FTI Consulting News Bytes – 31 January 2025

FTI Consulting News Bytes

This week, it’s hard to ignore where most of the attention has been focused, so we start with DeepSeek’s entry into the AI market which sent shockwaves throughout the industry and the world. We then continue exploring the subject of AI as SoftBank pledges to invest in OpenAI which would make it the biggest financial backer in ChatGPT maker. Next, we turn to the media sector where Sir Martin Sorrell’s S4 Capital adapts to the changing advertising and marketing market amid the shift to AI. Elsewhere, we discuss the UK’s cybersecurity vulnerabilities discovered by the National Audit Office. Finally, we explore Britain’s latest space endeavour as the UK government announces its investment in homegrown Orbex.

This week’s news

DeepSeek’s AI shakeup 

Chinese start-up DeepSeek shocked the industry on Monday after the company’s new generative AI app exceeded OpenAI’s ChatGPT downloads. The new low-cost AI newcomer wiped $1tn off the leading US tech stock index this week; however, it remains to be seen whether this is “the sky is falling moment” for markets. Venture capitalist Marc Andreessen summarised this as “AI’s Sputnik moment” while ASML CEO Christophe Fouquet said he sees no sign of a slowdown in demand for AI-focused chips, according to Reuters. Most recently, the Financial Times also reported that OpenAI has found evidence that DeepSeek used OpenAI’s proprietary models to train its own open-source competitor, pointing to a potential breach of intellectual property. Regardless of the outcome of this investigation, the biggest winner in this evolving story seems to be open-source AI. In the words of Meta’s chief AI scientist, Yann LeCun, DeepSeek’s success shows that “open-source models are surpassing proprietary ones”. Whether DeepSeek shows that AI’s centre of power is shifting away from the US is also questionable. The genie is out of the bottle, though. 

SoftBank’s “ambitious gambit”

While Wall Street is trying to determine the winners and losers in the fallout of China’s DeepSeek, SoftBank is focusing its attention on OpenAI. The Wall Street Journal reported that SoftBank is in talks to invest up to $25bn in OpenAI. If this investment is confirmed, SoftBank stands to become the largest investor in the AI company. Microsoft, which first invested in OpenAI in 2019, currently holds the position of the start-up’s largest shareholder. Sam Altman has been seeking to reduce the company’s reliance on Microsoft for computing resources. The Financial Times calls the potential deal with SoftBank “an ambitious gambit” by founder Masayoshi Son who is deepening his ties with OpenAI’s chief executive Sam Altman. This comes on the back of the announcement earlier that the two companies would lead a joint venture that would spend $100bn on Project Stargate in the US.

S4 Capital adapts as AI disrupts ads

Amid AI’s growing influence on marketing budgets, Sir Martin Sorrell’s digital advertising group, S4 Capital, recently has sought to reassure investors that performance was in line with expectations during the last three months of 2024. The Times reports that net revenue at S4 Capital is set to come in above a consensus forecast of £746 mn and adjusted earnings higher than £84 mn as the underlying trading showed a “sequential” improvement during the fourth quarter compared with earlier in the year. With AI-driven automation taking a larger role in digital advertising, some traditional agencies and marketing firms are facing uncertainty about their future value proposition. Sir Martin Sorrell admits clients are focusing on AI investments versus marketing spend, but the company has also been integrating AI into its digital-first model, using this technology to enhance its services rather than replace them. With the onset of AI, for marketers and advertisers, its either sink or swim. S4 Capital’s approach reflects that innovation will be key to future-proofing business models in the media sector. 

Cyber gaps leave UK vulnerable

According to Wednesday’s report by the National Audit Office (NAO), the UK needs to address significant deficiencies as the cyber threat landscape outpaces its current defensive strategies. Findings show that there is a shortage of skilled cyber security professionals within the UK’s government departments. According to The Telegraph, more than 50% of roles in several departments’ cyber security teams were vacant in 2023/24. This warning comes after a number of costly cyber-attacks on public services. Recent cyber-attacks include those on the British Library, the Parliament and the Electoral Commission. Senior Tory MP Geoffrey Clifton-Brown, who chairs the public accounts committee, has sounded the alarm on the UK’s cyber vulnerabilities: “We have seen too often the devastating impact of cyber-attacks on our public services and people’s lives. Despite the rapidly evolving cyber threat, government’s response has not kept pace.” 

Britain’s bet on Orbex

In an effort to regain momentum in the space race, the UK government has injected a £20mn investment into Scottish orbital launch services company, Orbex. The investment which forms part of Orbex’s latest funding round comes at a difficult time following reports their financial health was being investigated by PWC and the recent suspension of plans to develop a spaceport at Sutherland according to the Financial Times.  Other investors involved included Denmark’s Export & Investment Fund, Octopus Ventures and former Informatica CEO Sohaib Abbasi. Orbex CEO Phillip Chambers confirmed the investment “paves the way not only for us to launch our first rocket this year but also to develop a larger rocket to enable us to compete in the European Launcher Challenge”. Peter Kyle, the Technology Secretary, told The Telegraph that the upcoming launch was a “unique opportunity” for the UK to get ahead of its European rivals and would bring “prestige” to the domestic space sector.

Top Tweets of the Week 

• Zoe Kleinman, BBC Technology Editor: “I hate the phrase “wake up call” but that’s what DeepSeek is”.
• Jeremy Kahn, AI Editor at Fortune Magazine: “DeepSeek is the hottest new AI chatbot—but it comes with Chinese censorship built in”.
• Bloomberg: Apple has been secretly working with SpaceX and T-Mobile to add support for the Starlink network in its latest iPhone software.

Number of the week

$1tn US stocks erased more than $1 trillion in market cap on Monday amid the DeepSeek-fuelled sell-off.