AI Summary
5 min readThe classic venture capital adage is “sell in May and go away,” but a16z just launched a $1.1 billion fund on August 28th. For managing partner Jen Kha, that timing is a signal in itself. “There’s so much going on,” she says. The fund, called the Machine Age Fund, is focused entirely on the physical infrastructure underneath AI—chips, networking, data centers, cooling, robotics, and energy. The thesis is simple: AI has effectively solved the software problem, but it has created a massive physical bottleneck. The existing stack, built for the last era of the internet, was never designed for today’s compute demands, and a16z is betting that a new generation of founders will rebuild it from the ground up.
Why Hardware Became Investable Again
For decades, venture capital moved away from hardware. Software was cheaper to scale, faster to iterate, and less capital-intensive. AI has reversed that. “We went from seeing basically nothing in terms of hardware pitches to over now 20% of our pitches are hardware,” Kha notes. The shift is driven by a simple supply-demand mismatch. AI agents already use five times the tokens that humans do, and agents now outnumber humans on the internet—yet less than 5% of total AI capacity is currently utilized. Demand is going parabolic, but the physical infrastructure to support it is limping along.
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What you'll learn
- 1 (00:00) **Global AI Adoption and the US Bottleneck** - Jen Kha frames the global race to adopt AI, using South Korea and El Salvador as examples of nations moving faster than the US.
- 2 (00:36) **Why Hardware is Back in Venture Capital** - Jen explains that AI is pulling venture capital back into hardware after decades of moving away from it.
- 3 (02:02) **The Thesis: Why a Machine Age Fund Now** - Jen explains the core rationale for launching a dedicated $1.1 billion fund for physical AI infrastructure.
- 4 (03:33) **Why a Separate Vehicle, Not Just a Check from the Main Fund** - Jen details the organizational and portfolio construction logic behind the dedicated fund.
- 5 (05:19) **How LP Conversations Have Changed** - Jen describes how institutional investors now view AI hardware as a must-have exposure.
- 6 (08:05) **The Fund's Niche vs. Hyper-Scaler Spend** - Jen reconciles the $1.1 billion fund size against the trillion-dollar global buildout.
- 7 (10:32) **Beyond Capital: Geopolitical and Market Access Needs** - Jen explains that hardware companies now need partners who can provide national-level relationships and market access.
+ Full timestamped outline available in the app
Show Notes
a16z Managing Partner and Head of Global Partnerships Jen Kha joins MTS hosts Theo Jaffee and Sophia Dew to discuss a16z's Machine Age Fund and the investment thesis behind rebuilding the physical infrastructure that powers AI.
Jen explains why chips, networking, memory, cooling, data centers, and other parts of the physical computing stack are becoming investable again after decades in which software captured much of the industry's attention. As AI demand pushes existing infrastructure to its limits, she explains why a16z created a dedicated fund and why hardware founders are increasingly rethinking the stack from first principles.
They also discuss the global race to adopt AI, what hardware startups need beyond capital, the backlash against data centers in the U.S., and why experienced systems builders are returning to entrepreneurship as a new generation of infrastructure gets built.
Resources:
Follow Jen Kha on X: https://x.com/jkhamehl
Follow Theo Jaffee on X: https://x.com/theojaffee
Follow Sophia Dew on X: https://x.com/sophiadew
Follow MTS on X: https://x.com/mtslive
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Please note that the content here is for informational purposes only; should NOT be taken as legal, business, tax, or investment advice or be used to evaluate any investment or security; and is not directed at any investors or potential investors in any a16z fund. a16z and its affiliates may maintain investments in the companies discussed. For more details please see a16z.com/disclosures.
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