a16z Raises $1.1 Billion to Build AI's Physical Layer

Andreessen Horowitz has spent most of its history betting that software would eat the world. This week the firm put $1.1 billion behind the idea that hardware is hungry too. Its new Machine Age Fund, announced on August 28, will invest in the physical machinery underneath modern AI: the chips, memory, networking and storage that make a data center run, and the systems built on top of them, from robotics to home appliances.

The pitch, in the firm's own words, is to open the throttle and accelerate the physical buildout of AI. General partners Martin Casado and Raghu Raghuram will lead the strategy, backing both young startups and later-stage companies. Ben Horowitz, David Ulevitch and David George also put their names to the launch, and partners from a16z's infrastructure, American Dynamism and growth teams will invest alongside them.

Why hardware, and why now

The timing reflects a change in where the money and the bottlenecks sit. AI racks are approaching a megawatt of power draw apiece, and the constraint on building bigger models is no longer clever code. It is power, cooling, advanced packaging and the supply of high-bandwidth memory. Startups such as Emerald AI, which helps data centers ease their load on the grid, and the wave of custom-silicon ventures now raising capital all sit squarely in that gap.

The fund also fits a broader pattern at the firm. In January, a16z announced more than $15 billion across new vehicles, among them a $1.7 billion infrastructure fund and a $1.18 billion American Dynamism fund aimed at defense and industry. Anthropic, for its part, has made its own hardware bets, backing the unbuilt chips of a startup called Fractile. The venture world has decided that the next decade of AI returns will be won or lost in the physical world, and it is funding accordingly.