I Squared Capital, Yosemite. Fundraising signals.

"Ballistic Ventures... is seeking to raise $360m for its third flagship fund"; "I Squared Capital raised $3b for its second infrastructure credit fund"; "Yosemite, an oncology-focused VC firm led by Reed Jobs, raised $350m for its second fund."

4. People Identified

Gina Hinojosa. Texas gubernatorial winner. Her pledge directly affects the largest data center market.

"Gina Hinojosa pledged to end data center-related tax breaks."

Keisha Lance Bottoms. Georgia gubernatorial candidate.

"campaigned on a statewide 'pause' for new data center construction."

Amy Acton. Ohio gubernatorial candidate.

"Amy Acton said she wants a conditional moratorium."

Helena Foulkes. Former CVS Pharmacy president, elected Rhode Island governor.

"Helena Foulkes, former president of CVS Pharmacy, last night was elected governor of Rhode Island."

Pete Hegseth. Defense Secretary, whose potential ouster is flagged as a risk to defense tech.

"particularly if Pete Hegseth gets booted."

Luciana Lixandru, George Robson, Julien Bek. Sequoia London partners affected by the office closure.

"laying off its London staff — including partners Luciana Lixandru, George Robson, and Julien Bek"

Reed Jobs. Leads Yosemite, an oncology VC firm.

"Yosemite, an oncology-focused VC firm led by Reed Jobs, raised $350m for its second fund."

Greg Stewart. Joined Falfurrias Management Partners as a partner.

"joined Falfurrias Management Partners as a partner focused on tech and business services."

Axios BFD speakers (John C. Williams, Maria Sharapova, others). Event lineup.

"Newly added speakers include New York Fed president John C. Williams and tennis legend and entrepreneur Maria Sharapova."

5. Operating Insights

1. Stress-test AI business models for infrastructure delays. If your growth plan depends on data center capacity or power, model scenarios where build timelines slip.

"SemiAnalysis suggests that her victory could lead to extended delays for up to 41% of data center capacity planned in the U.S. for 2028."

2. Build relationships across the aisle. Companies and funds with heavy one-party political alignment should diversify their government relations before they need access.

"A lot of top venture capitalists spent big money boosting Republicans this cycle, which means they'll struggle to get face time with incoming Democrats."

3. Regulatory shifts can reward structural simplification. If you run a vertically integrated or acquisitive business, evaluate whether separation creates value ahead of a more hostile regulatory regime.

"The era of health-care vertical integration is in the rearview."

6. Overlooked Insights

Sequoia's London exit signals a shift in how top VCs think about geography. The firm will keep investing in Europe without a local team, a model that other global firms may copy.

"saying it plans to keep investing in Europe but no longer requires a 'local presence.'"

Carve-out and hostile-bid activity is heating up in consumer and branded goods. Multiple rejected-then-hostile approaches, plus a Kraft Heinz coffee carve-out, suggest rising appetite for portfolio pruning and forced deals.

"after two offers were rebuffed" / "after two prior offers were rejected"