The April 2026 issue of State of AI from Air Street Press. The through-line: frontier AI moved from benchmark progress to operational capability across cyber, coding, agents, and capital formation.

Two frontier models cleared the UK AI Security Institute's 32-step end-to-end cyber-attack range in a single month, and AISI now estimates frontier cyber-offence is doubling every four months, down from seven months at the end of last year. We unpack what that means for the public cybersecurity stack.

Microsoft and OpenAI reset their 2019 deal to non-exclusive while keeping Microsoft as primary cloud partner. Anthropic stacked another $40B from Google, $5B from Amazon (with $100B of AWS spend), and chip deals with Google and Broadcom reportedly worth hundreds of billions, and is reportedly already raising again at a $900B valuation. Sam Altman's Axios essay sketched a "superintelligence New Deal" in explicit FDR terms.

Four Chinese labs (Z.ai, MiniMax, Moonshot, DeepSeek) released open-weights coding models inside a 12-day window, all landing at roughly the same capability ceiling as Claude Opus 4.6 and GPT-5.4 on agentic engineering. NIST's CAISI evaluation puts the aggregate gap closer to eight months. Both are true.

Anthropic's Project Deal ran a classified marketplace of 69 Claude agents and reported that stronger agents won, and the losers did not realise it. KellyBench (from Air Street portfolio company General Reasoning) watched every frontier model lose money on a Premier League betting season under non-stationarity. Ramp's procurement agents run 3× faster.

Plus eight research papers worth keeping (π0.7, the Ríos-García epistemology paper, ClawBench, the FAIR experience-replay paper, Agent-World, and others), April Investments (Ineffable Intelligence's $1.1B seed, Saronic, Cognition's $25B talks, Cursor's $50B+ talks), and Exits (Skild and Zebra, SpaceX and Cursor, OpenAI and Hiro, Cohere and Aleph Alpha, China blocking Meta's acquisition of Manus).

Profluent just announced a multi-program strategic partnership with Eli Lilly to develop AI-designed recombinases for genetic medicine — worth up to $2.25 billion in milestones, plus tiered royalties on net sales.

In this episode, Nathan unpacks why this deal matters far beyond the headline number. CRISPR taught us how to fix typos in the genome. The harder problem — and arguably the larger one — is editing at the kilobase scale: replacing whole paragraphs of DNA at a chosen genomic address. That's the route to therapies for the long tail of genetic disease driven by patient-level mutational heterogeneity, from cystic fibrosis to inherited hearing loss to retinal dystrophy.

Recombinases have always been the right class of enzyme for this job. They've also been stuck for decades because their targeting specificity is encoded directly in the protein structure, with no equivalent of CRISPR's modular guide RNA. That makes recombinases a near-perfect problem for foundation-model protein design — and it's exactly the bet Profluent has been building toward since their 2024 work designing novel Cas enzymes from scratch.

We cover: why kilobase-scale editing is the next frontier of genetic medicine; why recombinases were intractable until AI; how Profluent's foundation-model platform changes the picture; why Lilly is the right partner; and what the world looks like if you can name a genomic address and get a designed editor back.

Episode Description

Welcome back to the State of AI! In this packed Q1 2026 episode, we dive into a quarter defined by unprecedented geopolitical friction, staggering capital concentration, and the rapidly blurring lines between commercial cloud infrastructure and national defense.

From a constitutional showdown between Anthropic and the Trump administration to the first-ever kinetic military strike on commercial data centers, the stakes for frontier AI have never been higher. Plus, we break down Anthropic’s explosive $19B ARR sprint, the escalating "distillation wars" with Chinese AI labs, and the historic $1.25 trillion merger between xAI and SpaceX.

If you want to understand where the frontier is heading next, you can't miss this one.

• The Pentagon Standoff: Anthropic's $200M DOD contract, its refusal to drop safety guardrails, and the ensuing White House blacklist and federal lawsuit.

• Cloud as a Theater of War: Breaking down the unprecedented Iranian drone strikes on AWS data centers in the Middle East.

• Revenues Go Vertical: How Anthropic surged to a $19B ARR on the back of Claude Cowork, and OpenAI's massive $50B strategic alliance with Amazon.

• The Model Treadmill: The rapid succession of new model releases, including Claude Sonnet 4.6, Gemini 3.1 Pro, and GPT-5.4.

• The Distillation Wars: Inside the industrial-scale IP theft by Chinese labs cloning Claude, and the $2.5B NVIDIA GPU smuggling bust.

• Safety Meets Reality: Sabotage risks, machine-speed SQL injections, and the UK AI Safety Institute's chilling findings on AI-assisted cyber attacks.

• The Physical Layer & NIMBYism: The pushback against hyper-scale data centers and NVIDIA's complete exit from the China-compliant chip market.

• Breakthrough Research: From zero-loss cache compression (TurboQuant) to an Australian entrepreneur curing his dog's cancer with AlphaFold.

• Historic Mega-Deals: OpenAI's record-shattering $110B raise and xAI's trillion-dollar merger into SpaceX.

• 00:00 - Intro, Air Street Capital Epoch 3, & RAAIS 2026

• 01:28 - Geopolitics: Anthropic vs. The White House

• 03:12 - The Iran-AWS Conflict & Cloud Warfare

• 04:12 - Financials: Anthropic's $19B ARR & OpenAI's Hyperscaler Strategy

• 08:04 - The Model Treadmill: Claude Sonnet 4.6, Gemini 3.1 Pro, & GPT-5.4

• 08:56 - Open Source, IP Warfare, & the $2.5B Smuggling Ring

• 10:44 - AI Safety: Catastrophic Sabotage & The Sabotage Risk Report

• 13:20 - Data Center NIMBYism & The Contested Physical Layer

• 16:00 - Research Highlights: UK AISI, TurboQuant, & World Action Models

• 22:40 - Investments & Exits: OpenAI's $110B Round & The SpaceX/xAI Merger

Stay Connected:Love hearing what you’re up to! Hit reply to our newsletter or connect with us at the upcoming Air Street AI meetups in SF (April 28) and NYC (May 14). We are also actively recruiting Research Analysts for the State of AI Report—reach out if you live and breathe this space.

Produced by the State of AI & Air Street Press.

In This Episode, We Cover:Episode Timestamps (Estimated):

Raia Hadsell is VP of Research at Google DeepMind, co-leading the Frontier AI unit. Her work spans Siamese nets and elastic weight consolidation to Gemini 2.5, RoboCat, and a UK AI Ambassador role. A RAAIS 2026 speaker profile from Air Street Press.

Roberta Raileanu leads open-ended learning at Google DeepMind and co-authored Toolformer. From RIDE and AMIGo to Llama 3's tool use and MLGym, her research tackles what it takes for AI agents to keep acquiring skills. A RAAIS 2026 speaker profile from Air Street Press.

Starcloud launched the first NVIDIA H100 GPU in space and trained the first LLM in orbit. CEO Philip Johnston explains why AI's energy bottleneck leads to orbital data centres — with 10x lower energy costs and 5 gigawatts of solar-powered compute on the roadmap. A RAAIS 2026 speaker profile from Air Street Press.

Air Street Capital has raised a third fund of $232M to back AI-first companies from the earliest stages. In this post, founder Nathan Benaich shares the conviction behind the firm - from his first investments in 2013 through to a portfolio that now includes Synthesia, Black Forest Labs, Wayve, Profluent, and poolside - and explains what Fund III enables for the most ambitious AI founders in Europe and North America.

Read more: https://press.airstreet.com/p/fund-iii

Sereact's Cortex 2.0 marks a shift in robotics from reactive control to predictive planning. In this episode, we examine how Sereact’s world-model architecture generates and scores imagined futures before acting, improving success rates and eliminating human intervention across complex warehouse tasks. We break down the benchmark results, the planning budget trade-off, and what it means to deploy world models in real industrial environments rather than simulation.

European voters say they support higher defense spending. But when higher taxes or welfare cuts are mentioned, support collapses.

In this episode from Munich Security Conference 2026, we explore Europe’s fiscal test: Germany’s industrial flywheel, the reality of attrition warfare in Ukraine, the broken procurement model, and the tension between welfare and warfare.

Europe has demonstrated urgency. Now it must prove permanence.

In this episode of the State of AI, we break down the growing disconnect between rapid AI capability gains and collapsing software valuations, with nearly $300B wiped from public markets in weeks. We cover the agent shock triggered by Anthropic and OpenAI’s latest releases, why investors are repricing long-term SaaS revenues, and how AI sovereignty is fracturing across U.S. policy, state-level infrastructure pushback, and China’s accelerating model and talent pipeline. We also look at the security risks of computer-use agents, the infrastructure arms race spanning GPUs, memory, power, and data centers, and the latest research breakthroughs in autonomy, medicine, and reinforcement learning. Plus, a full rundown of the month’s largest AI financings, IPOs, and acquisitions.

AI has progressed fastest where the world can be cleanly digitized, but robotics remains stubbornly hard. In this episode, we examine Sereact’s Cortex 1.6 and what its results reveal about learning from execution rather than sparse task outcomes. We discuss why execution-level learning improves robustness, recovery behavior, and learning efficiency in real-world robotic manipulation, and what this signals for the future of deployment-first robotics.