Sequoia, Andreessen at Odds Over Chip Shortage

The two most influential venture capital firms, Sequoia Capital and Andreessen Horowitz, have very different perspectives on demand for the most important resource for artificial intelligence companies: graphics processing units. 

Andresseen Horowitz is stockpiling them and renting them to startups, I reported this morning, which suggests the firm doesn’t expect the GPU bottleneck to ease anytime soon. Meanwhile, Sequoia believes GPU constraints have already peaked and the increased production will incinerate investor cash.

It’s not a surprise that Andressen Horowitz has secured its own GPU clusters. The firm has aggressively pursued AI startups, including OpenAI competitor Mistral and Elon Musk’s xAI. It led 19 generative AI deals worth an estimated $1.3 billion over the last two years, according to The Information’s recent analysis. (That’s in addition to other deals it participated in, such as xAI’s $6 billion fundraise.) Andreessen Horowitz has also raised two dedicated AI funds focused on infrastructure and apps, signaling its interest to founders. 

Sequoia has inked even more deals, leading roughly two dozen AI investments over the same time period, but those deals are worth only $400 million altogether, reflecting its focus on smaller investments in young companies. That total could grow significantly as the firm makes follow-on investments in portfolio companies like legal AI startup Harvey and LangChain.