The Blue Tsunami Is a… | Newcomer Newsletter Summary

1. Key Themes

Theme: Political backlash is turning data centers from a capex story into a regulatory and timeline risk

Ballot box rejection of data centers

Voters rejected data center measures almost everywhere they had a say, which suggests the opposition is broad rather than a fringe phenomenon.

"Of the 41 data center measures on state and local ballots, voters sided against data centers in all but one."

Project delays and rising costs

Delays are already visible in specific projects, and a third-party report puts a number on the slowdown. The newsletter reads this as a repricing event for AI infrastructure.

"A fresh report from GlobalData says that the average data center project is now taking 33% longer to complete due to public opposition and structural issues like grid connection delays."

"it now seems obvious that large data centers, at least those on planet Earth, will be more costly than planned — maybe a lot more costly — as political opposition slows or blocks projects and interest rates remain elevated. Tech stocks were rebounding somewhat on Friday but we expect more pain in the markets as this recalculation plays through."

Market reaction was volatile and contradictory

Markets first rallied, partly on the theory that slower buildouts would restrain hyperscaler capex, then sold off hard in AI infrastructure and chips.

"One explanation, amusingly, was that Democrats would save tech companies from themselves by slowing data center development and thus limiting the scary capex budgets of the hyperscalers."

"by Thursday, the uptick had quickly reversed and AI infrastructure and chip stocks especially were tanking and taking much of the market with them."

Theme: AI's social license is the binding constraint, not just a messaging problem

AI hasn't shown broad public benefit

The author argues resistance will persist until AI demonstrates gains for ordinary people rather than a narrow set of beneficiaries.

"AI companies are going to have to wrestle with the fact that they haven't shown that their wares will bring broad benefits to the masses — as opposed to, say, engineering managers, or venture capitalists. Until they do, political resistance to the AI agenda, on data centers and otherwise, will be the new normal. It's much more than a messaging problem."

Resentment of tech wealth and power fuels the revolt

The data center backlash is tied to anger at tech elites, which prominent figures worsened by dismissing public concerns.

"The data center revolt is clearly linked to popular resentment of tech power and wealth, and executives and investors led by Elon Musk, Marc Andreessen, and Mark Zuckerberg have simply fanned the flames by adopting the Trumpian view that the concerns of the people are much ado about nothing."

Google's classroom episode as a case study in overreach

Google's attempt to bundle AI with search in schools drew bipartisan-style condemnation and a quick retreat.

"Google announced on Tuesday that it would allow schools to turn off its AI tools in its educational software... However, as part of the change, any school that switches AI settings off will no longer be able to access Google Search."

"The company retreated a bit from its hard stance after the backlash and said in a statement later Tuesday that schools would be able to turn individual features on or off, including search, rather than a blanket removal."

Theme: Concentrated political bets by tech leaders backfired, reshaping regulatory risk

Musk's political spending and Texas exposure

Musk spent heavily on a losing effort and now faces a harder environment in his home state, where his chip factory benefited from state incentives.

"After spending more than $400 million, with around half of it in Texas, on a failed effort to elect Republicans, Elon Musk is now facing down a much more hostile regulatory environment in his home state."

"Sarah Eckhardt, the state's newly elected comptroller, will now review applications for statewide economic development initiatives like the Jobs, Energy, Technology and Innovation Act (JETI) that helped Musk gain approval for his Terafab chip factory."

Market impact on Musk companies

"Tesla and SpaceX shares were down 11% and 9% Thursday after each dropping roughly 3% on Wednesday."

A Democratic Congress will be unreceptive

The author calls the bet "foolish" and says it left the industry exposed to a Congress unlikely to be sympathetic.

"it was a foolish gamble that backfired spectacularly, helping turn the country against AI and ushering in a Democratic-led Congress that's going to be in no mood to hear about the industry's needs."

Theme: Capital is flowing to AI infrastructure and hardtech, with enterprise demand and open-source adoption rising

Large rounds in inference, drones, space, and custom models

"AI infrastructure and hardtech startups took most of this week's biggest checks."

"Inference startup Fal raised $1.65 billion across its Series E and F rounds."

"Drone delivery startup Zipline raised $1.5 billion in new funding led by Paradigm, WCM Investment Management, and Layer Global."

Enterprise appetite for AI and open-source models

"Businesses can't get enough of AI tools, data from Menlo Ventures' State of Enterprise AI report reveals."

Investors are skeptical about frontier lab valuations

"he will first have to face some investor skepticism that Anthropic can achieve a $1.5 trillion valuation in its IPO."

Theme: Software defensibility is eroding as AI agents can clone products

Agents can reverse-engineer SaaS

Work that once took months of expert effort can now be done by persistent agents, raising pricing pressure on software vendors.

"agents reverse-engineering their software from scratch... This process previously took months of expert work but can now be achieved by a group of persistent agents."

"developers are wondering how SaaS firms will compete on price if feature sets can be easily produced and updated in-house."

Small companies are most exposed

"Reverse engineering could be an even bigger problem for small tech companies with less ability to protect their IP."

2. Contrarian Perspectives

The "blue wave" is good for tech, even though markets sold off

The author argues Trump-aligned policies hurt the tech industry and that a rule-of-law, pro-trade, liberal-immigration environment is better for it than the lower taxes and lighter regulation the industry usually prizes.

"We get that lower taxes and less regulation are usually good for Silicon Valley (if not always the country). What's even better? Rule-of-law government, good relations with trading partners, more liberal immigration policies, basic decency in public life and business affairs, and an honest and thoughtful approach to inevitable AI regulation."

Backing Trump was a business mistake, not just a moral one

Most of the industry treated aligning with Trump as pragmatic. The author calls it strategically foolish.

"Even leaving morality aside, it was a foolish gamble that backfired spectacularly, helping turn the country against AI and ushering in a Democratic-led Congress that's going to be in no mood to hear about the industry's needs."

Anthropic may be better positioned than peers for a Democratic Congress

Despite his past ties to rationalist and transhumanist circles, Amodei's reported liberal leanings and earlier objection to Peter Thiel's money could become an advantage.

"if Amodei's beliefs remain as liberal as reported, he seems well-placed to take advantage of a resurgent Democratic Congress, particularly as the rest of Big Tech has unwisely chosen to back a lame-duck president."

The durable value of AI may accrue to distributors, not frontier labs

The Manidis and Roberts essay argues intelligence will commoditize and bottlenecks like chips and power will prove temporary, so distribution to the real economy captures the gains.

"intelligence will become cheap, abundant, and commoditized, so frontier labs won't keep the wealth. It also argues that bottlenecks such as chips and power consumption are temporary, and that durable gains will go to whoever controls distribution of machine intelligence to the real economy."

"diffusion is the real story of AI, and that the companies that power that diffusion will become the overwhelming chunk of the economy over the next decade."

3. Companies Identified

Tesla / SpaceX

Description: Musk-led electric vehicle and space companies.
Why mentioned: Shares fell sharply after the election, reflecting Musk's Texas political exposure.
Quote: "Tesla and SpaceX shares were down 11% and 9% Thursday after each dropping roughly 3% on Wednesday."

Terafab (Musk chip factory)

Description: Musk's chip factory project in Texas.
Why mentioned: Its approval depended on state incentives now under a more skeptical comptroller.
Quote: "the Jobs, Energy, Technology and Innovation Act (JETI) that helped Musk gain approval for his Terafab chip factory."

Microsoft, IREN, Nebius, DataOne

Description: Hyperscaler and data center builders/partners.
Why mentioned: Data center projects face construction lags and permitting delays.
Quote: "Satellite images of construction sites show a Microsoft data center project supported by IREN lacking power generators and cooling equipment. Another project for Microsoft led by Nebius and DataOne in New Jersey is facing major delays from permitting issues."

GlobalData

Description: Research firm.
Why mentioned: Quantified the data center delay problem.
Quote: "the average data center project is now taking 33% longer to complete due to public opposition and structural issues like grid connection delays."

Google

Description: Search and AI giant with a large education software footprint.
Why mentioned: Case study in AI backlash and perceived monopoly leverage in classrooms.
Quote: "Lina Khan said the company was 'using its search monopoly to coerce schools' into adopting this technology."

Anthropic

Description: Frontier AI lab behind Claude.
Why mentioned: Positioned for a Democratic Congress, faces IPO valuation skepticism, and tightened controls on cloning.
Quote: "Anthropic has since cracked down on using Claude Code to clone video games by updating Opus 5.5's prompt, but it's unclear how much overall reverse engineering this new restriction will catch."

Founders Fund

Description: Venture firm co-founded by Peter Thiel.
Why mentioned: Co-led Anthropic's Series G, an irony given Amodei's earlier objection to Thiel's money.
Quote: "given that Founders Fund later co-led Anthropic's Series G."

Menlo Ventures

Description: VC firm that publishes the State of Enterprise AI report.
Why mentioned: Its data shows strong enterprise AI demand and open-source adoption.
Quote: "Businesses can't get enough of AI tools, data from Menlo Ventures' State of Enterprise AI report reveals."

Fal

Description: Inference startup.
Why mentioned: Raised a very large round.
Quote: "Fal raised $1.65 billion across its Series E and F rounds. The Series E was led by Sequoia and the Series F was led by Bessemer Venture Partners."

Zipline

Description: Drone delivery startup.
Why mentioned: Raised $1.5B with a broad investor base.
Quote: "raised $1.5 billion in new funding led by Paradigm, WCM Investment Management, and Layer Global."

Northwood Space

Description: Satellite antenna builder and ground station provider.
Why mentioned: Raised a $375M Series C.
Quote: "raised $375 million in Series C funding co-led by a16z and DFJ Growth."

Applied Compute

Description: Builds custom open-source AI models for businesses.
Why mentioned: Raised $350M, aligned with the open-source enterprise trend.
Quote: "raised $350 million in a new funding round led by Elad Gil."

Traversal

Description: Uses AI to review and troubleshoot software issues.
Why mentioned: Raised a $120M Series B.
Quote: "raised $120 million in Series B funding co-led by Kleiner Perkins, Redpoint Ventures, Khosla Ventures, and Sequoia Capital."

Valor Equity Partners

Description: Growth fund run by Antonio Gracias, a major Musk backer.
Why mentioned: Raising a large new fund.
Quote: "has raised nearly $3.3 billion so far for a new fund, per securities filings."

Reverse Engineer Anything (REA)

Description: GitHub project that decompiles and reconstitutes software.
Why mentioned: Illustrates the threat to SaaS defensibility.
Quote: "lets users break software down into binary code and reconstitute it for free personal use."

4. People Identified

Elon Musk

Description: CEO of Tesla and SpaceX.
Why mentioned: Big political spender facing Texas fallout.
Quote: "After spending more than $400 million, with around half of it in Texas, on a failed effort to elect Republicans, Elon Musk is now facing down a much more hostile regulatory environment in his home state."

Gina Hinojosa

Description: Texas governor-elect.
Why mentioned: Campaigned against data centers and Musk.
Quote: "governor-elect Gina Hinojosa make data center opposition, and Musk, a central component of her campaign."

Sarah Eckhardt

Description: Newly elected Texas comptroller.
Why mentioned: Will scrutinize economic development subsidies.
Quote: "She campaigned on running the office as a watchdog that would be highly critical of big-business subsidies."

Marc Andreessen and Mark Zuckerberg

Description: Prominent tech investor and Meta CEO.
Why mentioned: Criticized for dismissing public concerns.
Quote: "executives and investors led by Elon Musk, Marc Andreessen, and Mark Zuckerberg have simply fanned the flames."

Reid Hoffman

Description: Venture capitalist and outspoken Democrat.
Why mentioned: Staked out ideas on technology and society in a blog post.
Quote: "Reid Hoffman, among the few top VCs who have remained an outspoken Democrat, staked out some ideas in that regard in a blog post Thursday."

Dylan Patel

Description: SemiAnalysis.
Why mentioned: Reacted to the Texas result, "worried about Gina Hinojosa's victory."
Quote: "I am now bullish space datacenters."

Patrick Collison

Description: Stripe CEO.
Why mentioned: Offered a positive view of American democracy.
Quote: "democracy has on the whole worked very well in America over the last decade, and perhaps better than in any other major country in the West."

Keith Rabois, Chamath Palihapitiya

Description: Investors and commentators.
Why mentioned: Election-night reactions, Rabois after predicting a Republican sweep.
Quote: "Another reason to move to Miami." (Rabois)

Dario Amodei

Description: Anthropic CEO.
Why mentioned: NYT profile on his ideological influences and political positioning.
Quote: "as a doctoral student in the mid-2000s, Amodei was known as an enthusiastic proponent of transhumanist inventor Ray Kurzweil... and rationalist writer and AI researcher Eliezer Yudkowsky."

Peter Thiel

Description: Investor, Founders Fund co-founder.
Why mentioned: Amodei once argued OpenAI should stop accepting his money.
Quote: "Amodei arguing while working at OpenAI that the firm should no longer accept money from Peter Thiel due to his donations to Donald Trump's 2016 campaign."

Lina Khan

Description: Former FTC chair.
Why mentioned: Criticized Google's school policy.
Quote: "using its search monopoly to coerce schools."

Chris Phillips

Description: Google VP for education.
Why mentioned: Defended bundling AI and search.
Quote: "search and AI were 'deeply integrated.'"

Zohran Mamdani, Bernie Sanders, Richard Blumenthal

Description: NYC mayor and U.S. senators.
Why mentioned: Condemned Google's school change.
Quote: "swiftly condemned the changes."

Will Manidis and Joe Roberts

Description: Authors of The Commanding Heights.
Why mentioned: Put forth a thesis that distribution captures AI value.
Quote: "diffusion is the real story of AI, and that the companies that power that diffusion will become the overwhelming chunk of the economy over the next decade." (Manidis)

Leopold Aschenbrenner

Description: Author of Situational Awareness.
Why mentioned: His manifesto is the intellectual predecessor of the Manidis/Roberts essay.
Quote: "the thrust of the piece continues on from Leopold Aschenbrenner's infamous manifesto."

Peter Hall

Description: Scientific American author.
Why mentioned: Reported on REA and Anthropic's response.
Quote: "Peter Hall, the article's author, told Newcomer that Anthropic has since cracked down on using Claude Code to clone video games."

Antonio Gracias

Description: Head of Valor Equity Partners.
Why mentioned: Major Musk backer raising a large fund.
Quote: "the growth fund run by major Elon Musk backer Antonio Gracias — is raising a big new fund."

Elad Gil

Description: Investor.
Why mentioned: Led Applied Compute's round.
Quote: "raised $350 million in a new funding round led by Elad Gil."

5. Operating Insights

Price in permitting and political risk for physical infrastructure

Anyone building or depending on data centers should assume longer timelines and higher costs, and plan for local opposition rather than treating approval as routine.

"the average data center project is now taking 33% longer to complete due to public opposition and structural issues like grid connection delays."

Don't bundle products in ways that look coercive

Google's all-or-nothing bundling of AI and search provoked a backlash within hours and a partial reversal. Granular, opt-in controls are safer.

"schools would be able to turn individual features on or off, including search, rather than a blanket removal."

Protect SaaS moats against agentic cloning

Small software companies should assume features can be replicated quickly and shift defensibility toward distribution, data, and integration rather than feature sets alone.

"I just... have their award winning algorithms now."

6. Overlooked Insights

State subsidies and economic development vehicles are now a political vulnerability

Beyond the headline data center fight, a single elected comptroller can alter the approval pipeline for incentive programs that underpin major industrial projects.

"will now review applications for statewide economic development initiatives like the Jobs, Energy, Technology and Innovation Act (JETI) that helped Musk gain approval for his Terafab chip factory."

Space data centers are emerging as a semi-serious hedge against terrestrial opposition

Both Musk and a prominent semiconductor analyst joked or declared interest in orbital compute after the election, which hints at a possible narrative shift as earthbound projects stall.

"Data centers in space looking pretty appealing right now" (Musk) and "I am now bullish space datacenters" (Patel).