Exclusive | Andreessen Horowitz Launches ‘Machine Age’ Fund to Tackle AI Supply Bottlenecks

Fifteen years after Marc Andreessen famously declared that “software is eating the world,” his venture-capital firm Andreessen Horowitz is making a big bet on hardware.

Andreessen Horowitz has raised $1.1 billion for its first dedicated hardware-infrastructure fund, dubbed Machine Age, which will focus on investments in artificial-intelligence processors, memory chips, networking equipment, data storage and robotics, among other areas.

“The simplistic way to think about it is things that are within the four walls of the data center, this fund would do,” said Raghu Raghuram, a tech-industry veteran who started his career at internet pioneer Netscape, where he worked alongside Andreessen, then later served as chief executive of VMware before joining Andreessen Horowitz as a general partner last year.

Raghuram will make investments from the new fund alongside general partner Martin Casado, who also leads the firm’s software-infrastructure fund, as well as other partners.

Andreessen Horowitz has made investments in hardware companies in the past, including SpaceX and Anduril, but “it was never a main focus,” said Casado, who joined Andreessen Horowitz in 2016 after founding software startup Nicira and serving as an executive at VMware following its acquisition of the startup. “Our primary focus has always been software.”

That has changed as a result of growing bottlenecks in AI infrastructure and an influx of founders building in the space amid the AI boom.

“Every time we have one of these technical epochs, it puts pressure on the infrastructure, but none of us have ever seen it this dramatic,” said Casado. “Every aspect of the hardware supply chain is capacity constrained, from chips to memory all the way down to power.”

The VC industry writ large has made a huge push into companies contributing to the physical build-out of AI, as it becomes increasingly clear that sustaining AI’s fast growth will require significantly more infrastructure. Casado said Andreessen Horowitz decided to raise a stand-alone fund after noticing how many talented founders were building hardware companies.

“Our north star tends to be the founders and what the founders find interesting,” said Casado. “In the last few years, there has just been a tremendous amount of founder activity in hardware.”

Semiconductor and autonomous-machine startups have raised roughly $100 billion from investors over the past year, according to PitchBook data. Venture-backed infrastructure startups have notched a string of exits recently, fueling enthusiasm for the space. Chip company Cerebras completed a blockbuster initial public offering in May, and Groq, another chip startup, licensed its technology to Nvidia in a $20 billion deal late last year.

The fresh funding also represents a return to form for venture capital, Raghuram said. “If you look at the history of Silicon Valley, the original venture capitalists were all people that came out of the original semiconductor companies and underwrote semiconductor investments for a long time,” Raghuram said.

Andreessen Horowitz’s new fund represents a very small portion of over $100 billion in assets under the firm’s management, according to a recent regulatory filing. In January, the venture-capital powerhouse raised over $15 billion for a new set of funds, including $6.75 billion for late-stage investments and over $1 billion each for three strategies: American Dynamism, which focuses on companies that support American interests; AI applications; and software infrastructure.

Andreessen Horowitz is one of the most active startup investors and has heavily invested in the rise of AI, from OpenAI and Thinking Machines to Cursor, the AI coding company that was sold to SpaceX in a $60 billion deal.

Casado shrugged off concerns of an AI bubble or impending correction, saying that while valuations in some areas are likely to come down, overall demand continues to grow.

“What I view as a primary indicator of the health of the space is demand, and as far as I can tell, the demand continues,” Casado said. “If demand continues, then of course it makes sense to invest in supply.”