Oh say can EUV

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• China’s AI “Manhattan Project”: According to Reuters, Chinese scientists in Shenzhen have developed the nation’s first Extreme Ultraviolet Lithography (EUV) machine. These are the extremely complex and costly machines that produce the state-of-the-art semiconductor chips required to power AI data centers. Reuters suggests the massive machine — filling an entire factory floor — was completed earlier this year. It was apparently “reverse-engineered” from the only EUV currently in existence, a unit used by Dutch giant ASML, with the help of former ASML employees. While the Chinese EUV prototype is “operational,” it’s not yet producing chips, and the nation still faces a number of technical challenges on that front. Still, should China sort all these issues out, they could be well on their way to catching up in this AI chip arms race.

• Armadin pushes back against AI hacks: The startup comes from Kevin Mandia, formerly of the cybersecurity company Mandiant, which Google picked up for $5.4 billion in 2022. His new project uses AI to help test networks for vulnerabilities, a process known as “red-teaming” when it’s human-powered. It’s of course part of an AI arms race between hackers and site engineers that’s already underway; as hackers arm themselves with more sophisticated tools, developers and security pros must respond accordingly.

• What’s powering Salient’s growth: It’s a niche segment of the financial system that we don’t think about often (unless we’re deeply in debt): the challenges faced by repossession agents and loan officers. One start-up, Salient, has seen some considerable growth over the last two years by throwing AI at the problem, automating all the painstaking, traditionally manual parts of the process, from collection calls to payment processing. They’ve recently surpassed $25 million in ARR, and are sitting on a $500 million valuation.

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One of those “benchmarking” AI tests companies use to evaluate their models is based around virtual vending machines. You give your new model a string of fictional vending machines to operate and a set of rules, then judge their problem-solving abilities based on how much product they’re able to move and their virtual profitability.

Anthropic and the Wall Street Journal went one step further, building a REAL WORLD vending machine (placed in the WSJ employee break room) and putting the AI company’s Claude model in charge of everything from selecting and ordering inventory, setting prices, and responding to customer feedback. They named the new smart snack dispenser “Claudius,” and the AI bot overseeing the storefront “Seymour Cash.”

In a best case scenario result for convenience store managers everywhere, it turns out… AI is not very good at responsibly selling snacks. Within just a few days of launch, after prodding in Slack from various WSJ staffers, Claudius was convinced to give away nearly all of its inventory for free, losing several hundreds of dollars in the process. And we’re not just talking Doritos, either. Staffers managed to convince Claude to order them items including a live fish, a PlayStation 5, kosher wine, stun guns, cigarettes, and underwear.

Anthropic suggests the latest incarnation of so-called “Project Vend” was not a failure, and had been designed as more of an open experiment, to see what might happen if an AI agent were given real agency in a real-world scenario, interacting with actual humans and their money.

Running a vending machine was deemed by the team as the simplest version of operating a business, so it’s a perfect base-level scenario for testing Claude, before moving the model on to more high-level or sophisticated tasks. So this isn’t a sign that Claude will NEVER be able to reliably sell you a Pepsi and some pretzel sticks. We’re just not there YET. – Lon

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This Week in Startups

E2224: Roomba… we hardly knew ya! The company behind the iconic disc-shaped autonomous vacuum, iRobot, had a chance to get acquired by Amazon back in 2022, but European and US regulators stalled the deal. NOW iRobot is entering bankruptcy. Per Jason, allowing this deal to go through would have benefitted everybody, but because of over-cautious antitrust action, the world lost out on a once-great company.

E2223: Disney signed a landmark new deal with OpenAI, investing $1 billion in the ChatGPT maker and licensing over 200 of their most famous characters for use in the Sora app. Jason naturally saw all this coming, and predicted as much on the “All-In Podcast” over the summer. Hear him unpack why this was so important for the future of BOTH companies, plus lots more of the week’s biggest stories for founders.

E2222: It’s a VC Roundtable, featuring special guests Bryan Kim of a16z and David Clark of Ven Cap. On the docket: Boom Supersonic’s innovative new turbine-based revenue stream, Bill Gurley’s iconic “Miss By a Mile” post about calculating TAM, why it’s so important for founders for remain relentless, the discourse surrounding the “AI Bubble,” and much more.

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