FTI Consulting News Bytes – 01 September 2023

FTI Consulting News Bytes

In this week’s edition we kick off by looking at the Semiconductor industry. The US has expanded the restriction of exports of some of Nvidia’s and Advanced Micro Devices AI chips that are used for machine-learning tasks to include some countries in the Middle East. Elsewhere, Google has for the first-time, expanded its generative AI search experience outside of the US to India and Japan.  We then switch over to Fintech as Klarna’s CEO outlines his conditions for taking the Company public as well as sharing some context on the state of funding for fintech’s.  Whilst the US IPO drought appears to be ending, a Bloomberg Opinion piece tempers the optimism of those hoping for a swift and total comeback for the market.  Finally, take extra care when sending out emails as the UK privacy watchdog has warned that incorrect use of email BCC is leading to a spike in data breaches, resulting in fines for businesses. 

This week’s news

Chip wars

As reported by Reuters, the US government has expanded restrictions of exports of Nvidia’s and Advanced Micro Devices AI chips beyond China, to include other regions (including some countries in the Middle East). Both Nvidia and Advanced Micro Devices have flagged that the restrictions won’t have a material impact on their revenues. The chips affected are those which are typically used to accelerate machine-learning tasks on major AI apps such as ChatGPT.  The countries that will be affected within the Middle East were also not disclosed by Nvidia or Advanced Micro Devices.

Gen AI Search comes to India and Japan

Search Generative Experience (“SGE”), Google’s new AI-powered search feature, was first announced at this year’s Google I/O Developer conference in May. Following an initial rollout in the U.S. TechCrunch highlights that Google has now embarked on its global expansion plans, bringing its generative AI search tool to users in India and Japan. Similar to an AI chatbot you can ask Google questions about a topic and it will return answers – now showing text or visual results to prompts, including  summaries. In recent months, the Company has updated the feature with support for videos and images, local info and travel recommendations, as well as new tools to provide summaries, definitions, and more help with coding-related queries. Users will have the choice to opt in whilst Japanese users will have the choice to use the feature in their local languages. In India, the feature will be available in Hindi.  

Buy now, public later

In an interview with the Financial Times, Klarna’s CEO, Sebastian Siemiatkowski, said the three conditions he has for taking Klarna public have been met. These are an established US presence, a sustainable business model (Klarna just posted its first profitable month in three years) and strong room for further growth. However, Semiatkowski said the conditions are only sufficient when complemented by favourable market conditions. On the mood music around fintech, he highlighted he has “never seen this level of depression” adding now is not the ideal time to be raising money. 

IPO drought is ending…but hopes for a comeback aren’t high

The US market for IPOs is finally reopening after a dormant period, with Instacart, Klaviyo and Arm Holdings all filing to go public last week. Whilst “conventional wisdom” holds that other IPOs will follow if these deals go through smoothly, it could take years until the market recaptures its “erstwhile sizzle”, Jonathan Levin argues in an opinion piece for Bloomberg. Apparently, after the sleepiest stretch in 32 years, Levin comments that firms are having a hard time accepting that today’s sale multiples don’t match those received by their industry peers, particularly tech firms, during the peak of the 2021 bull market. Whilst the drought “is much more about supply than demand”, Levin notes that IPO bankers may have to make some amends to lure back investors, as institutional IPO buyers have been left disappointed with lacklustre returns on IPO offers. Although AI could, in theory, generate numbers of new equity offerings comparable to those generated by the internet boom of the 1990s, the IPO market is likely to struggle to make a total comeback until this happens.

BCC blunders could mean fines for businesses

The UK’s Information Commissioner’s Office (ICO) has warned that misuse of “blind carbon copy” (BCC) on emails could result in fines for businesses, The Telegraph reports. Sending an email using BCC hides the addresses of the intended recipients from other people, but the ICO said it was routinely misused, or inadvertently listed email recipients in the “to” or “CC”, leading to a spike in data breaches. It advised organisations to instead use alternatives, such as mail merge tools or professional bulk email software. Mihaela Jembei, a director at the ICO, said: “Failure to use BCC correctly in emails is one of the top data breaches reported to us every year – and these breaches can cause real harm, especially where sensitive personal information is involved…where we see negligent behaviour that puts people at risk of harm, we will not hesitate to use the full suite of enforcement tools available to us.” The ICO has the power to issue fines of up to £17.5m for the most serious data breaches. It has said it will use “discretion” when issuing penalties to the public sector, only fining organisations in the most serious cases.

Top Tweets of the Week

• Nick Bloom, an Economics professor at Stanford tweets: Maybe the best evidence that #WFH is here to say – CEOs and CFOs say so. The SBU polled leaders at 500 US firms in July 2023 asking them about 2018, 2023, and 2028 future working. As the chart shows, executives expect hybrid and fully-virtual to grow.
• Bloomberg: The Bank of England’s chief economist Huw Pill says UK interest rates need to remain “sufficiently high for sufficiently long” to get inflation down sustainably to the 2% target.
• Guy Berger, Principal Economist and Head of Macroeconomics at LinkedIn tweets a snapshot of LinkedIn’s Workforce report:  US hiring fell by 3.6% M/M (SA). We’d seen signs of stabilization in the spring, but over the past 3 months this metric has resumed moving in a negative direction. Most industries do show hiring declines moderating in the past 6 months relative to the preceding six months.  Tech, information and media in particular stands out her.

Number of the Week

$200M – The cost of an Extreme Ultraviolet machine (EUV), essential for semiconductor chip making.