State of AI: April 2026 newsletter
State of AI: April 2026 newsletter US Government blacklists Anthropic as Iran bombs AWS data centers. Plus: $19B revenue in weeks, industrial-scale distillation wars, and an mRNA dog cancer vaccine designed by ChatGPT. Dear readers, Welcome to the latest issue of the State of AI, an editorialized newsletter that covers the key developments in AI policy, research, industry, and start-ups from February 1 to April 7, 2026. First up, a few news items: Air Street Capital Epoch 3 is live! $232M to continue backing AI-first companies across the US and Europe in software, dev/infra, techbio and defense. RAAIS 2026 is back in London on June 12. This year’s speakers include Raia Hadsell (VP Research, Google DeepMind), Roberta Raileanu (Senior Staff Research Scientist, Google DeepMind), Jeff Hawke (Co-Founder & CTO, Odyssey), and Philip Johnston (Co-Founder & CEO, Starcloud - yes, data centers in space). Come along and support the RAAIS Foundation’s mission in AI education and research. Air Street AI meetups are coming up in SF on April 28 and NYC on May 14. We’re recruiting Research Analysts for the State of AI Report. If you live and breathe this stuff and want to help us build the next edition, get in touch. If you’re looking for a new challenge in our portfolio or community, come chat with Guy Kendall, Air Street’s new Head of Talent. Air Street Press featured the A Letter from the Munich Security Conference 2026 and Dreaming in Latent Space. I love hearing what you’re up to, so just hit reply or forward to your friends :-) The Pentagon Standoff How did we even get here? The defining industry story of this quarter wasn’t an agentic model launch or more exotic financial engineering, but a constitutional confrontation between a sitting president and an AI lab over who gets to decide how frontier models are used in war. In late February, Under Secretary of War Emil Michael publicly criticized Anthropic for maintaining usage restrictions, including prohibitions on autonomous weapons and domestic mass surveillance, in its Pentagon contracts. Anthropic had won a $200M DOD contract alongside other frontier labs last summer, but its insistence on binding safety guardrails placed it on a collision course with a Trump administration that viewed such constraints as vendor overreach. On February 27, the White House issued a directive ordering all federal agencies to phase out Anthropic’s products within six months. Literally hours later, OpenAI CEO Sam Altman announced a deal to deploy its models on the Pentagon’s classified network, with contractual “red lines” against autonomous weapons and domestic mass surveillance allegedly written into the agreement. He followed up days later with an internal memo detailing amendments that added explicit language: “The AI system shall not be intentionally used for domestic surveillance of U.S. persons and nationals.” By March 4, three cabinet agencies, State, Treasury, and HHS, had switched from Anthropic to OpenAI, with the State Department migrating (read: downgrading) its in-house StateChat to GPT-4.1 (grief!). On March 5, the Pentagon formally notified Anthropic…