Morning newsletter digest

Fortune Term Sheet: “Chinese state capital is the new VC”

• DeepSeek reportedly moved from no outside capital to a possible raise at a $45B to $50B valuation, with China’s Big Fund as lead investor.
• Chinese government-linked AI investing has exploded from under 10 deals a year before 2018 to more than 140 in 2025, especially around chips, compute, and hardware.
• Beijing is also tightening control over foreign capital in strategic AI companies, mirroring U.S. restrictions on investment into Chinese AI and chip firms.

Why it matters: The AI race is becoming less “startup vs. startup” and more “state-backed industrial policy vs. state-backed industrial policy.” Watch Chinese AI hardware and compute bets, not just model labs.

The Rundown AI: “Musk’s OpenAI case runs out of time”

• Musk’s lawsuit against OpenAI, Altman, Brockman, and Microsoft was dismissed after a jury found the case was filed too late. Musk says he will appeal.
• Cursor released Composer 2.5, claiming near-frontier coding model performance at much lower per-task cost than top rivals.
• Odyssey announced Starchild-1 and Agora-1, real-time multimodal world models that can support live, shared AI-generated environments.

Why it matters: OpenAI just removed a major IPO overhang, while the tooling layer keeps getting cheaper and more capable. Composer 2.5 is the sneaky one to watch.

Short Squeez: “Elon Musk Lost”

• The newsletter frames the OpenAI verdict as a major cleanup for OpenAI’s IPO story, since Musk had sought to unwind the for-profit structure and force huge damages into an OpenAI foundation.
• The trial surfaced rare financial details: Greg Brockman’s stake was described as worth close to $30B, Ilya Sutskever’s around $7B, and Microsoft’s stake around $135B.
• Market notes: NextEra is buying Dominion in a $67B all-stock utility merger tied to AI power demand, BDCs are pricing in Covid-level pain, and Nvidia earnings are the week’s big AI-market catalyst.

Why it matters: The legal drama is fading, but the capital markets story is heating up. AI is showing up in litigation, utilities, credit, and earnings season. Subtle as a leaf blower.

Worth opening: Fortune Term Sheet for the China/state-capital AI angle, and Short Squeez for the OpenAI trial financial disclosures.