FTI Consulting News Bytes – 23 August 2024

FTI Consulting News Bytes

This week we kick off by looking at Chinese investors’ big bet on Black Myth: Wukong, described as “a new milestone moment” for the gaming industry. Next, staying in the East, we turn our attention to news of record imports of chipmaking machinery by China as the global chip wars roll on. Elsewhere, a new survey sheds light on the lack of AI proficiency among the management class in the City of London, while OpenAI agrees yet another deal with a global publisher to ramp up its data training for SearchGPT and ChatGPT. Finally, we dive into fresh data revealing that US startup failures have risen by 60% over the last year following the boom of 2021/22. 

This week’s news

Chinese gaming goes global

Black Myth: Wukong is its name and its China’s first AAA game. It’s currently on its way to becoming a global hit. The Financial Times’ Lex column notes that its sparked heavy buying from Chinese investors in Chinese companies linked to the game both directly and indirectly. One Chinese brokerage proclaims the game represents “a new milestone moment” for the game industry. It does mark an interesting change in dynamic. The Chinese game market traditionally has been dominated by smartphone games, but Black Myth is one of many games that are helping console games to gradually gain ground. The Financial Times concludes it “could kick-start the sluggish global gaming industry.”

The Chip wars continue

Chinese imports of equipment to make semiconductors hit a record for the first seven months of this year. Domestic companies are continuing to increase their purchases wary of the fact that further restrictions from the US and its allies may block them from buying. According to fresh trade data, Chinese firms imported almost $26 billion worth of chipmaking machinery surpassing the previous high mark in 2021. There is increasing spend on lower end technology too after restrictions have impacted their ability to purchase more cutting-edge technology. Bloomberg adds that it has given a boost to European firms such as ASML. The Dutch company’s sales to China surged 21% in the second quarter to hit almost half of its total revenue. ASML is the sole supplier of the most advanced lithography equipment required to make cutting-edge chips.

Lack of understanding of AI goes right to the top 

A new survey by the Chartered Management Institute reveals that over a third of British managers have yet to try ChatGPT, and most lack formal training in AI. Despite AI’s growing influence on business operations, including in call centers, marketing, and legal work, 86% of the 1,000 managers surveyed had never received AI training from their employers. Only 9% believe their organizations have the skills to use AI effectively reports The Times. This comes as another survey conducted by digital transformation specialists UST reveals that nearly 90% of IT leaders in $500+ million revenue companies say their firm needs to increase spending on AI implementation to keep up with their competitors. The UK Government has urged businesses to adopt AI to boost productivity, offering grants up to £5,000 for training in professional services, with plans to expand to other sectors. Anthony Painter, CMI’s director of policy, emphasized the need for comprehensive AI training to avoid falling behind globally. Without it, the UK risks missing out on AI’s full economic potential, he argues. 

OpenAI closes latest publisher deal for LLM data training 

The makers of ChatGPT and the recently launched SearchGPT, OpenAI, have reached an agreement with well-known publisher Condé Nast to use its vast archives of text to train the AI company’s large-language-models. The multi-year partnership with the magazine publisher gives SearchGPT permission to return information and quotes from Condé Nast articles in its results. It marks the latest in a series of agreements made with other high-profile publishers, such as Financial Times, Axel Springer and Time magazine, and has become a key part of OpenAI’s strategy to resolve issues concerning AI and intellectual property. As reported by The Guardian, Condé Nast’s CEO highlighted the importance of adapting to AI-driven content discovery while ensuring proper attribution and compensation. Meanwhile, other media companies, like The New York Times, are pursuing legal action against OpenAI.

Challenging market for US start-ups as failures rise by 60% 

New data reported in the Financial Times reveals start-up failures in the U.S. have surged by 60% over the past year, as companies run out of cash raised during the tech boom of 2021-22. This sharp rise in closures threatens millions of jobs in venture-backed firms and poses risks to the broader economy. Data from Carta shows that 254 of its venture-backed clients shut down in the first quarter of this year, marking a failure rate over seven times higher than in 2019. Despite ongoing heavy investment in AI, notable start-ups are collapsing. The latest casualty is Tally, a financial technology firm valued at $855 million in 2022, which failed to secure additional funding. Other high-profile closures include Caffeine, a live-streaming site backed by Fox Corp; healthcare start-up Olive, once valued at $4 billion; and trucking company Convoy, last valued at $3.8 billion. These shutdowns highlight the growing challenges faced by start-ups as funding dries up and market conditions tighten.

Top Tweets of the Week

• Phillip Heimberger a researcher at the Vienna Institute for International Economic Studies tweets: “China is currently building 8 times as much solar and wind capacity as the US, and 34 times as much as the UK. Even if you combine all of the rest of the world, China builds twice as much solar and wind capacity as everyone else combined.”
• Ashley Armstrong, Business Editor at the Sun tweets: “Octopus boss Greg Jackson likens car manufacturers who kick back against net zero tariffs to retailers who went bust after not investing online. * On IPO chances of £7bn firm says UK investors aren’t “ambitious” enough in blow to LSE.”
• Michael Pettis a Senior Fellow at the Carnegie Endowment tweets: “50.8% of car dealers in China reported losses in the first six months of 2024, compared to 43.5% in 2023, according to data released yesterday by the China Automobile Dealers Association. Only 35.4% of them were profitable.”

Number of the week

>2.4m – The number of concurrent users on Steam playing China’s first AAA gaming hit Black Myth: Wukong according to SteamDB.