Google squandered its AI lead

Chinese AI lab DeepSeek released DeepSeek-V4-Pro, its latest AI model, now out of preview with benchmark gains, as the company raises prices amid a multi-billion-dollar funding round. The price increase follows DeepSeek's recent notification to customers, signaling a shift from its earlier low-cost strategy.

Google squandered its AI lead But don't worry DeepSeek is raising prices. Welcome to . Cautious Optimism https://www.cautiousoptimism.news/ , a newsletter on tech, business, and power. Modestly upbeat Thursday. Going public? Might as well snap up a startup for $6 billion, right https://www.bloomberg.com/news/articles/2026-08-13/anthropic-said-in-talks-to-buy-ai-startup-decart-for-6-billion ? That’s what Anthropic is considering. After all, what’s a single-digit-billion-dollar purchase when you are targeting a possible $2,000 billion valuation https://www.ft.com/content/840ac156-af1c-4a82-b260-ae791072fcfa?accessToken=zwAAAZ 6yHO9kdOECsFWrxxKgtOyYK55EHL8-g.MEUCIQDUzeMiGW6UboFtYr2F Llwge2IB8ubdmWZVqeD-dEI2gIgQmlsOPTronqbAHY24gjsyrrdmBKBLz0uGHiKPRMhYdU&sharetype=gift&token=fa2b9bb8-393a-4cee-8a73-6a5864cb21fd&syn-25a6b1a6=1 ? Decart , the reported target, is a company I’ve interviewed before https://www.youtube.com/watch?v=vEFgEwdsD4g&t=147s . It does two things: improves GPU efficiency and builds world models. Both of which, you can imagine, Dario is interested in Now, to work — Alex 📈 Trending Up: More wars for oil https://www.cnbc.com/2026/08/13/greenland-energy-oil-drilling-trump.html … digital letters of marque https://www.bloomberg.com/news/articles/2026-08-13/trump-enlists-private-sector-to-boost-cyber-offensive-arsenal?accessToken=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJzb3VyY2UiOiJTdWJzY3JpYmVyR2lmdGVkQXJ0aWNsZSIsImlhdCI6MTc4NjYwMjQzMywiZXhwIjoxNzg3MjA3MjMzLCJhcnRpY2xlSWQiOiJUSk9QM0hLSzNOWTkwMCIsImJjb25uZWN0SWQiOiJGNDJDMzlEM0JBNjY0NkQ0ODdDNTI0NzM1QjQ2OTExMyJ9.numdJnKP-sXa3qzd -fCDfuNsY61ZpPAV crbprM4Ek … major pickups https://x.com/draecomino/status/2087516952658849905 … VCs hating on Anthropic https://x.com/chetanp/status/2087573240269111487 … paying up for the harness https://x.com/reidRMC/status/2087568046579921386 … split custody of the Strait of Hormuz https://www.cbsnews.com/live-updates/iran-war-us-strait-of-hormuz-donald-trump-tehran-control-threatens-keep-it/ … no shit, Sherlock https://www.theverge.com/policy/979339/flock-ceo-audits-data-retention?view token=eyJhbGciOiJIUzI1NiJ9.eyJpZCI6IjVGMURaM1drcDQiLCJwIjoiL3BvbGljeS85NzkzMzkvZmxvY2stY2VvLWF1ZGl0cy1kYXRhLXJldGVudGlvbiIsImV4cCI6MTc4NzA1OTA1NSwiaWF0IjoxNzg2NjI3MDU1fQ.bWI6Ig8PWL-dV72LeLmthsL 4xquYfsk0hvy VHaGLA&utm medium=gift-link … gaming footage as critical AI training data https://techcrunch.com/2026/08/12/amazon-will-train-on-twitch-streamers-content-by-default-unless-they-opt-out/ … 📉 https://finance.yahoo.com/news/servicenow-pledges-1-5bn-investment-110000403.html Trending Down: Wholesale inflation in the United States https://www.cnbc.com/2026/08/13/wholesale-prices-were-flat-in-july-below-expectations-for-0point2percent-increase.html ? … Microsoft’s app-spread https://www.geekwire.com/2026/microsoft-starts-merging-its-copilot-consumer-and-business-apps-in-advance-of-super-app-rollout/ … ethics https://www.nytimes.com/2026/08/12/business/forbes-editor-fired.html?unlocked article code=1.41A.Fhs9.QC5cqzYGd5Rd&smid=url-share … technology companies killing media https://www.wsj.com/business/media/apple-in-talks-to-pay-publishers-to-improve-ai-powered-siri-0641f64b?st=RivHB3&reflink=desktopwebshare permalink ? … Databricks’ IPO timing https://www.cnbc.com/2026/08/13/databricks-funding-round-190-billion-valuation.html … prediction market accuracy https://www.cnbc.com/2026/08/13/midterm-democrats-polling-primary-wisconsin-michigan-minnesota.html … DeepSeek raises prices: The latest AI model from Chinese AI lab DeepSeek is out https://x.com/deepseek ai/status/2087864585504305397 . DeepSeek-V4-Pro is no longer in preview, and its new iteration brings with it a host of benchmark gains. At a cost. Recall that DeepSeek is busy raising billions of dollars, and recently told customers that it would raise prices. Yes indeed. The new V4-Pro model will cost https://x.com/deepseek ai/status/2087864589895798968/photo/1 $0.66/$1.98 per million input/output tokens during off-peak hours, and $1.32/$3.96 per million tokens during peak demand. During its preview period https://deepseek.ai/pricing , V4-Pro cost $0.435/$0.87 per million input/output tokens. V4-Flash now costs $0.44/$1.32 during peak periods, far more than its preceding $0.14/$0.28 rate. - As we argued a few days back https://www.cautiousoptimism.news/the-end-of-chinese-ais-free-lunch-era/ , the era of super-cheap, performant models from China is closing. They cost more now, even if they still represent an attractive, low-cost option even with a multiplied price. - DeepSeek-V4-Pro was impressive before its upgrades and full release; with an intelligence score of 53 per AA https://artificialanalysis.ai/ intelligence , the preview version of V4-Pro was smarter than all but eight AI models. Everyone is clowning on Google Here’s a run of recent news, setting aside updates from Anthropic and DeepSeek that we covered above: SpaceXAI’s fresh Grok 5.6 release raised the AI lab’s prominence https://x.com/ArtificialAnlys/status/2087564648325530099 to near frontier-lab status at a very attractive price point. An open-weight model from South Korea Motif 3 by Motif Technologies https://huggingface.co/Motif-Technologies/Motif-3 set an AA intelligence score of 47, besting MiniMax’s M3. Microsoft’s recently released coding model has already received a major upgrade https://microsoft.ai/news/mai-code-1-1-flash-br-better-faster-at-a-quarter-of-the-cost/ ; Microsoft also made its first general model, MAI-Thinking-1, available to its Foundry customers https://x.com/mustafasuleyman/status/2087570047967408396 , though precisely how strong that model is remains a little opaque. Meta’s own fast-cadence update to its Muse 1.1 Spark model will be released with open weights soon https://x.com/alexandr wang/status/2086756152034066792 . The impressive model will help boost the American open-AI frontier forward; Nvidia’s latest Nemotron model family is also starting to roll out https://developer.nvidia.com/blog/nvidia-nemotron-3-5-lightning-delivers-fast-accurate-specialized-task-execution-for-long-running-agents/ , bringing even more open-weight heft to these shores. And then there’s Google . It’s precisely nowhere. Observe the dark green candles https://artificialanalysis.ai/ intelligence : From market leader at the end of 2025 https://www.cautiousoptimism.news/google-rules-the-ai-roost/ to getting mogged by a half-dozen labs in less than a year is an accomplishment. Worse, the similarly-performant Gemini 3.6 Flash costs $1.50/$7.50 per million input/output tokens while OpenAI’s GPT-5.6-Luna costs just $0.25/$1.20 for the same number of tokens. I was hesitant to pile on Google for its delayed release of Gemini 3.5 Pro. The AI treadmill is brutal, and every lab misses a step here and there. But every day that passes pushes Google further back in the AI stack ranking; every day that slips by without Gemini 3.5 Pro out raises the bar it must clear to be market-relevant. It’s time to be a little rude. That OpenAI and Anthropic are beating Google is not a massive shock; they were Alphabet’s rivals in the American frontier AI trivium. But falling behind, variously, SpaceXAI, Moonshot , Alibaba , Meta, DeepSeek, and Z.ai , and nearly getting beaten by a South Korean lab that you hadn’t heard of until this morning is downright embarrassing. This is not to say that Google is down/out in the AI game; it makes oodles of money via its cloud business, as we recently explored. No matter if its models are good or not, Alphabet shareholders are earning an AI dividend. But those gains could be far larger if the company could sling its own models as easily as it’s finding customers for its TPUs. Microsoft’s quick improvements to its coding model are especially galling, as it’s the precise place where Google is supposedly working to close a gap to the market. If Google can’t catch up on coding, it likely cannot accelerate its AI development with more AI. Meanwhile, OpenAI and Anthropic are turning their data and model foundations into tools to accelerate building new LLMs, something that Microsoft is imitating. Precisely what has gone wrong inside Alphabet is not clear. What Google does show us, however, is that no leading lab is inevitable. And having a mountain of compute is necessary, but not sufficient. For now, at least The money tornado keeps spinning Sweden rising Shortly after vibe-coding intonation: neutral giant Lovable announced a $400 million raise at a $13.3 billion valuation on the back of a June-era revenue run rate of $500 million, another Swedish startup is raising at an eleven-figure valuation. Legora , a legal AI unicorn that competes with Harvey and Spellbook, is raising at a $10 billion valuation per the FT https://www.ft.com/content/8202960d-ec90-4709-96e0-ab9cbddb5258?syn-25a6b1a6=1 , “roughly double the $5.6 billion it achieved only four months ago.” Why? Quick growth: Legora grew from $1 million ARR to $100 million in 18 months, it announced in April https://legora.com/newsroom/legal-teams-adoption-of-ai-propels-legora-past-100-million-in-annual-recurring-revenue . Harvey grew from $100 million ARR in August 2025 to $300 million in June https://www.sourcery.vc/p/breaking-11b-harvey-hits-300m-arr , with the company announcing in July that the second quarter saw its first with “ over $100M ARR added https://www.harvey.ai/blog/harvey-announces-strategic-investment-from-goldman-sachs-and-jp-morgan .” Spellbook was “ on track to hit $100 million USD in annual recurring revenue in 2026, after tripling its revenue over the past year https://betakit.com/on-track-to-hit-100-million-usd-arr-spellbook-partners-with-canadian-bar-association/ ” this March.- Venture investors expect faster portfolio company growth than ever. This trend concentrates capital into fewer startups. Sometimes, even in the same competitive space. I struggle to fully understand ~100x revenue multiples, but as an index fund guy at heart, I am not the target market here. Bending Spoons earnings: Italian startup undertaker https://www.cautiousoptimism.news/who-will-bending-spoons-eat-next/ conglomerate Bending Spoons reported earnings https://storage.googleapis.com/bsp-talent-websites-bendingspoons-website-docs-public/financials/2026/20260813%20Bending%20Spoons%E2%80%94Q2%202026%20Results.pdf today. Revenue of $704 million +126% beat analyst expectations https://www.marketscreener.com/news/bending-spoons-q2-adjusted-earnings-revenue-rise-ce7859d9dc80f72d , though the company’s full-year guidance may have come in light. Regardless, Spoons’ earnings release had several interesting nuggets: Bending Spoons’ purchased assets are barely growing in aggregate : Per BSP earnings, “organic revenue growth was 3% in Q2 2026, with Tractive and WeTransfer making the largest contributions.” That’s thin . Today, Bending Spoons is growing almost purely on the back of inorganic methods M&A . Bending Spoons is very proud of its internal tech team: From detailing its ‘Alt-Spooner’ AI agent for staffers that takes into account employee data context, runs on locally-hosted open-weight models, to claiming dozens of product updates at Eventbrite and Vimeo in a single quarter, Bending Spoons is far more than a PE chop-shop.- Shares of Bending Spoons are down 6% this morning. AIObs is hot hot hot: Dynatrace is buying Arize https://www.businesswire.com/news/home/20260813982051/en/Dynatrace-to-Acquire-AI-Observability-Leader-Arize . Or if you want that in corporate-speak, an AI-powered observability platform is buying an AI observability platform. Obs now requires AIObs, if you will. The deal will cost the larger company nearly a billion dollars https://x.com/ashugarg/status/2087875566095528017 . Recall that Cisco bought another AIObs startup, Galileo , earlier this year https://blogs.cisco.com/news/cisco-announces-the-intent-to-acquire-galileo , and . https://clickhouse.com/blog/clickhouse-acquires-langfuse-open-source-llm-observability ClickHouse bought Langfuse There are still a number of startups working in the space, presenting attractive acquisition targets: Braintrust , Fiddler AI , Arthur AI , and Evidently AI come to mind. - Why are so many companies building AIobs tools? From a high level, probabilistic systems are inherently observability-primed. And with everyone trying to keep their agents on-task and their AI costs in check, it’s a fertile time to sell tools to help folks understand their AI usage and spend.