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  • AI and Semiconductors, Semiconductors and AI...Oh The Fun Venture Capitalists Are Having

AI and Semiconductors, Semiconductors and AI...Oh The Fun Venture Capitalists Are Having

And busting up the staggering 'coordination tax' of non AI first companies

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Good morning everyone…

Check out the discount offer above for portfolio company DSTNC.com for you or your cycling friends. My gift for you ‘in real lifers’.

I plan on spending the afternoon on the couch watching The Masters. My lucky partner Tom spent the first two days at the Masters with Ethan the founder of portfolio company Parfour.com as a guest of some partners and customers. I eagerly await my hat!

Let’s begin…

It has never been a better time to be a large venture capitalist with Capital to deploy (that 2 percent is wonderful). In the first quarter of 2026, a record $300 billion was invested by Venture Capitalists ($6 billion in fees)…

A staggering 65 percent of it ($188 billion) went to just four companies, Anthropic, Open AI, Waymo and xAI.

This chart above is why Silicon Valley is all in on Trump no matter what he does (no excuse of course). The chart is also what AOC, Bernie and Lizzy McWarren fantasize about stopping.

Outside of AI, but related, data centers and semiconductors have captured all the markets attention. If you are a public market investor you have nothing to complain about because these stocks have been in plain sight to those following the all-time high lists like I do here.

Whether and when these data centers get built are questions being debated all day. What is not in question is the staggering growth and demand in the semiconductor industry…

Marc Andreessen famously said ‘software is eating the world’, but now AI and Hardware is eating software and Marc has smartly coined the broader ‘it’s time to build’ slogan…

We have entered the ‘Downton Abbey’ blame it on AI era of history. I know this because I went viral with a very niche ‘joke’ tying the demise of Campbell’s Soup to AI…

In the physical world outside of defense, chemicals and industrials, market capitalizations are plummeting. It is not just soup! Nike is now just a $60 billion company, down from $250 billion a few years ago.

Can Nike, the rest of the physical world and the beaten down software companies work their way out of this death spiral of lower valuations and brain drain that comes with that to survive in an AI world?

Yes!

All incumbents are definitely in trouble because of the ‘coordination tax’. This post from Bucco does a good job of explaining the massive ‘coordination tax’ faced by non AI first businesses. The gist…

Peter Drucker, widely considered “the man who invented management”, said it succinctly in the 1950s:

It’s not that the people in other roles aren’t incredibly talented, or critical for the business to function. It’s just that they’re…costs.

The vast majority of these roles are what I would call a “coordination tax” the business needs to pay in order to bring their product to market.

Now, because of AI, many companies are asking themselves the obvious question:

Why are we still paying the coordination tax?

Finally…

It is tax week this week which for me means ‘extensions’ !!!

People say we have lost our prehistoric ways of hunting and gathering, but those people have never invested for a living. All I do is hunt and gather…K1’s!

What is a K1?

A Schedule K-1 is a tax form for investors in partnerships, S-corps, or beneficiaries of estates/trusts. Instead of the business paying taxes, it "passes through" income, losses, and credits to you. You use the K-1 to report your share of this activity on your personal Form 1040, even if you received no cash.

As a firm at Social Leverage we are responsible for delivering them to our LP’s (luckily for everyone I do not handle this for us).

As an investor I must chase/hunt them down from all my own investing. If anyone has some good tricks for organizing this hunting and gathering, hit me up.

Have a great Masters Sunday.

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