MY TAKE
This was the week Microsoft reminded us what “single point of failure” means. Ten hours without email, without Teams, without OneDrive, without SharePoint. And the worst part: the fix they attempted made the problem worse. That blows my mind, because this isn’t some garage startup — it’s Microsoft, with decades of experience in critical infrastructure.
Sony selling 51% of Bravia to TCL surprised me more than it should have. It’s not that Sony is dying — it’s that they’re accepting they can no longer compete in manufacturing against the Chinese. They keep the brand and the intellectual property, but real control moves to Shenzhen. It’s the new model: the West designs and puts the logo on it, Asia manufactures and decides.
What I do see is Palmer Luckey doing with Anduril what Elon did with SpaceX, but in defense. $1.2 billion in Long Beach, 5,500 jobs, and him saying the coolest part is the fighter jets he’ll be able to see from his office. The guy has no filter, and that’s why I quite like him.
And OpenAI launching an AI-based age verification system to protect minors. Sounds good until you read the fine print: if the system gets it wrong and flags you as under 18, you have to send your ID or a selfie to a third-party company. Privacy hell, but that’s the world we’re building.
This week I’m also exposing the pattern nobody wants to admit: AI valuations are completely disconnected from reality. Applied Compute went from $500 million to $1.3 billion in three months. What changed? Nothing. Just VC FOMO.
Happy end of January, dear reader. The newsletter keeps me motivated, but I need you to share it more. I’m counting on you. If this brings you value, forward it to someone who could use it. I’m not asking for much.
THE BOMBSHELL OF THE WEEK
Microsoft 365 Offline: The 10-hour outage that paralyzed half the planet
On January 22, Microsoft 365 went down for more than 10 hours. This wasn’t a small glitch. It was a massive outage affecting Outlook, Teams, OneDrive, SharePoint, Defender and Purview. Entire companies ground to a halt. 16,000 reports at the peak of the problem. And best of all: when Microsoft tried to fix it by rebalancing traffic, they made it worse.
The story in plain terms: At 11:40 AM Pacific time, Microsoft’s infrastructure in North America stopped processing traffic correctly. Users couldn’t send or receive emails. Error 451 4.3.2 everywhere. Microsoft tried to fix it by redistributing traffic to other data centers. The result: more imbalance, more chaos. It took until the next day, January 23, to confirm everything was resolved.
The core facts:
- Actual duration: between 8 and 11 hours depending on the source
- Services affected: Outlook, Teams, OneDrive, SharePoint, Defender, Purview
- Region: Primarily North America, but with global impact
- Root cause: Infrastructure failure in traffic processing
- Aggravating factor: The load balancing made the problem worse instead of fixing it
Microsoft’s response: “We’ve identified that infrastructure in North America wasn’t processing traffic properly. We’re redirecting traffic to alternative infrastructure while we work to restore normal operations.”
Translation: “We screwed up and don’t know exactly why, so we’re trying things until it works.”
Why it matters: This isn’t just a technical problem. It’s a reminder of the world’s dependence on a handful of cloud providers. When Microsoft goes down, half the corporate world stops. There’s no plan B. There’s no real failover for the millions of companies that migrated everything to the cloud on the promise of 99.99% uptime.
And the detail that kills me: Microsoft has decades of experience in distributed systems. They have infinite resources. And even so, a load balancing problem knocked them out for 10 hours. What does that tell us about the real fragility of the cloud?
The timeline:
- January 22, 11:40 AM PT: The outage begins
- January 22, 3:00 PM ET: Peak of 16,000 reports
- January 22, afternoon: Load balancing attempt makes things worse
- January 23, early hours: Resolution confirmed
The lesson: The cloud isn’t magic. It’s physical infrastructure operated by humans who make mistakes. And when that mistake hits Microsoft, it hits the world. If your company doesn’t have a continuity plan that accounts for Office 365 disappearing for 10 hours, you’re playing Russian roulette.
Single-vendor dependency is the biggest risk nobody wants to admit until it happens.
POWER MOVES
Meta Reality Labs: The silent massacre of the metaverse
Meta announced permanent layoffs affecting more than 1,000 workers, with more than 270 in California and 331 in Washington State by March 20. It’s the first major tech layoff of 2026, and it confirms what we all knew: the metaverse is dead, long live AI.
Andrew Bosworth, Meta’s CTO, announced it in an internal post on Tuesday. The official narrative: “strategic refocus toward artificial intelligence.” The reality: Reality Labs has burned tens of billions with no tangible results and shareholders are tired.
The fascinating part is the timing. Meta waited until after the Q4 2025 reports to drop the bomb. Classic. And the magic number: most divisions avoided reaching 100 layoffs to keep from triggering the full WARN Act.
The pattern nobody mentions: California led tech layoffs in 2025 with 73,499 job cuts, 43% of all tech layoffs in the US. It’s not an anomaly, it’s the new normal. Companies are relocating operations to states with fewer labor regulations and lower costs.
So far in 2026: 28 rounds of tech layoffs, 5,285 people affected. That’s 294 people per day losing their jobs. And it’s still just January.
Executive moves that matter
Apple - January 2026
- Chief of Hardware Engineering takes control of design teams
- Clear positioning for Tim Cook’s succession
- Engineering and design unified under one leader
- Signal: Apple is preparing for the post-Cook era
Starbucks - January 19
- Anand Varadarajan as new EVP and CTO
- Comes from being VP of Grocery Technology at Amazon
- Brings expertise in supply chain tech and retail automation
- Signal: Starbucks wants to Amazonify its operations
Meta - January 2026
- Melissa Brown (Global Head of Developer Relations, Reality Labs) laid off
- 6 years at Meta, out in the wave of cuts
- Signal: Developer relations for the metaverse no longer matters
Unity - January 2026
- Larry Hryb (Director of Community & Advocacy) let go after 18 months
- Known as Major Nelson at Xbox
- Signal: Unity keeps bleeding senior talent
Stillfront Group - January 2026
- Emily Villatte promoted to CFO
- Former CFO and Deputy CEO of Acast for 6 years
- Fast-tracked for her expertise in digital media finance
- Signal: Gaming is prioritizing financial discipline
The pattern: CTOs with Amazon backgrounds are in fashion. Companies want to import AWS’s culture of operational efficiency and tech. And in gaming/metaverse, they’re cutting evangelists and promoting the people who know the numbers.
MONEY TALKS
xAI: Elon’s $20 billion nobody expected
Elon Musk closed a $20 billion Series E for xAI. Twenty. Billion. It’s the largest round in history for an AI company less than two years old. And the product, Grok, competes directly with ChatGPT but without the traction.
Why does it matter? Because it confirms that in AI, normal valuation rules don’t apply. xAI hasn’t proven product-market fit. It has no public user metrics. We don’t know its revenue. But it has Elon and it has access to X (Twitter) data, and apparently that’s worth $20 billion.
The investor list is long and includes venture capital and strategics. What catches my attention is that Elon keeps selling the narrative that real-time access to X data is an insurmountable competitive advantage. And the VCs are buying it.
Applied Compute: From $500 million to $1.3 billion in three months
Three former OpenAI researchers (Rhythm Garg, Linden Li, Yash Patil) founded Applied Compute in May 2025. In September they were in talks to be valued at $500 million. In January 2026, barely three months later, they’re raising at a $1.3 billion valuation.
What changed? Nothing fundamental. The company does the same thing: it embeds engineers with companies to fine-tune models and deploy autonomous AI agents. They have clients like DoorDash, Mercor and Cognition. But nothing justifies 2.6x the valuation in 90 days.
Benchmark led the pre-launch round valuing them at $100 million. Then Sequoia Capital, Lux Capital and others put in $80 million total. And now they want more than double the valuation without having proven scale.
This is institutional FOMO. VCs are so scared of missing “the next OpenAI” that they’re throwing absurd valuations at anything with ex-Anthropic or ex-OpenAI employees on the cap table.
Anduril: $1 billion in bricks and steel
Palmer Luckey announced a $1 billion expansion in Long Beach, California. It’s not a funding round, it’s pure capex: 1.18 million square feet across six buildings, 750,000 of offices and 435,000 of industrial R&D space.
5,500 jobs by 2027. In California. When everyone is fleeing to Texas and Florida. Palmer is making the contrarian play and betting on his hometown.
The interesting part is that Long Beach will host R&D, but the actual manufacturing is in Ohio. Palmer is separating design from production geographically, which is smart for IP protection and for tapping into different talent pools.
And Palmer’s comment about fighter jets is pure him: “The coolest part is I’ll be able to see fighter jets from my office.” The guy is building the Lockheed Martin of the 21st century and he knows it.
The rest of the week’s money
Baseten - $300 million
- Focus: AI model deployment for enterprise
- Signal: AI infrastructure is hot
Humans& - $480 million
- Focus: Human-centric AI research lab
- Signal: There’s capital for “ethical AI”
Lyte - $107 million (out of stealth)
- Location: Mountain View
- Focus: Integrated perception for robotics and AI
- Signal: Computer vision for robotics is taking off
Duetti - $200 million (January 21)
- Sector: Music-tech and financial services
- Signal: Fintech + creative industries crossover
PraxisPro - $6 million seed (January 21)
- Sector: Data intelligence for Life Sciences
- Oversubscribed
- Signal: Healthcare data keeps attracting capital
AheadComputing - $30 million Seed2 (January 21)
- Focus: New microarchitecture for CPUs
- Signal: There’s appetite for semiconductor innovation
Benepass - $40 million Series B (January 21)
- Focus: Global benefits management platform
- Signal: HRtech with a fintech component works
Week’s total: More than $21 billion counting xAI
The key stat: 65.4% of VC money in 2025 went to AI and machine learning. And in 2026 the proportion is rising. It’s not a bubble if it never pops, right?
PRODUCT SECRETS
OpenAI launches AI-powered age verification (and raises every privacy red flag)
On January 20, OpenAI announced an age prediction system for ChatGPT. The idea: automatically identify users under 18 and apply content restrictions. Sounds responsible until you look at the details.
The system uses “account-level signals and behavioral patterns”: how long the account has been active, usage patterns, times of day the user is active, and the declared age. Basically, mass behavioral analysis to infer age.
If the AI decides you’re under 18, you’re automatically put into “youth mode”: no explicit violent content, no pornography, no dangerous internet challenges, no restrictive diets, no self-harm content.
But here’s the kicker: if the system gets it wrong, you have to use Persona (an identity verification service) to prove you’re an adult. Options: a selfie or a government ID. Persona deletes your ID or selfie “within hours,” OpenAI never receives your ID or selfie, only your date of birth.
The problem? We’re normalizing a private company using AI to profile you and, if the algorithm doesn’t like you, making you hand over biometrics or identity documents to a third party to regain full access.
And we all know that “deleted within hours” in tech means “deleted from production servers but probably sitting in backups for years.”
Global rollout except the EU, which will come “within weeks” to comply with local regulations. Translation: GDPR is going to give them headaches.
Sony and TCL: The end of the Sony era as a TV maker
On January 20, Sony and TCL announced a joint venture where TCL takes 51% control of Sony’s Bravia television business. Operations begin in April 2027, definitive agreements by March 2026.
Sony retains the brand names (Sony and Bravia), contributes IP and technology (image processing, audio systems). TCL contributes display technology and, critically, manufacturing capacity.
But real operational control (development, manufacturing, sales, logistics, customer support) moves to the JV where TCL holds the majority. Sony no longer decides how Bravias get made.
It’s the new model: the West designs and puts the logo on it, Asia manufactures and controls operations. Sony is admitting it can no longer compete on production costs against TCL and other Chinese players. So they monetize the brand and the IP, and let others do the heavy lifting.
TCL has two stated goals: overtake Samsung as the global market leader, and defend itself against brutal competition in China. Using the Sony brand gives them the premium credibility they need.
For Sony, it’s admitting defeat in manufacturing but winning on capital efficiency. For TCL, it’s buying brand respectability. Win-win on paper, but Sony loses strategic control of a category it defined for decades.
REAL NUMBERS
Layoffs 2026:
- 28 rounds of tech layoffs in 2026 so far
- 5,285 people impacted
- 294 people per day losing tech jobs
- California: 73,499 tech layoffs in 2025 (43% of the US total)
Microsoft Outage:
- 10 hours of downtime for Microsoft 365
- 16,000 reports at the peak of the problem
- Services affected: Outlook, Teams, OneDrive, SharePoint, Defender, Purview
- Cause: Infrastructure failure + poorly executed load balancing
Venture Capital 2025-2026:
- AI/ML captured 65.4% of VC money in 2025
- Andreessen Horowitz raised $15+ billion (18% of the US total)
- a16z now manages $90+ billion in AUM
- North American startup funding rose 46% in 2025 vs 2024
AI Valuations:
- xAI: $20 billion Series E
- Applied Compute: From $500M to $1.3B valuation in 3 months
- 49 US AI startups raised $100M+ in 2025
- More than 100 new tech unicorns created in 2025
Sony-TCL Deal:
- TCL takes 51% control of the Bravia TV business
- Operations begin April 2027
- Sony retains IP and brand, TCL controls operations
- TCL’s goal: overtake Samsung as global leader
Anduril Long Beach:
- Investment: $1 billion
- Space: 1.18 million square feet (6 buildings)
- Jobs: 5,500 by mid-2027
- 750k sq ft offices + 435k sq ft industrial R&D
Defense Tech Funding:
- Best funding year ever for defense startups in 2025
- The trend continues into 2026
- Anduril leading the wave
WHAT TO WATCH NEXT WEEK
Key events
- Big Tech Q4 2025 earnings reports continue
- Microsoft under scrutiny over the outage post-mortem
- Applied Compute closing (or not) its round at $1.3B
Market signals
- More layoffs at Meta’s Reality Labs?
- Samsung’s reaction to the Sony-TCL deal?
- EU regulatory response to OpenAI’s age verification?
Weak signals to monitor
- How many more ex-OpenAI folks raise absurd rounds
- Whether Andreessen Horowitz, with $90B in AUM, starts dictating savage terms
- Senior Microsoft talent moves post-outage
- Anyone else following Palmer Luckey in betting on California vs Texas/Florida?
Thanks for reading. Onward.