GenAI Daily - February 2, 2026: Software Sector Selloff, xAI's $20B Round, Enterprise Pragmatism Takes Hold

Top Story

Software companies are facing their first major reckoning of the AI era as investors demand proof of profitability from AI features. After two years of betting on AI integration promises, the first earnings season of 2026 has triggered a violent rotation away from general software providers toward hardware and specialized AI winners.

About 70% of software providers now admit that delivering AI features is eating into profitability, challenging the era of "infinite margins" for SaaS as GPU compute costs mount.

The selloff accelerated after Microsoft reported $81 billion in quarterly revenue - beating expectations on all metrics - yet saw its stock plunge 10% as Azure's growth decelerated from 40% to 39%. In 2026's market environment, "beating" expectations isn't enough; companies must show acceleration or face multiple compression.

Companies like Salesforce and Adobe are being forced to pivot from traditional subscriptions to usage-based pricing models just to maintain margins.

Why it matters: The AI revenue honeymoon is over. Enterprise buyers should expect fundamental pricing model shifts across their software stack as vendors struggle to balance AI capabilities with profitability. (Yahoo Finance)

Key Developments

Microsoft Launches Maia 200 Inference Chip to Break NVIDIA Dependence

Microsoft launched Maia 200, a custom AI inference chip manufactured on TSMC's 3nm process, offering 30% better cost performance than existing systems and outperforming Amazon and Google chips in lightweight computation.

In FP4 performance, it delivers three times the capability of Amazon's Trainium chip and outperforms Google's TPU Ironwood.

Initial supply will prioritize Microsoft's internal superintelligence development team, with applications to Copilot and AI models for cloud customers before expanding to Azure service customers.

This marks Microsoft's second custom chip after the Maia 100 in November 2023. (Seoul Economic Daily)

Impact: Enterprise customers can expect better cost-performance ratios for AI inference workloads on Azure as Microsoft reduces NVIDIA dependence.

xAI Completes Record $20 Billion Series E Round

xAI has completed a $20 billion Series E round, exceeding its initial $15 billion target with backing from NVIDIA, Cisco, and the Qatar Investment Authority. The funds will fuel expansion of its Colossus supercomputer cluster (operating over one million H100 GPU equivalents) and support development of Grok 5.

Simultaneously, Anthropic is reportedly in talks to raise $10 billion at a $350 billion valuation, led by GIC and Coatue Management, accompanied by a separate deal where NVIDIA and Microsoft plan to invest up to $15 billion in exchange for $30 billion in compute capacity.

(Crunchbase)

Impact: The funding arms race signals intensifying competition for enterprise AI contracts, potentially driving down pricing as well-funded players compete for market share.

Enterprise AI Shifts to Pragmatic Implementation

The need for financial payoff has emerged as a consistent theme among experts predicting AI trends for 2026. "2026 is the 'show me the money' year for AI," with enterprises needing to see real ROI and countries requiring meaningful productivity growth to justify continued AI infrastructure spending.

James Brundage of EY notes that 2026 will be when pragmatism supplants optimism: "Boards will stop counting tokens and pilots and start counting dollars."

With MCP (Model Context Protocol) reducing friction of connecting agents to real systems, 2026 is likely the year agentic workflows finally move from demos into day-to-day practice.

(Axios)

Impact: Enterprise software buyers should expect vendors to shift from capability demos to concrete ROI metrics and measurable business outcomes.

Product Launches

• Microsoft Copilot Checkout: AI shopping feature that lets users complete purchases directly inside Microsoft's chatbot, targeting enterprise retailers through existing Azure and Microsoft 365 relationships (GeekWire)

• NVIDIA Rubin Platform: Next-generation AI supercomputer architecture comprising six new chips, with deployment starting in 2026 across AWS, Google Cloud, Microsoft, and NVIDIA cloud partners (NVIDIA)

• Mercedes-Benz CLA with Alpamayo: First passenger vehicle featuring NVIDIA's reasoning-based autonomous driving system, providing "reasoning traces" to explain driving decisions in complex scenarios (DC The Median)

Funding & Deals

• xAI - $20B Series E: Generative AI startup behind Grok chatbot securing record funding to expand Colossus supercomputer and develop Grok 5 - Led by NVIDIA, Cisco, and Qatar Investment Authority (Crunchbase)

• LMArena - $150M Series A: Platform for evaluating AI models reached $1.7 billion valuation with 5 million monthly users facilitating 60 million conversations - Led by Felicis and UC Investments (AI Apps)

• Neural Concept - $100M Series C: CAD-native, physics-aware AI platform for product development used by General Motors, GE Vernova, and F1 teams - Led by Goldman Sachs Growth Equity (AI Funding Tracker)

Tomorrow's Watch List

• Databricks earnings expected to show progress on $15 billion revenue target for 2026
• Federal preemption challenges to state AI laws as Trump's AI litigation task force begins operations
• CES 2026 physical AI demonstrations translating to enterprise deployment timelines

Related reading: Check out this week's Deep Insights analysis for strategic context on the software sector rotation and enterprise AI maturation.