The Trade War Chronicles ??????

Week of February 3rd, 2025

Welcome to AI8’s weekly newsletter, your ultimate source for curated insights and updates from the dynamic world of venture capital!

We’ve scoured the vast landscape of the web to bring you a comprehensive roundup of the industry’s top news articles, all in one convenient place. We keep you ahead of the game and in the know about all things related to the vibrant world of investments

?? STARTUPS

ROUNDS AND UNICORNS

The Week’s Biggest Funding Rounds: Helion Energy Takes Top Spot In Another Slow Week (Crunchbase, 5 minute read)

1. Helion Energy (Energy): raised $425M in Series F, bringing its valuation to $5.4B. The fusion energy startup, based in Everett, WA, has now raised over $1B and is commercializing fusion technology, with agreements to supply power to Microsoft and Nucor
2. ElevenLabs (Artificial Intelligence): a voice AI company, raised $180M at a $3.3B valuation. Founded in 2022, ElevenLabs offers AI software for voice replication in multiple languages. With this latest round, it has raised a total of $281M
3. Openly (Insurance): an insurtech company, secured $123M in equity financing, led by Eden Global Partners, and an additional $70M in debt. This brings the company’s total raised to nearly $431M since its founding in 2017, providing homeowners insurance through a platform for independent agents
4. Atalanta Therapeutics (Biotech): a biotech company focused on RNA interference for neurological diseases, raised $97M in Series B to support clinical trials for epilepsy and Huntington’s disease treatments. It has raised a total of $207M since its founding in 2018
5. Mercor (Human Resources): a recruiting startup, raised $75M at a $2B valuation, co-led by Felicis. Founded in 2023, the company has raised nearly $109M to date

INDUSTRY

Will DeepSeek Burst VC’s AI Bubble? (Crunchbase, 5 minute read)

The rise of DeepSeek, a Chinese AI company claiming to rival OpenAI with models developed for just $6 million, sent shockwaves through the tech sector, causing Nvidia's stock to drop over 15% and the Nasdaq Composite to plunge by about 3% during last Monday trading. This development has raised concerns about the U.S.'s position in the AI race, with VC firms closely monitoring the potential impact on their portfolios after investing over $100 billion globally in AI-related startups in 2024, including $42 billion in Q4 alone

• Investors like Thomvest's Umesh Padval see DeepSeek as a catalyst for AI adoption, but it threatens high-valuation foundational AI startups such as OpenAI, which recently raised $6.6 billion at a $157 billion valuation
• As DeepSeek's emergence coincides with the White House's new $100 billion to $500 billion AI Stargate Project involving OpenAI and Oracle, concerns over data privacy and U.S.-China competition signal a potential reshaping of the global AI landscape

Far Fewer Seed-Stage Startups Are Graduating To Series A — Raising The Risk Of Failure (Crunchbase, 4 minute read)

U.S. seed-stage funding has shown resilience during the venture funding downturn, driven partly by larger seed rounds and extended timelines for companies at this stage. Since 2023, companies have stayed longer at seed, raising multiple rounds, but many struggle to progress to Series A. Data shows only 36% of 2021 seed companies and just 20% of 2022 seed companies advanced beyond seed, a sharp decline compared to the 51% to 61% progression rates seen in previous years

• Seed rounds of $1 million or more have particularly seen diminished graduation rates
• Investors highlight a paradox: while the slower pace increases the risk of failures, it helps investors focus capital on winners and identify losses earlier
• This reset could benefit the ecosystem by reallocating talent from failed ventures to companies with better traction

Emerging GPs no longer closing more VC funds than experienced peers (Pitchbook, 3 minute read)

In 2023, emerging venture managers like Beta Boom GP Sergio Paluch faced significant setbacks, with fundraising efforts going from oversubscribed to nearly dead. For the first time in a decade, experienced managers closed more funds than emerging ones. Paluch attributes this to institutional LPs pulling out, while other emerging managers cite over-allocation of capital and falling valuations as key factors for the pullback

• Ballooning valuations, unsubstantiated by revenue growth, have raised skepticism among LPs, who are questioning the sustainability of their investments
• Additionally, emerging managers struggle to compete with larger funds, as LPs find it harder to justify investing in smaller funds with lower returns, even if those funds perform well
• Data reveals that in 2023, experienced managers closed 55% more funds than emerging managers, a significant shift in fundraising trends

?? ECONOMIC SNAPSHOT

Trump agrees to pause tariffs on Canada and Mexico after they pledge to boost border enforcement (AP, 5 minute read)

President Donald Trump agreed to a 30-day pause on his tariff threats against Mexico and Canada after both countries took steps to address his concerns over border security and drug trafficking. The move followed a tumultuous few days that nearly led to a trade war, threatening to reduce economic growth, raise prices, and disrupt two of the U.S.’s most important trade partnerships

• Canadian Prime Minister Justin Trudeau announced three key measures: naming a fentanyl czar, designating Mexican cartels as terrorist groups, and launching a Canada-U.S.
• Mexico was also granted a 30-day reprieve to negotiate solutions regarding drug smuggling and illegal immigration
• Meanwhile, a 10% tariff on Chinese imports is still scheduled to take effect Tuesday. Trump plans to speak with Chinese President Xi Jinping in the coming days

Trump’s tariffs are a $1.4 trillion gamble with the economy and prices (CNN, 5 minute read)

President Trump is set to impose sweeping tariffs on Mexico, Canada, and China, targeting $1.4 trillion worth of imported goods—over three times the $380 billion taxed during his first term. While Trump views tariffs as a key tool for addressing trade deficits, illegal immigration, and drug flow, economists warn of serious risks, including price hikes and job losses. Economists predict tariffs could reduce GDP growth by 1.5% in 2025 and 2.1% in 2026. The Federal Reserve might maintain high interest rates if inflation expectations rise, further tightening financial conditions

• The auto industry may face a $3,000 increase in vehicle prices, while tariffs on Canadian oil could raise gasoline costs in the Midwest and Great Lakes
• Grocery prices are at risk, with Mexico supplying the U.S.'s largest share of fruits and vegetables and Canada leading in grains, livestock, and meats
• This aggressive strategy, described as "playing with fire," could disrupt markets and cause stagflation—a combination of economic stagnation and rising prices

Here Are the Stock Market Winners and Losers from the DeepSeek AI Upheaval (Investopedia, 5 minute read)

This past week, AI stocks experienced turbulence as Chinese start-up DeepSeek introduced a high-performance, cost-efficient open-source AI model. Trained for just $6 million in a few months, the model raised concerns that AI development may no longer require the most advanced, expensive hardware, threatening the prevailing investment approach of U.S. tech companies.

• Nvidia (NVDA): Shares plunged 17% last Monday, the biggest drop since March 2020, wiping out nearly $590 billion of market value. The stock ended the week 16% lower as investors feared reduced demand for its high-end chips, though some analysts viewed DeepSeek as a potential catalyst for increased AI investments
• Meta Platforms (META): Shares rose 6.4% for the week, supported by investor confidence in open-source AI models similar to Meta’s Llama. Strong quarterly earnings also bolstered the stock, which climbed 2% during Monday’s AI sell-off
• ServiceNow (NOW): Initially gained 4% as investors saw promise in lower AI development costs. However, disappointing quarterly earnings led to an 11% drop midweek, ending the week 1% lower

US economy continues to grow at robust pace as Trump vows to reduce prices (The Guardian, 3 minute read)

The U.S. economy grew by 2.3% in Q4 2024, down from 3.1% in Q3 and below economists' expectations of 2.6%. Despite this slowdown, annual GDP growth for 2024 reached 2.8%, slightly lower than the 2.9% recorded in 2023, showcasing continued resilience despite high inflation and rising interest rates. During his successful 2024 campaign, Donald Trump criticized the Biden administration's handling of the economy, making it a key election issue

• Now back in office, Trump has pledged to reduce prices and revitalize manufacturing, though his tariff-focused economic plans have raised concerns about potential inflation risks
• The Federal Reserve, maintaining interest rates, described the economy as expanding "at a solid pace" with stable unemployment and "somewhat elevated" inflation
• Consumer spending, which surged by 4.2% in Q4, drove much of the economic growth, compensating for declines in investment and inventory contributions
• Economists noted this spike was likely due to consumers making purchases early in anticipation of tariffs proposed by the Trump administration

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Fed holds interest rates steady amid uncertainty over Trump’s impact on economy (The Guardian, 3 minute read)

On January 29, 2025, the Federal Reserve decided to keep interest rates steady, with the benchmark rate remaining in the range of 4.25% to 4.5%. This decision comes amid continued uncertainty regarding the impact of President Donald Trump’s policies on the U.S. economy and persistent inflation above the Fed's target level. The Fed has been cutting rates since the fall, but this marks the first time since September that no further cuts were made

• Fed chair Jerome Powell declined to comment on Trump's public calls for lower rates, emphasizing that the central bank would continue focusing on its goals without political interference
• While inflation has decreased since its peak in 2022, it remains above the 2% target, with December's rate at 2.9%. The job market has shown strong growth, with more than 250,000 jobs added recently
• The start of Trump's second term has created uncertainty, particularly with his tariff plans creating tension between the White House and the Federal Reserve

???? IMPACT & CLIMATE RESILIENCE

DEI-Focused Startups Are Not Funding Favorites (Crunchbase, 4 minute read)

Startups focused on workplace diversity, equity, and inclusion (DEI) have struggled to secure follow-on funding recently, coinciding with political and cultural shifts. Newly inaugurated President Donald Trump issued an executive order ending federal DEI programs, placing affected employees on paid leave with potential terminations pending. The private sector’s response remains unclear, though major companies like Google still maintain diversity roles and mission statements

• Between 2020 and early 2023, DEI initiatives were popular, and startups in this space secured significant funding. Examples include Untapped, which raised $50 million in 2021 at a $400 million valuation
• Currently, DEI-focused messaging has faded. Few startups have raised new capital since 2021 or 2022, and many now downplay diversity capabilities in public statements
• The decline in DEI funding is part of a broader trend. U.S. employment and recruiting startups raised $988 million in 2024, down from $1.73 billion in 2023 and a peak of $7.5 billion in 2021

?? IPO & EXITS

Ranked: The Biggest Corporate Dealmakers by M&A Activity (Visualcapitalist, 3 minute read)

From 2008 to 2020, Accenture led global M&A activity with an average of 9.1 deals per year, far outpacing other companies. This includes acquisitions spanning across cybersecurity, digital services, advertising, and industry-specific consulting, such as Symantec's cybersecurity business, Droga5, Procurian, Acquity Group, and Orbium. Tech giants like Microsoft, IBM, and Apple also dominated the list of top companies by M&A activity

• Microsoft, with an average of 6.7 deals per year, made high-profile acquisitions including LinkedIn ($26.2B, 2016), Skype ($8.5B, 2011), and GitHub ($7.5B, 2018)
• Other notable companies on the list include Cisco Systems (4.8 deals/year), Assa Abloy (5.1 deals/year), Meta (3.9 deals/year), and Salesforce (3.1 deals/year), with these companies also heavily investing in M&A as part of their strategies to grow and diversify their businesses

??? AI8 VENTURES HIGHLIGHT

Trumponomics 2.0

Following President-elect Donald J. Trump’s victory over Kamala Harris, the financial world witnessed an immediate response. In just one week, the S&P 500’s value surged by $1.9 trillion, pushing stocks to record highs. The U.S. dollar strengthened globally and Bitcoin achieved unprecedented highs.

Wall Street is preparing for more government spending, lighter regulation, bigger deficits, and accelerating growth under a Trump administration and a Republican-led Congress.

Biden’s Economic Legacy

The Biden era was marked by headlines of massive layoffs and a cost of living crisis. The average worker faced double-digit increases in food, energy, housing, and other essential expenses that impacted middle-class families the most and consumed the bulk of household budgets. Despite record highs in the stock market, nearly half of Americans believed the nation was in a recession. Is this Biden’s fault? No. Global supply chain disruptions, stimulus checks, the aftermath of COVID-19 lockdowns, and the ripple effects of geopolitical tensions all contributed to soaring prices. Did Americans blame Biden? Election results suggest they did. Two-thirds of voters believed the economy was on the wrong track.

Hence, Trumponomics 2.0.

Trump’s campaign capitalized on promises of economic revival, pledging to deliver low taxes, low regulations, low energy costs, low interest rates, and low inflation -Trumponomics.

Alpha Insights on Trump and AI in Mexico City

What an incredible experience at the NAA International Symposium and Startup Pitching Last week, we hosted our first?Alpha Insights?event in Mexico City, where we brought together industry experts, investors, and entrepreneurs to discuss the evolving landscape under the new U.S. administration. We dove into how the election of Donald Trump, "Trumponomics," and the transformative role of AI are shaping the future of investments, regulations, markets, taxes, and cross-border opportunities.

Missed the event? We’ve curated the key insights in our Alpha Insights Special Edition: Trumponomics Report. Understand everything VC-related that happened in 2024 and how profit will shift under Trump 2.0

(Trumponomics 2.0 Special Edition starts on page 22)

Read Full Report

Alpha Impact 8 Ventures is thrilled to share our latest insights into the dynamic world of investments with our 2024 Venture Capital Report.

Last year, Michael Burry, the legendary fund manager who famously profited from shorting the US housing market in 2008, bet more than $1.6 billion on a Wall Street crash by shorting the S&P 500 and Nasdaq-100. Nothing happened.

This year, Warren Buffett’s cash reserves reached a record $276.9 billion as Berkshire Hathaway trimmed its stock holdings in Apple. Some view it as a routine adjustment, while others speculate that Buffett perceives an overheated, overvalued market.

Everyone talks about a soft landing, but warning signs are flashing and the world seems to be teetering on a delicate balance. Is there something we’re missing? Is there an unseen factor at play?

Read Full Report

If you have any comments or feedback, just shoot an email @[email protected]!

Happy reading,

AI8 Ventures’ Research & Investment Team