Upside is a weekly podcast designed to look behind the headlines that will affect European venture, startups and investing.

Below are the notes from this week’s episode. Episode links above to tune in and stream wherever you pod.

Micron is the canary, and the canary is shouting

The mood going in was sour. US tech took a kicking while the FTSE barely moved. SpaceX is the cautionary tale, around 150 after a 225 peak and now selling a 25 billion dollar bond, Cerebras is below its IPO price, and the Shiller PE is nearly in dot-com territory.

Then Micron walked in and steadied the room. Stock up 17%, revenue up 346% year on year and 74% quarter on quarter, gross margins almost 85%. As Mads said, that is sassy, software-type margins on a memory business.

Here is why Mads put it first. Micron is one of only three companies on the planet that make the high-bandwidth memory in the GPUs, and the only one reporting right now. So while everyone argues about whether AI spend is real, Micron is the lie detector. And the read is unambiguous: over 100 billion dollars in long-term agreements, 22 billion in deposits to lock down supply, capacity sold out for the year, and they can still only fill half to two-thirds of demand. The memory says we are still building. The knock-on is close to home: Apple is putting prices up around 20%, blaming memory and storage cost. That is Micron, in your phone upgrade.

Neil’s lens was picks and shovels. Nobody wanted to be a hardware banker, the cycle is brutal, and yet here we are with a 1.4 trillion dollar memory business. He pointed at IQE in South Wales, a world leader in compound semiconductor wafers and photonics, share price from about 5p to a 56p peak. If you are a chip designer you cannot get the materials, so the materials people are having a moment.

Can the UK actually find the capital?

Close to all our hearts, this one. Seventh prime minister in ten years, ten years since Brexit, and a nagging feeling the pension money never quite arrives.

Neil’s framing was sharper than the usual hand-wringing. Since 2020 the exchange has done 50-plus tech IPOs, in spite of the fact that UK pensions, insurers and retail barely touch the market. Back in 1997 roughly 53% of UK pension AUM flowed into the stock market. Today it is about 2.8%, and for VC around 0.8%. It would not take much to turn that into a wall of money. Founders get funded anyway, because American capital is hunting cheaper European equity. The people missing out are UK savers.

So what is moving? The Mansion House Compact, then the Accords that widened it, then a pensions bill that can mandate UK investment if needed. The British Growth Partnership at 200 million pounds, which Neil reckons needs to be nearer 20 billion to matter. An AIM consultation finishing next week to reset the junior market. And Pisces, which lets a private company go public for a day, stamp-duty free for buyers.

There is a storytelling problem too. Craneware went from 50 million dollars of revenue to 200 million selling into US hospitals off a London listing, and almost nobody talks about it. The exchange is now running campaigns across 19 train stations because the wins do not tell themselves.

I asked Neil for the one thing he would fix. Instant answer.

“Pensions, if there was a silver bullet, this is it.” – Neil Shah

He went further, and personal. Give employees a choice between the status quo and a plan more aligned to the UK, get more LP money into VCs like SuperSeed and public funds, and a lot of this sorts itself. He wrote his first angel cheque in a decade two weeks ago, and confessed to a cash ISA he wishes he had put in the market years ago. Not investment advice. Obviously.

Defence is a decade, not a deal

A lot of cash moved into defence this week. Tank maker KNDS is doing a 12 to 15 billion euro dual listing in Frankfurt and Paris. Drone maker Stark raised 500 million euro from Peter Thiel and Sequoia at a 3.5 billion euro valuation. And the EIC is now set up to do direct equity into pure defence, having lived in the dual-use grey zone for years.

Mads’ take: Europe collected a peace dividend for decades and massively underinvested, so re-arming is a secular trend over the next decade, not a fad. The constraint is political willingness to fund it, and we struggle to find even a few extra billion when we say we will. He tied it to energy: the encouraging story is the manufacturing boom in Europe, but we keep undercutting ourselves with curtailed drilling that pushed prices up and manufacturing offshore. Blocking the North Sea while importing the same energy is virtue-signalling we cannot afford.

Neil is seeing it in his inbox. War feels closer with Russian subs around the UK, and investors have decided involvement is inevitable. Continental Europe is further ahead on building defence primes, the UK has a ton of dual-use companies coming, and CSG’s Amsterdam IPO is the template.

The AI invoice comes due

For three years the AI story has been spend. Now the bill is arriving from several directions. Qualcomm unveiled a data centre processor with Meta as first customer, and put 4 billion dollars into software to chip at NVIDIA’s real moat. There are around 300 data centre bans or moratoriums across the US, so the bottleneck is no longer the model, it is planning, water, energy and land. And enterprises are now negotiating their AI bills down, with open-weight models looming as the outside option.

This is where Europe steps in as tokens get cheaper, or so I argued. Mads pushed back, rightly. Cheap inference is everybody’s input, so it confers no advantage. To win you build the best products, and there is no shortcut.

“Cheap inference is everybody’s input.” – Mads Jensen

He put numbers on it. If a million tokens goes from 15 dollars to 50 cents, you need 30 times the volume just to stand still. But consumption is growing so fast that revenue is exploding anyway, and in Q1 the revenue from the AI economy exceeded the depreciation on the CapEx. His bigger point: a pure model lab is brutal and commoditising fast against Chinese open-weight models, so power accrues to whoever builds the best products on top, Anthropic being the live example.

Sovereign AI and the ID gate

Two weeks ago Washington switched off Anthropic’s two most powerful models, Fable and Mythos. The fable5up.com page is just a big no, then you refresh. This week the Five Eyes agencies named the same models and warned AI can overthrow a nation’s cyber defences in months. The Dutch trade minister flew to Washington to fight the Match Act, which restricts ASML, the only maker of the machines for leading-edge chips. And Italy’s Domin was handed the job of building Europe’s own frontier model: open source, 400 billion parameters, 24 languages.

Mads is not sold on the single-European-champion model. The whole lesson of the Fable switch-off is do not depend on one vendor, so picking a national champion repeats the mistake.

“I’d rather let a thousand flowers bloom.” – Mads Jensen

He would rather the state act as a customer than a venture capitalist. Run procurement competitions, award contracts to several vendors, and let capital fund the winners, which is what China has done for decades. The practical sting is the new gate: Fable is dark for most of us because Anthropic cannot yet tell US citizens from everyone else in real time, down to its own non-US staff. So from 8 July its policy allows it to demand government ID, date of birth and a facial biometric scan. Neil’s note of optimism: the UK government is finally showing up as a customer, with a contract to Quantexa among others, and cyber is having a moment.

Predictions

Dan Bowyer: SpaceX halves to around 120 by year end, then recovers. I called it lightweight myself, but I will plant the flag. Neil declined to second it, on pure self-interest, since a strong SpaceX makes this year’s IPOs easier. Fair.

Deal of the Week

Dan’s deal: the British Business Bank backing 10 first-time UK VCs. Not always comfortable for the person on the street, seeing government money go into venture. But this is exactly the capital flow into new firms that funds the businesses we all end up using. I wish all ten rip-roaring success.

The Week Ahead

Bending Spoons IPOs on 1 July at a 19 to 20 billion dollar valuation on the Nasdaq. Several European defence IPOs are lining up. SpaceX is joining the Nasdaq 100, so expect forced passive buying, though the S&P said no while Nasdaq and FTSE Russell said yes. There is an EIC defence equity call coming. And Microsoft has threatened to cut its internal Claude Code use by Monday 30 June.

Notable Quotes

“Pensions, if there was a silver bullet, this is it.” – Neil Shah, on unlocking UK capital.

“I think we’re getting our mojo back and realizing that we can build in the UK.” – Neil Shah.

“Cheap inference is everybody’s input.” – Mads Jensen, on why falling token prices are not Europe’s advantage.

“The state should be a customer as opposed to funding its own labs or its own industries.” – Mads Jensen, on sovereign AI.