Sequoia Partner, David Cahn on Who Wins in AI, Defence & The New $0–$100M Playbook

I do think we're in an AI bubble. You can see the fragility. Everybody can see the fragility. The thing that I think is more interesting is, who's gonna survive the bubble? Consumers of compute benefit from a bubble, because if we overproduce compute, prices go down, your COGS goes down, and your gross margin goes up. The lesson that punches you in the stomach in venture is you can't make a company succeed.

How would you respond to Sequoia were asleep at the wheel when it came to defense, not being in Helsing and Anduril, the two clear market leaders in the category?

I would say... (mouse clicks)

Ready to go?

(instrumental music)

David, I love your writing. Our episode last year was one of the most downloaded shows. I had, like, the CMO of Meta tell me that it is the single show that he has forwarded to more people and cites more often than any other. Not to make you, you know, nervous or set the pressure for this episode.

(laughs)

But thank you so much for joining me again, dude.

Thanks for having me, Harry. You're always very kind.

Now, the Year of the Data Center sounds wonderful. We had an amazing discussion last year. What did you predict last year, David, that happened and we are seeing in action now?

I think there's really... So we talked about, last year, this concept of steel servers and power. And I think if you remember, you know, rewind to summer 2024, the big conversation at that time was compute models and data. That's what everybody was talking about. And I sort of had this view that everyone was underestimating the physicality of these data centers. I'm on the front lines. I'm talking to people every day. And you, you know, you talk to people, they're flying electricians to Texas, and they're trying to buy out generator capacity, and, you know, generators are sold out until 2030, and, and so how do you get in line, and how do you do that? And so I sort of had this sense that people were thinking very abstractly, sort of in a, in a bits perspective about AI, but they should be thinking in an atoms perspective about AI. And I think that prediction came true in two ways. Uh, the first way is, the best trade of 2025 was the AI power trade. A lot of Wall Street people made a lot of money betting on the fact that power was gonna be the constraint and we were going to move away... You know, you hear Sam Altman now talking about gigawatts every day. He's not talking about dollars anymore, right? So we're moving away from dollars, and we're moving toward gigawatts, and I think that transition has s- fully happened in the last year. The second way I think it was right, and I saw... You know, it's funny now, like a year and a half later you see this on the cover of The Economist and the cover of The Wall Street Journal and the cover of The Atlantic. The mainstream media has now really picked up on this narrative of the physicality of AI is what translates to GDP. I mean, GDP is an imperfect metric, and it generally captures physical things more than virtual things. And so GDP now is picking up all of this construction boom that's happening, all this deal that's getting created, all of the physi- physical stuff that's happening in, in the AI data centers, and you're seeing these stories which I think are true, which is, AI is now one of the biggest contributors to GDP growth in the United States, and so I think that's the second way in which that prediction has played out.