The Morning Download: Today’s Newsletter Is Brought to You By the Letter ‘M’

Good morning. A few years ago, the idea of a tech startup raising a Series M venture capital round would have been pretty crazy. Few, if any, companies got that far into the alphabet, opting for an IPO or M&A exit somewhere around the letter F or perhaps G.  Given the intensity of the current rotation out of many tech stocks, the idea isn’t so wild.

Why wait? Coatue Management is leading a $3 billion investment in Databricks, a data-analytics software provider, that values the company at $188 billion, the Wall Street Journal reports, citing people familiar with the matter.

The rare Series M round represents a 40% increase from its valuation in December, when Databricks raised money at a $134 billion valuation. It recently released a new software tool, called Unity AI Gateway, that allows companies to access AI models and track their spending on the technology, according to the Journal.

Looking out the window, I see two things: smoke rolling in from forest fires in Minnesota and Canada, and the shares of tech companies falling to earth. “The chip-stock selloff is accelerating,” the Journal reports today. “Nasdaq-100 futures are down more than 1% this morning, following a bruising session overseas that sent Taiwan and Japan’s benchmark indexes falling 6.5% and 4%, respectively.”

The appeal of remaining private and working with longer-term investors who are focused on market fundamentals rather than momentum trades is clear. Databricks is a large and well-established company with well-above $5 billion in annual revenue run rate. But it’s operating at a scale that venture capital can fund. Chip makers and AI infrastructure companies don’t have that option. They need to tap the public capital markets for equity and debt, given the enormity of their funding needs, and that comes with volatility and risk.

Tech leader takeaway. Investor unease over the capital spending and debt levels tied to AI is amplified by momentum trading in the market. Fundamentals still look strong, given the growth at companies such as TSMC and ASML. We’ll be looking closely at those fundamentals to see if they remain intact. So far, the answer is yes they do. But we want to hear from you.

Has your budgeting process changed at all with respect to technology, especially AI? Let us know.

• Chip stocks slipped again Thursday even after Taiwan Semiconductor Manufacturing posted another strong earnings quarter. The WSJ says investors focused more on TSMC's spending plans, which include an extra $100 billion commitment to U.S.-based plants. Those declines extended a selloff that has some investors rotating out of semiconductors. Sandisk was down 13%, Western Digital off more than 9% and Marvell Technology down 8.7%. The PHLX Semiconductor Index has tumbled 19% from its June high. The index includes Nvidia, Micron Technology, Broadcom and Applied Materials.

• Chinese leader Xi Jinping used a Shanghai AI conference to champion open-source AI development and criticize U.S. efforts to protect its lead through export controls and national-security restrictions, the WSJ reports. The speech coincided with Moonshot AI's release of open-weight model, Kimi K3, underscoring China's push to close the gap with the U.S. The company said Kimi K3 beat Anthropic’s Opus 4.8 and OpenAI’s GPT 5.5 in most coding and agent benchmarks.

• WSJ Columnist Christopher Mims makes the case that AI is rapidly becoming commoditized as cheaper, open-source, and Chinese models (see above) close the gap. Those improvements, along with growing pushback from businesses who are reassessing how much they spend on AI and which of the frontier models they actually need, add a new dimension to the AI race.

• Microsoft CEO Satya Nadella in an internal discussion with engineers Wednesday criticized Anthropic's Fable AI model for being overly restrictive with user requests. A copy of his remarks was provided to CNBC. His comments build on a blog post he wrote days earlier in which he argued that using AI can force force companies to reveal proprietary knowledge to the model provider, and that enterprises need more control.

• Dave Brown, one of the most senior executives at Amazon Web Services, is leaving to join Meta Platforms where he will help lead the company's data center build-out, the Journal reports. Meta Chief Executive Mark Zuckerberg signaled his interest in launching a cloud business during Meta’s annual shareholder meeting in May. Meta expects to spend between $125 billion and $145 billion on capital expenditures this year, much of it related to its build out of AI data centers.

This September 14–15, technology leaders will gather in New York City for the WSJ Technology Council Summit to explore how enterprise AI is moving from experimentation to measurable business value. Join the Technology Council and be part of the conversations shaping the future of leadership, as executives tackle AI deployment, cybersecurity, evolving technology policy, enterprise transformation and the strategies driving the next generation of business innovation.

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Follow Isabelle Bousquette on LinkedIn, Instagram, X, and TikTok for more behind the scenes on her tech and AI coverage, and lately, her contributions to the WSJ Leadership Institute's new Executive Resilience series, where she's profiling America's top execs about their fitness and wellness habits.

Follow Belle Lin on LinkedIn and X for her latest reporting on enterprise technology and AI.

Steven Rosenbush is chief of the enterprise technology bureau at the WSJ Leadership Institute. He also has a column. You can follow him on LinkedIn.

Tom Loftus is the editor of The Morning Download. He suggests following Isabelle, Belle and Steve on their various social channels. But if you insist, here's his LinkedIn.