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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 DescriptionWelcome 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 202601:28 - Geopolitics: Anthropic vs. The White House03:12 - The Iran-AWS Conflict & Cloud Warfare04:12 - Financials: Anthropic's $19B ARR & OpenAI's Hyperscaler Strategy08:04 - The Model Treadmill: Claude Sonnet 4.6, Gemini 3.1 Pro, & GPT-5.408:56 - Open Source, IP Warfare, & the $2.5B Smuggling Ring10:44 - AI Safety: Catastrophic Sabotage & The Sabotage Risk Report13:20 - Data Center NIMBYism & The Contested Physical Layer16:00 - Research Highlights: UK AISI, TurboQuant, & World Action Models22:40 - Investments & Exits: OpenAI's $110B Round & The SpaceX/xAI MergerStay 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.