FTI Consulting News Bytes – 23 February 2024

FTI Consulting News Bytes

We kick off this week’s edition of News Bytes with a glance at Big Tech and regulation, as Meta and Microsoft put Apple into the regulatory spotlight in Brussels. Staying within the EU, we then look at a report which reveals plummeting exit values for European startups in 2023. Turning to the Middle East, Saudi Arabia’s new investment firm has caught attention this week, announcing deals with SoftBank and a Chinese surveillance firm. Elsewhere, Nvidia impressed investors this week as demand for AI chips soars. Finally, we return to the UK where the CMA has been urged to launch a phase-two inquiry before reaching a decision on the planned merger between Vodafone and Three.

Before we dive into the news stories, on Tuesday 5th March FTI Consulting will host a lunchtime fireside chat between Rory Cellan-Jones, former BBC Technology Correspondent, and Nigel Toon, CEO & Co-Founder of Graphcore, to discuss how we can ensure better understanding of how AI thinks and work with intelligent machines to produce innovations that are beyond human capacity. Please do let us know if you are able to join us. You can sign up via this link.

Additionally, on Thursday 11th April, we are also hosting a breakfast event with Madhumita Murgia, Artificial Intelligence Editor at the Financial Times, to discuss her new book on AI. More from Madhumita in our Top Tweets of the Week below. Do get in touch if you would like to attend.

This week’s news

Apple under regulatory spotlight for App Store dominance

The Financial Times reports that Apple is “coming under fire” from rivals Meta and Microsoft who say the iPhone maker’s plans to open up its mobile software to comply with a landmark EU law fail to go far enough. Brussels regulators are also being lobbied to extract more concessions that unpick the iOS software and to reject Apple’s proposals to satisfy the bloc’s Digital Markets Act. Apple announced it will make changes to its iOS mobile software in Europe ahead of the EU’s 7th March deadline for companies to declare how they will adhere to the DMA, which aims to tackle the market power of Big Tech groups. The FT notes that the proposal poses a dilemma for developers: should they stick with Apple’s existing ecosystem and fees, or twist, leaving permanently and facing new terms.

Exit values plunge as public listing activity reaches a ten year low

A new report has revealed that the value of exits for European startups plunged nearly 30% to €23m in 2023 amid ongoing macroeconomic uncertainty and a 10-year low in public listings. Navina Rajan, senior EMEA private capital analyst at PitchBook, told Sifted that this tougher exist environment means management teams will need to take on debt or follow-on rounds, or extend internal cash runways to keep running. The outlet reports that the lack of exit opportunities is hitting European unicorns with further redundancies expected during 2024. Whilst some of the largest deals in 2023 involved AI companies, Sifted reports that the AI hype hasn’t resulted in an overarching increase in valuations for AI startups. Rather, for AI companies, last year saw only marginal increases in seed and pre-seed valuations, while post Series A valuations halved.

Signed, sealed, delivered: Saudi investment firm’s deals push  

Saudi Arabia’s new $100bn investment firm, Alat, announced a series of deals on Tuesday, including partnerships with SoftBank and Dahua Technology, a Chinese surveillance equipment maker, to set up local manufacturing facilities in the kingdom. Bloomberg reports that these deals form part of Saudi Arabia’s efforts to become an “industrial powerhouse”. Alat and SoftBank will reportedly invest as much as $150 million to establish a fully automated manufacturing and engineering hub in Riyadh, which will build industrial robots with SoftBank-developed IP. Dahua was among firms banned from selling electronics in the US by regulators who said they posed a security risk, Bloomberg notes. The company has previously supplied products to Saudi Arabia, including face scanners for the government’s $500 billion Neom project. The deals come one month after a Saudi Arabian government minister said that its public investment fund is looking to make a “sizable investment” in the semiconductor industry.

Nvidia declares AI tipping point

The world’s most valuable chip company, Nvidia, reported year-on-year quarterly revenue growth of 265% amid soaring demand for its AI chips. The market’s reaction to Nvidia’s quarterly earnings saw shares gain more than 13%. “Accelerated computing and generative AI have hit the tipping point,” said Nvidia founder and chief executive Jensen Huang, adding that “demand is surging worldwide across companies, industries and nations.” The Financial Times reports that Nvidia’s chips have become the industry standard for AI developers to crunch data for large language models which has accelerated generative AI as a new industry. Big Tech companies account for nearly 40% of Nvidia revenues, but its customers have diversified as more industries rush to invest in hardware for AI computing.

CMA urged to investigate planned Vodafone-Three merger further

The Commons business and trade committee has urged the Competition Markets Authority (CMA) to launch an in-depth investigation into the planned £18 billion merger between Vodafone and Three in the UK. The Times reports that Liam Byrne, the committee’s Labour chairman, wrote in a letter that it believed that the proposed merger, which would create Britain’s biggest mobile network, would lead to a “substantial lessening of competition” following “significant doubts” that had been raised by witnesses on the benefits of the deal at a recent parliamentary hearing. While the CMA announced an initial phase one inquiry into the deal last month, the letter asserts the committee’s belief that the regulator “has a duty to launch an in-depth phase two assessment.” The CMA has until 22nd March to reach a decision on whether to refer the deal to a more in-depth phase two inquiry. 

Top Tweets of the Week

• BBC News: BT Tower: ‘Iconic’ landmark to be turned into a hotel after £275m sale
• Madhumita Murgia, AI Editor at the Financial Times: Impossible to have a nuanced conversation about race on here, but genuine question: why does seemingly everyone have such a huge issue with Gemini generating images of women/people of colour, when AI has been doing this for YEARS in the opposite direction?
• Bloomberg Technology: Samsung sells its entire $930 million stake in ASML in a push to expand into new areas of chipmaking

Number of the Week

$100bn – The amount SoftBank’s founder is reportedly seeking to build a new AI chip venture