The Peel with Turner Novak The State of AI: Rise of Reasoning, Surge in Chinese Open Source, Sovereign AI , How to Invest in AI Today | Nathan Benaich, Air Street Capital
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Jan 22, 2026 
In this discussion, Nathan Benaich, founder of Air Street Capital and author of the influential State of AI report, delves into groundbreaking trends shaping the AI landscape. He discusses the shift toward reasoning and tool calling in AI models, and the significant rise of Chinese open-source projects. The conversation also touches on the reality of AI monetization and the emergence of sovereign AI strategies driven by geopolitical motives. Benaich reflects on whether we are in an AI bubble and shares insights on AI investments and opportunities in Europe’s defense sector.
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Models Move From Memorization To Reasoning
- Models have shifted from memorizing web knowledge to stepwise reasoning and calling external tools like web search or APIs.
- This enables up-to-date answers and repeatable logical workflows rather than brittle weight-based facts.
Design Systems To Separate Memory From Reasoning
- Separate memory (facts) from reasoning in system design and use tool-calls for dynamic facts.
- Train models to learn reasoning patterns rather than embedding facts that require frequent updates.
China's Open-Weights Surge Changed The Market
- Chinese labs have rapidly produced high-quality open-weight models and public listings, accelerating global competition.
- This surge changed the open vs closed source dynamics and pressured Western policy around model access.