Welcome back to Upside, where Dan Bowyer, Mads Jensen of SuperSeed and Lomax Ward of Outsized Ventures go behind the headlines shaping European venture, geopolitics and technology.
This week felt like multiple systems colliding at once.
A war threatens one of the most important energy choke points in the world. AI companies are discovering that governments may have the final say over frontier models. Hyperscalers are spending hundreds of billions on infrastructure while investors quietly whisper the word bubble.
And in Europe, Germany’s chancellor just said the quiet part out loud:
We’re not productive enough.
What’s Covered
03:00 The Strait of Hormuz: the energy choke point behind the headlines
10:30 Warfare innovation: drones and the “fast fashion” defence model
18:00 Anthropic vs the Pentagon: who controls frontier AI?
27:30 AI layoffs: productivity shift or pandemic hangover?
34:30 The $650B AI infrastructure boom
44:00 Friedrich Merz and Europe’s productivity reality check
52:30 Europe’s fusion moonshot
Energy, War and the Venture Ripple Effect
The Strait of Hormuz rarely makes startup pitch decks. But it probably should.
Roughly one fifth of global oil supply moves through that narrow passage, alongside fertilisers, aluminium and other critical commodities. Any disruption feeds directly into energy prices, inflation and capital markets.
And capital markets are the oxygen of venture.
Higher energy costs → higher inflation → tighter monetary policy → less liquidity in private markets.
The uncomfortable truth is that Europe depends heavily on regions where it has almost no geopolitical leverage.
And crises like this make that painfully visible.
Defence Is Starting to Look Like a Startup Industry
Modern warfare is changing faster than defence procurement systems.
Cheap attack drones costing tens of thousands are being countered by interceptor drones costing roughly the same — instead of the multi-million-dollar missiles designed for a different era.
Ukraine has become the world’s most intense real-time R&D lab for this shift. Rapid iteration. Short supply chains. Software-defined warfare.
It’s a defence model that looks far closer to startup speed than legacy military procurement.
And that opens the door for venture-backed companies in ways that simply didn’t exist a decade ago.
Anthropic vs the Pentagon
One of the biggest AI stories this week wasn’t a model launch. It was a refusal.
Anthropic declined to allow its models to be used for certain military applications. The response from Washington was immediate: threats to designate the company as a national security supply-chain risk.
That label has historically been used against foreign firms. Not American ones.
The confrontation surfaces a deeper question that hasn’t fully landed yet:
If frontier AI really becomes as powerful as its creators claim, will governments allow private companies to control it?
History suggests the answer is probably no.
AI Layoffs and the Narrative of Productivity
Block’s announcement of massive job cuts was framed as an AI productivity revolution. Maybe.
But the simpler explanation is that many tech companies hired aggressively during the pandemic and are now correcting.
Across the industry, layoffs attributed to AI often look suspiciously like post-Covid normalisation.
The productivity shift may be real. But the narrative arrived before the data.
The $650 Billion AI Infrastructure Bet
While venture investors debate bubbles, the hyperscalers are behaving as if the opposite is true.
Collectively they are expected to spend roughly $650 billion on AI infrastructure this year alone.
Data centers. Custom silicon. Power infrastructure. This is one of the largest coordinated capital deployments the technology sector has ever seen.
At the same time, venture firms are quietly advising founders to extend runway and prepare for potential shocks.
It’s a strange moment where unprecedented investment meets macro uncertainty.
Friedrich Merz Says the Quiet Part Out Loud
Germany’s chancellor delivered an unusually blunt message this week:
Europe simply isn’t productive enough.
The statement lands at a moment when defence budgets are rising, geopolitical risks are multiplying, and economic growth across the continent remains stubbornly weak.
The issue isn’t a lack of ideas. Europe still produces world-class research and deep technical talent. The problem is execution: slow procurement, fragmented markets and political systems that struggle to move quickly.
In a world defined by technological competition, those constraints are becoming harder to ignore.
Europe’s Fusion Moonshot
Not everything this week was about crisis.
Proxima Fusion signed an agreement to build what could become Europe’s first commercial fusion power plant.
Fusion remains a long-horizon technology — meaningful grid power may still be decades away. But projects like this signal something important:
Europe still has the ability to pursue ambitious scientific and industrial bets.
And in a world increasingly shaped by energy and technology sovereignty, those bets matter.
Closing Reflection
This episode carries one underlying theme: The era of comfortable assumptions is ending.
Energy security can’t be taken for granted. AI governance is becoming geopolitical.
Industrial policy is back and productivity is once again a national priority.
Europe still has extraordinary ingredients but ingredients alone don’t win.
Execution speed does.
