State of AI: December 2025 newsletter
State of AI: December 2025 newsletter What you've got to know in AI from the last 4 weeks. Dear readers, Welcome to the latest issue of the State of AI, an editorialized newsletter that covers the key developments in AI policy, research, industry, and start-ups over the last month. First up, a few reminders: AI meetups + RAAIS 2026: Join our upcoming AI meetups in London (2nd Dec ‘25), Munich (17 Feb ‘26) and Zurich (19 Feb ‘26) as well as our 11th Research and Applied AI Summit in London on 12 June 2026. Watch my 25 min State of AI Report 2025 talk: and impress your friends as though you’d read 300 slides. That said, you really should read the slides, because we’re already 2/10 correct on the 2026 predictions (this and this) and it’ll help temper your friend’s AI bubble banter. Take the State of AI usage survey: You can submit your usage patterns to the largest ongoing open access survey, which now has over 1,400 respondents :-) Air Street Press featured poolside’s acquisition of Fern Labs (two portfolio companies!), Profluent’s $106M financing led by Jeff Bezos and their new retrieval-augmented model for biology, our investment in Clove Wealth and PARIMA’s milestone in reaching the first regulatory approval for a European cultivated meat company. I love hearing what you’re up to, so just hit reply or forward to your friends :-) The compute arms race The last four weeks have seen reality drift from the “AI bubble” narrative. Commentators fretted about over-valuation and froth, yet the numbers from infrastructure builders, chip vendors and AI labs, as well as a flurry of frontier model releases, told a different story... The cleanest single datapoint was NVIDIA’s latest quarterly earnings. For the three months to 26 October, NVIDIA reported $57.0B in revenue, up 22% QoQ and 62% YoY, with data center revenue at $51.2B (at a gross margin of 73%), up 25% sequentially and 66% YoY. Some commentators pointed to NVIDIA’s rapidly rising inventories as a bearish signal. But the composition tells a different story. New Street Research analysis suggests that the 32% QoQ rise in inventories is driven almost entirely by raw materials and work-in-process, while finished goods collapsed. NVIDIA’s inventory shift reflects accelerating server build-outs, not softening demand. NVIDIA is pulling forward components and subassemblies to meet hyperscaler roadmaps, not sitting on unsold product. The setup strengthens the company’s position entering 2026, with visibility into multi-year capex frameworks rather than signs of a cooling cycle. At the same time, the demand side continued to lock in long-dated capacity. OpenAI’s new seven-year deal with Amazon Web Services, reported at around $38B of contracted spend on AWS infrastructure, gives OpenAI access to Amazon’s high-density EC2 UltraServers and a ton of NVIDIA accelerators as a complement to its existing Azure footprint. This is less about “multi-cloud” fashion and more about survivability: no single provider can credibly guarantee the power, chips and land needed for GPT-class training runs over the rest of the…