Gravitas Spark CrowdFunding

Tag: Apple

  • A Wave Of Huge Numbers And New Thoughts

    A Wave Of Huge Numbers And New Thoughts

    Freezbrury waters are imminent, but I sense things are actually hotting up. I’m also conscious it’s Friday before a bank holiday weekend so will keep it light. Let’s just highlight a few significant datapoints from the tsunami of numbers bombarding our screens this week. Then, next week we might dive deeper. Not quite as low as Cruella “Reformed” Braverman, Commandant Greg “Himmler coat” Bovino, Stephen “Peewee German” Miller, or Kristi “ICE Barbie” Noem who definitely fall into wannabe Waffen SS territory. There’s something deliciously ironic about a world which has embarked on an artificial intelligence (AI) space race while “Trump Is Making America Stupider” per The Bulwark newsletter headline. Maybe the bots won’t need to be that good? Anyway, that possibility doesn’t seem to be stalling spending by global technology giants on AI… for now.

    My favourite AI datapoints this week come from Microsoft, Meta, Sandisk, OpenAI and ElevenLabs. Given these numbers are like an assault on the senses I think it’s best to present them in bullet form:

     

    • Microsoft’s fiscal Q2 update this week showed its cloud/AI order backlog rocketing by 110% to $625 billion. But, that wasn’t the show stopper or the share price killer (down 10% overnight). A whopping 45% of that backlog ($281 billion) was linked to one private start-up company, OpenAI.

     

    • Meta/Facebook also announced a huge number, but not a future revenue one. Its planned capital spending on AI infrastructure and development this year will be $135 billion. For context, as recently as 2023 Meta did not even generate this much money as its entire year’s REVENUES (not profits).

     

    • Lesser-known memory chip player, Sandisk, was the S&P 500’s best performing stock last year (+577%) as a beneficiary of investors’ search for AI ‘picks and shovels’. That story continues and is a reminder not to quit on your winners. Sandisk’s quarterly update this week beat expectations with 600% earnings growth and another 25% jump in the share price in after-hours trading. So far this year, the Sandisk share price is up 127%. Yep, just January.

     

    • In start-up land ElevenLabs is the hot AI Voice tool backed by Sequoia. It’s not just a hot investment, it’s a hot career choice. Only 0.018% of 180,000 job applicants in a 6 -month period get a job. As the brilliant VC commentator and fund manager, Harry Stebbings, pointed out, you are 200x more likely to get into Harvard.

     

    • Back to OpenAI. Yes, people worry about that famous FT graphic and OpenAI as the potential AI investment “weakest link”. However, the capital cavalry could be on its way. Latest chat is that OpenAI plans to IPO in Q4 2026 with a raise of $100 billion on a valuation close to $1 trillion. For historical context, the previous biggest IPO raise in history was $26 billion by Saudi Aramco.

     

     

    There’s now a bigger qualitative exploration of the AI theme due, given the pretty scary comments from OpenAI rival, Anthropic, CEO founder Daro Amodei. He reckons we are moving towards “AI systems that will be better than almost all humans, at almost all tasks….by 2026, 2027.” Check out the videos on social media showing how the likes of Moltbook and Clawd are blowing people’s minds with the power of their agentic capabilities.  Here’s a few other mind-blowing datapoints in a variety of areas where regular readers will know I have been thematically focused.

    Opportunity outside USA: We talked about real things (atoms) versus digital code (bits) previously. So, see how Brazil’s real asset-rich stock market has clocked 14% gains in January alone. However, the genuine head-rocker outside US stocks is the latest earnings growth  estimates for South Korea’s stock market. Goldman’s reckon earnings growth for the entire blue chip Kospi Index will be 75% in 2026. Note most of that earnings growth will come from two companies who are critically plugged into the supply squeeze for memory chips (RAM, DRAMs, thank you Mam) – Samsung and SK Hynix. Amazingly, South Korea’s stock market is now worth more than Germany’s DAX index ($3.25 trillion).

    Automation/Power Infrastructure: It’s not a huge surprise software stocks (SaaS) like SAP are being hurt by AI speculation, investment capital shifts. However, we should note the recent overtaking of SAP as the highest valued German company by Siemens. Its key three divisions? Automation processing, power/grid systems and transport infrastructure. Note none of the famous German auto stocks feature in this table-topping race.

    Electric Vehicles: Europe hit an inflexion point in recent weeks. Latest data shows EVs as a percentage of new car sales overtook traditional internal combustion engine (ICE) powered vehicles. Looks like ICE on two levels this week faces an existential threat. Thinking of not nice people, it was amusing to see Tesla post a 61% decline in profits in its results this week. Who knew, apart from Ryanair’s Michael O’Leary, that idiotic interfering in other people’s business (politics and privacy too) can be brand destructive…?

    Last thought, and this merits a much bigger discussion. The problems for Tesla might result in a $3 trillion mega-merger/pivot of SpaceX, Xitter, xAI and Tesla, but also subtly highlights the scale of manufacturing dominance exerted by China in the electrification race. While Trump focuses on Bruce Springsteen, White House ballrooms, Melania movies and Venezuelan oil grift, the Chinese are stealing a march on the US in so many technologies. Oh, and the Chinese consumer might be coming back. Apple just told us it had its greatest ever quarter in The Middle Kingdom. A 38% jump in China sales blew the hinges off all the ‘expert’ analyst expectations.

    Lots to think about over the weekend and well done to all who invested in Social Voice before its dramatic funding close; a great illustration of investor ‘social listening’  in the venture world of little gems.

  • Is This The End….?

    Is This The End….?

    Let’s start with the easy one. I’m A Celeb 2025 is almost finished. The more tricky version of this headline question might relate to the Epstein files or even the filing of war crimes charges in The Hague against US Secretary of War, Pete Hegseth. Not any time soon me thinks. We could ask Sleepy Don but he might become angry – about the sleepy bit, not the war crimes or paedophilia. Actually, the question most asked in recent weeks is about the end of the AI boom. I asked my own excellent AI ‘friend’ Claude (courtesy of Anthropic) about ‘bubble’ mentions in the media and even he agreed in his remarkably comprehensive market summaries of public and private markets that the AI bubble question is occupying investors’ minds. Mine, not so much. More on Claude later, but first a historical perspective. The last technology boom in 2000 did indeed end in a bust but generalisations on technology can be misleading.

    Back in 2000 we should remind ourselves of the telecoms companies racking up massive debt obligations to acquire mobile spectrum licences and build out fibre/internet networks. Then there were the infrastructure suppliers like Ericsson, Nortel and Cisco dependent on those telecoms, internet and wireless expansion projects. Then the projects stopped. A possible over-simplification by this writer, but a combination of over-build and debt pressures slowed activity and cratered the valuations (growth expectations) of the leading infrastructure players. For illustration, Cisco was trading on a price/earnings multiple of 200x in late 1999. Twenty five years later the Cisco share price has finally recovered to within touching distance of its $80 high in 2000. However, one must make a distinction between the infrastructure plays and the tools/applications which were built on those over-priced networks….

    The Nokia phone in my year 2000 pocket didn’t end up ruling the world but Apple and the mobile internet did. Similarly, Google was just 2 years old at the time and wouldn’t IPO until 4 years later, the same year as TheFacebook Inc was born. Mobile networks enabled commerce (Amazon) and communities (social media platforms) to flourish and generate enormous wealth. Readers might be now detecting a similar pattern with AI. The race for computing power (in 2000 it was networks) is an infrastructure story but investors must not lose sight of the applications of AI and the business models possible (Amazon was an online book store once). The tools like Claude, ChatGPT and Sora are really only in their infancy. The infrastructure story is driven by GPU/TPU chips (Nvidia), cloud computing, hyper-scale data centres and energy. And it’s possibly infrastructure again where risks are building. The CEO of IBM, Arvind Krishna, in recent days put some numbers on those risks.

    Krishna cited a data centre power consumption estimate of 100 GW which at current costs would mean an $8 trillion capital expenditure in the next few years. Now, for the wet blanket of capital reality. That ginormous $8 trillion spend would need to earn profits of $800 billion just to pay the interest/cost of that capital. Yep, that’s stretchy but get ready for the other reality. This infrastructure isn’t piping, fibre, railways or copper which lasts for decades and is depreciated gently over time. The chips which currently power Nvidia’s $5 trillion valuation and sit inside all these data centres could become technologically obsolete within 5 years. Arguably, at current innovation/evolution rates that timeline is too optimistic. Imagine having to replace all your chips every 3 years… ? That should make creditors to these huge data centre projects a little queasy.  The International Financing Review summarized the massive acceleration in borrowing as follows:

     

    “An unprecedented splurge from companies at the forefront of the AI boom that has left banks and investors potentially on the hook for billions. Alphabet, Amazon, Blue Owl Capital, Broadcom, Oracle and Meta have between them issued US$120bn of corporate bonds since September – and are raising another US$38bn in the loan market. The debt binge shows no sign of abating, with JP Morgan predicting US$300bn of bond issuance next year – and US$1.5trn by the end of 2030. Another US$2.3trn could be raised in equity, structured finance and private capital markets over the next five years, as hyper-scalers tap every available pocket of capital to finance the US$5.3trn of investments into AI they are expected to make”

     

    Before everyone runs for the hills, we need to be mindful of some very positive starting points. These technology giants tapping the debt markets in most cases are swimming in cash, have dominant market positions and are generating prodigious annual cash flows of almost $700 billion. These are not the fragile telecom balance sheets of the TMT bust in 2000. Of course, OpenAI, sits in the middle of that famous Financial Times graphic showing $1.2 trillion of data centre projects. In my personal view, OpenAI is the weakest link but that could take years to play out. The harsh truth for all investors is that we don’t really know who will win the foundational large-language-model (LLM) race. Google’s Gemini 3.0 seems to be winning this month and did anyone notice Google share price is up 67% year-to-date? Yep, and my Claude’s parent company, Anthropic, is looking to IPO at a $350 billion valuation. These are very early days. Just ask Nvidia. Actually, don’t. They are saying nice things about almost everyone because all are prospective customers. But….. as always watch what a company does, not what it says.

    Nvidia made a $2 billion investment in chip designer, Synopsys, this week. This is just the latest move by Nvidia in what can only be described as a deal spree. In 2025 alone the company has backed 77 equity investments in start-ups, as well as making 5 outright acquisitions (Source: CB Insights). Let’s just say it looks like Nvidia is hedging its AI ‘winner’ bets. Indeed, the ‘AI infrastructure’ bubble fears run the risk of missing the true lessons of the TMT bubble bust of 2000. ChatGPT might be today’s Nokia but the monthly user statistics tell another ‘mobile’ story. ChatGPT is used by 800 million people each month. Gemini is fast catching up with 650 million devotees and Microsoft’s Co-pilot has 200 million monthly users. The market, business or individual, is already converted. That’s the true investor opportunity.

    Meanwhile, there’s a bigger story brewing at the other side of the world. Arguably, we really do need to see that story end very soon. More next week on why troubles in Japan’s bond market REALLY scare me……

  • Think Big, Think Private

    Think Big, Think Private

    Well, that wasn’t so bad. Said no US general summoned to Quantico this week by their spray-tanned hardened bosses. I actually was thinking more about September and its data-earned reputation as historically the worst month for stock markets. Scratch that. The key benchmarks for equities, the S&P 500(up 4.25% in the month) and the Nasdaq(up 5.6%), blew the hinges off investor expectations amid lots of ugly headlines. Public markets are on an absolute tear, but investors playing catch up and wondering how to get involved could be understandably wary. I’d be wary too, but in a more nuanced way. My sense is the out-sized influence and weight of big tech in public markets is troubling. Try these statistics for size…

     

    *AI chip superstar, Nvidia, at $4.6 trillion is now worth more than Apple, Saudi Aramco and the entire German stock market…combined.

    *The “Buffett Indicator” is a trusted temperature check on US stock market euphoria which tracks the ratio of total US stock market value to US GDP. Currently that metric is touching 217%, or about 70% above trend.

    *Another long-run measure of ‘value’ is the Shiller PE Ratio (CAPE) which divides the current value of US markets (S&P 500) by the earnings of its constituent companies over the previous 10 years. That metric is over 40x for the first time since the dotcom bubble of 2000.

    *Options markets are not for the faint-hearted. So, it was striking to see the September 19th expiry date attract over $5 trillion of notional option exposure. More striking was that the majority of options players (62% of S&P 500 volume) in August were seeking ultra-high risk “Zero Day” instrument exposure (expiry within 24 hours). That is seat-of-pants stuff.

    *Intel’s share price has rocketed 50% since September, Google is up 68% since April, and Tesla’s stock has doubled in the same period while making the DOGE-whisperer, Elon Musk, the world’s first half trillionaire. Yep, $500 billion.

    *Nvidia’s stock market value is now bigger than the GDP of 180 countries, including India and its 1.4 billion people.

     

    You get the ‘big tech’ picture. Now for some historical context. Remember Palm Inc and its PalmPilot?  When Palm listed as an IPO 25 years ago, it was worth more than Apple, Amazon, Google and Nvidia combined. There is a cautionary tale there, but not the key point of today’s article. The sheer intensity and speed of capital flows in the listed large cap arena is telling us there is a massive investment shift happening. However, it is possibly too late to ‘pick’ the winners in the public markets, and one could end up picking today’s Palm Inc. However, private equity and venture capital markets have been left behind by public markets. Private investment flows and deals have slowed (with the exception of AI deals) due to subdued exit, M&A, and IPO activity, further hampered by levels of geopolitical uncertainty we haven’t seen in 50 years. The critical point is that private markets are likely to ultimately benefit from the trickle-down impact of public markets hitting all-time-high valuations. I would highlight four interesting developments:

     

    1. The leveraged buy-out (LBO) of gaming giant, Electronic Arts(EA), at $55 billion is the biggest ever and beats the $45 billion KKR deal to buy TXU way back in 2007. This time the buyer consortium is led by the Saudi PIF and Silver Lake. The EA buy-out adds to a wave of M&A in Q3 which will have topped $1 trillion in total global deal volume for only the second time in history.
    2. The latest funding round of OpenAI was a sale of $6.5 billion of employee stock putting the valuation of the ChatGPT owner at $500 billion. That makes it possibly the most valuable private company in the world. For those thinking it’s just AI giddiness, it’s not the only $500 billion private opportunity…
    3. We have written before about the fast-approaching age of stablecoins. So, we were intrigued to see stablecoin platform, Tether, launch a funding round of $15-20 billion which would value the financial services player at $500 billion, overtaking the value of Bank of America(!).
    4. These are all big beasts in the private markets. What about the small guys? Well, if you thought tech(+11.6%) and the Nasdaq (+9.7%) had a great last 3 months, you might be surprised that smaller companies in the Russell 2000 index did even better (+13.5%). Note 50% of the constituent companies in that index LOSE money.

     

    Arguably, the smaller company index is the best proxy for the Spark Private world of start-up tech and smaller private equity deals. So, evidence of small company catch-up is a positive indicator. Furthermore, Spark Private investors have a real opportunity to gain exposure to the digital currency infrastructure, AI and private equity themes above in our upcoming deal pipeline. Note we are also entering EIIS ‘season’ so investors fearing they’ve missed out on public/pension opportunities will be able to use the private markets to balance out their risk budgets at highly attractive tax-assisted valuations.

    The public markets are clearly telling investors to think BIG, but valuation risks are rising rapidly. Our message is BIG too, but private as valuations (not risk) resume an upward trajectory. Watch closely, those BIG theme deals are coming very soon.

     

     

  • Are We Ready For Another Banking B-AI-L Out?

    Are We Ready For Another Banking B-AI-L Out?

    Domestic business and investing titan, Dermot Desmond, upset the orthodoxy this week. Ireland’s 500-year plan to build the Metrolink might be cut short, even ended. Desmond suggested the €12 billion urban rail project due to start in 2028 could be a white elephant project superseded by AI and autonomous-driving vehicles. Any bets on the kilometres per annum build speed on this 18 kilometre ‘monster’? Actually, don’t bother. Reflect on China’s average motor expressway construction build of circa 8,000 kilometres per year. Then think about the UK adding barely 65 miles of motorway over the past ….decade. Given the Irish public service obsession with tracking the UK National Health Service or UK Housing/Planning as benchmarks, one shudders to think what our ‘ambition’ could deliver in over-spend and century-shifting deadlines. On a more positive note, AI could be one of the tools which could dig us out of our transport infrastructure black hole.  A bit early to call that one you might say, but I’m beginning to think another crucial economic sector which gets its fair share of criticism is enjoying the halo AI effect. Don’t bank on it but the banking sector is suddenly looking interesting….

    The ”animal spirits” of Wall Street and record financial market highs always help the banking sector. Indeed Wall Street’s banks have just finished reporting quarterly results where trading revenues clocked a whopping $34 billion in Q2, up 17% on the previous year. Yes, the phenomenal gains in AI-focused stocks like Nvidia and Microsoft inflate bank trading revenues and drive increased investment activity but there’s more going on. You might have read about meme-stocks and unheard of companies in the US smaller cap markets (Russell 3000) tripling their share prices since April; 33 companies at the last count and only 5 actually making profits. But, banks as meme-stocks? Really? Well check out the Financial Times headline this week:

    “European banks get their meme-stock moment”

    Not even US banks, but European ones tracking an economic bloc getting its tummy tickled on tariffs by the Fiddler on The Roof of the White House. Can’t wait for the South Park treatment on that one, but back to the FT and European banks. When French banks like Societe Generale see their share prices increase by more than 100% year-to-date then my “spidey sense” tells me this is not about mundane cyclical banking drivers like trading revenues, interest rates or the shape of the bond yield curve. The aggregate European bank sector is up a whopping 40% in 2025 and there could be an (infra)structural driver of this story. Think back to our earlier sniping about Ireland’s struggles on transport infrastructure. Banks have struggled with unwieldy data and service infrastructures which have been a nightmare to upgrade to modern customer expectations. As we have written many times on these pages, the banks sit on some of the richest consumer data on the planet. Critical information on individual and institutional funding, spending and income patterns are in the possession of the banks. What if that data could be mobilised in a far more efficient way using AI and its agentic tools? Like Dermot Desmond’s thinking, could AI allow banks to skip an infrastructure bottleneck? It is early days but let’s take a look at a company you’ve probably never heard about before.

    Palantir Technologies might be named after a Tolkien crystal ball but it looks like its future might be right now, thanks to AI. The Denver-based company has been around since 2003 and specializes in software to analyze or “mine” data. Its early customers were government departments seeking assistance with unwieldy datasets and looking for actionable information. In particular, it gained traction with security/police departments searching for surveillance and predictive intelligence solutions. Sound familiar, or creepy? Park that thought and think banking. Then consider Palantir only just hit quarterly revenue run rates of $1 billion in its most recent results. However, that was enough to make it one of the 20 most valuable companies in America. Stock market investors think it’s worth $440 billion which is bigger than the mighty healthcare player, Johnson & Johnson (J&J) and its 138,000 employees. Yes, if you were wondering if the valuation of Palantir was looking a bit punchy, you’d be correct. Annualized revenues of just over $4 billion (vs J&J’s $85 billion) means the Palantir valuation multiple is currently 110x current revenues. The excitement and valuation is driven by two recurring messages whenever Palantir is mentioned:

     

    1. AI is accelerating the monetization of data infrastructure
    2. AI is reshaping enterprise software and Palantir is uniquely positioned

     

    Palantir is expanding beyond government into commercial sectors like healthcare, finance and energy. The first thing that should strike readers about government and these three specific sectors is that they have enormous customer/user bases. This is the banking sector clue, and possibly its infrastructure B-AI-L out. AI will very likely remove the need for “transition” projects to upgrade data infrastructure and provide banking organizations with valuable action prompts which might even be carried out by AI-agents/bots. That’s a business model ‘Hail Mary’ for the bank sector and Wall Street’s banking analysts are doing something unusual too.

    Typically, bank analysts stick close together and move their recommendations in tandem with their competitor analysts at the other investment banks. Remember, “nobody gets fired if we are all wrong” is an established career strategy for the average analyst. This also means that share price targets set by analysts move in relatively small increments so as not to spook the herd or attract excessive attention to their analysis or models (usually flawed as with all human forecasting exercises). So, I was checking a few market analytics dashboards today and spotted the following:

    KeyBanc target price moved UP from $60 to $100

    RBC Capital  target price moved UP from $63 to $97

    Raymond James target price moved UP from $79 to $95

    Believe me, 25%-65% banking share price target upgrades are not the done thing on Wall Street when TACO Trumpolini is threatening the Chairman of the Federal Reserve Bank on interest rate policy.  So, this is yet another sector to add to your list where the two letter response to any share price move query can be “AI”. However, at a structural level, you don’t need a Tolkien crystal ball to know that technology can transform the commercial prospects of a country or sector saddled with a perceived long-term ‘challenge’. I’m old enough to remember the gloomsters telling us Ireland was destined to perpetual under-development because we had no energy resources and could never compete in manufacturing/building things. Who knew? Maybe, the leaders who finally gave up on Ford in 1984 after welcoming and watching Apple begin manufacturing in Cork in 1980…..

     

  • The Euphoric Wisdom Of Crowds

    The Euphoric Wisdom Of Crowds

    I laughed a lot at a very sad funeral this week. Emotions, eh. I’m hopeful this weird juxta-positioning of emotions is a kind of human coping strategy, rather than a sociopathic tell. Then again, the mourning crowd laughed at the brilliant life narration too. Back at my desk, a flurry of headlines hitting the screen prompted a further emotional conflict. Surging extreme weather events globally, Europe battered by tariff tyranny, Gaza starved and Ukrainian cities terrorised by Russian bombardment are hardly sources of optimism for the progress of our species. And, yet……I’m picking up a very euphoric vibe from the financial markets. Strangely for this publication, I’m not that interested in retro-fitting the euphoria with some financial rationale along the lines of falling cost of money(rates), corporate earnings, tech innovation or economic cycles. The sheer phenomenon of financial euphoria is worth highlighting first. Then we can do some thinking, all of us.  Now for the euphoria…..

    The “wisdom of crowds” leans on the idea that large groups of people (markets) are collectively more likely to be correct than individual experts. What is particularly striking about current financial market behaviours is that there is a wide variety of “crowds” ignoring the gloom-filled headlines and seeing a better future out there. However, that optimism is not exactly a new phenomenon. Note that financial markets typically enjoy positive returns in seven out of every ten years. In other words, it pays off to be relatively optimistic. However, in this piece we are looking at something more, evidence of euphoric excess. Let’s try a few of these crowds for starters…..

     

    *The crypto crowd: Bitcoin is hitting record highs of $118,000 while the entire crypto ecosystem has now surpassed $4 trillion in value.

    *The IT crowd: If one uses pre-2018 sector classifications, then technology stocks’ weighting in the S&P 500 is above 45%. That’s way higher than the dotcom bubble of 2000.

    *The ‘Magnificent 7’ crowd: There’s now, not one, but two Big Tech companies with market values in excess of $4 trillion. For context (and wobbly comparison), the $8 trillion combination of Microsoft and Nvidia alone would rank 3rd globally as a single country GDP.  

    *The meme-stock crowd: In 2021 it was Gamestop and the Robinhood day-traders. Now, it’s Kohl,’s (retail) Krispy Kreme(donuts) OpenDoor (estate agent) and American Eagle with Sydney Sweeney dominating social media, chat rooms and…. Wall Street trading volumes.

    *The AI/Cloud crowd: Earlier in the year Microsoft CEO, Satya Nadella, in a Davos interview stated he “was good for $80 billion of investment in 2025” in AI/Cloud infrastructure. Scratch that. This week he said the number will be $120 billion. Google said $85 billion (up from $75 billion) as Big Tech companies look like they will do a giddy AI spend of close to $400 billion in 2025.

    *The M&A crowd: Research data from Pitchbook shows robust merger and acquisition (M&A) activity in Q2, marking the third consecutive quarter for deal value to hit about $1 trillion across roughly 12,000 transactions. It’s not just tech showing confidence. Railway giants Norfolk Southern and Union Pacific are doing an $85 billion merger to create the first transcontinental railway line in US history.

    *The retail crowd: Barclays research points to retail investors as the “primary driver” of the recent stock market rally. In the past month alone, retail investors poured $50 billion into US stocks and now account for up to 20% of daily trading volume on Wall Street. That’s double the levels seen before the pandemic.

    *The VC crowd: The challenged venture capital (VC) world has been looking for a genuine positive pulse-take via an IPO exit. As I write, Greylock Partners, Sequoia and Index Venture will be the VCs doing cartwheels tonight after the largest VC-backed tech IPO in years, Figma, tripled in value within hours of its NYSE debut to almost $50 billion. Or… will they be wondering how they got the selling (IPO) price so wrong?

    It is entirely possible many of the above trends are rooted in fundamental investment theses but suggestions of dangerous  “euphoria” can be found in aggregate valuations of US stocks. The average price/sales valuation multiple (per Bloomberg) for US stocks is a punchy 3.3x. Furthermore, Warren Buffett’s favoured sanity check of comparing the market value(cap) of all publicly traded US companies with total US GDP currently stands at 212%. As a risk guide, Warren is usually uneasy when that number is over 100%. My own two personal favourites in the euphoria beauty parade are more esoteric but tell their own stories.

    First, it is no secret Facebook/Meta and others in the AI “arms race” are desperately looking for AI talent. However, the numbers are starting to look bonkers. According to Wired magazine, at least one prospective employee was offered a 3-year billion dollar salary package to join Meta. Others were offered hundreds of millions (rumoured to be Mira Murati’s Thinking Machines Lab team) but here’s the best bit…. the prospective hires turned down the offers!! Now, here’s a few other proposals that were turned down as recently as November 2022.

    If that date sounds familiar, you might have been vowing to stay away from markets at the time as stocks hit bear market lows spooked by rising global interest rates. Online car retailer, Carvana, was “on sale” that day after its share price had collapsed by almost 99% from its highs the previous year. Nobody wanted to touch it. As of today, it’s up more than 10,000% since then. Fear and greed, emotions eh. Oh, and Meta’s share price on that day after a rough year for the Zuck was $88.91 per share. It’s up almost 800% since then but here’s the best bit….in barely one trading session after its excellent quarterly results this week, Meta’s share price jumped by about $88.91 per share. That number sound familiar?

    No more teasing. The key point is that confidence is surging in public markets. The quieter, less public private markets have struggled to generate similar headlines. Yes, there are pockets of excess. However, it would be foolish to ignore the ‘wisdom’ of the public market crowds. Ultimately, higher trading activity levels, record capex investment, big M&A deals and higher valuations will feed into private markets and smaller companies. Indeed, you might have to get used to the giddy headlines for a bit longer. Goldman Sachs have done a bit of historical analysis and concluded that spikes in speculative trading actually precede abnormally high returns on a one-year time horizon. Don’t stay too long at the beach….the YOLO crowd might be on to something.

     

                                      N.H.  RIP

     

     

  • Big Beautiful Bull Market Or Bust?

    Big Beautiful Bull Market Or Bust?

    It has been a very good week for the accused. Vlad Putin gets free war-crime shots at defence-stymied Ukraine courtesy of ‘Whiskey Pete’ in the Pentagon, P.Diddy is acquitted on the worst RICO charges, Bibi flies to Washington without fear of arrest and the US Supreme Court gives King Donald a July 4th gift of even more freedom to ignore other judges. Oh, and Trump’s “Big Beautiful Bill” was passed in the US Congress. Tempted to laugh, cry or rant? Don’t. Investors need to focus on the ‘cards’ dealt and be alert to an investment environment which is increasingly looking like a “Big Beautiful Bull Market”. Despite ongoing tariff tantrums and confusion (Japan and South Korea getting their letters as I write) we should be keeping a close eye on a number of market developments.

    The obvious pulse take on investment market health is the performance of stock markets. Irrespective of dollar weakness, the key US benchmark indices of the S&P 500 and Nasdaq hitting all-time-highs in recent days is a strong positive signal to investors. But it’s not just the headline numbers which are flashing green. There are additional promising signals in different parts of the capital markets. Many commentators believe the markets are entirely driven by AI optimism so it is no harm to see the AI chip poster child, Nvidia, regain its crown as most valuable company on the planet and gently ease its way to within 2% of a $4 trillion market value. The all-too-recent excitement about the first trillion dollar company (Apple in 2018) seems almost quaint amid such phenomenal acceleration in wealth creation. And, there’s more AI chip good news in Washington’s Big Beautiful Bill.

    There’s a quasi-arms race going on globally in AI chip manufacturing which the Biden administration spotted and supported with the CHIPS & Science Act. Trump might be happy to burn the planet (and Elon Musk!) by reversing the electrification revolution championed by Biden but…. he’s not reversing the CHIPS tax incentives. In fact, Trump’s bill has increased investment tax credits from 25% to 35% for any manufacturers building new facilities on US soil.  It’s not the only recent policy win for the industry. Last week, the US Commerce Department told leading semiconductor design software providers — including Synopsys and Siemens — that they are no longer required to obtain government licenses to conduct business in China. One can be sceptical about the true value being created by AI but there’s no doubt real money being spent by Big Tech companies like Microsoft, Amazon and Google has massive knock-on positive impacts in the global economy. Forget that old canard of “trickle down” tax reliefs for the wealthy benefitting the wider economy, but corporate incentives really do work. Indeed, if you want money to flow into the economy then it’s always good to see banks become more ambitious in their lending activities. Even better, if an entirely new bank comes along.

    Silicon Valley Bank may have failed the basics of asset-liability matching (term horizons) in 2023 but the venture funding world never really managed to fill that $218 billion gap left by the early-stage champion. Now, there are reports Musk billionaire buddy, Peter Thiel, and an investing team of tech titans have applied for a bank charter. The new bank will be called Erebor, another Tolkien reference like Anduril and Palantir, to assist the ‘innovation economy’ and companies engaged in developing cryptocurrencies, AI and next-generation defence technology. Banks don’t usually emerge in risk-off moments so there must be some confidence bubbling back into the private early-stage investing world. Of course, it’s great to see new money or new bank flows IN to riskier parts of the investment market but what about getting OUT the other side of the risk journey? More good news.

    IPO data compiled by Bloomberg shows that a slowish start to 2025 has delivered some very interesting performance figures. The weighted average performance of companies whose shares made their debut on US exchanges in 2025 was a punchy 53% compared to single digit returns year-to-date on the S&P 500. The highlights were stablecoin fintech Circle up a whopping 585% since its IPO in…. June. Not far behind, cloud computing player, Coreweave, has returned 300% since its March listing. Suddenly, but not surprisingly, it’s raining IPOs with another high profile fintech, Wealthfront, filing for IPO.  Crypto exchange, Gemini, has filed for a public listing too. Europe didn’t miss out on the IPO fun either in the first 6 months of 2025– a weighted average return of 38% for its newly listed companies is not too shabby. They are the public liquidity or exit events a market needs to see for confidence to flow into the early stage private markets and there’s early evidence of increasing optimism.

    Medtech VC funding activity had its best quarterly performance since 2022 with $4 billion invested globally in young companies (Source: Pitchbook). Meanwhile the value of VC exits hit a 3-year high in Q2 with almost $115 billion of deals completed and exits celebrated. It can be a little too easy to criticize the US these days at a political level but Europe needs to look in the mirror. This article mostly cites US capital market develoipments. For good reason. Mark Rubinstein in his excellent Net Interest newsletter titled “Ode to America” this week put it well:

     

    “European policymakers bemoan that while households in their part of the world save more than Americans, they keep a third of their assets in low-yielding deposits, compared with a tenth in the US. European pension funds allocate just 0.02% of assets to venture capital versus 2% for their US peers. And the median European venture-backed company receives around half as much funding as its US counterpart. European Central Bank president Christine Lagarde recently calculated that, if Europeans matched Americans’ appetite for capital markets, some €8 trillion currently trapped in bank deposits would be unleashed to finance transformation.”

     

    Wowzers. Eight trillion euro. Food for thought but we might need that eight trillion for other things. One can’t ignore that there is a critical part of financial markets which is not as cheery as a Republican pardon party. The half year reviews are in and the mighty US dollar is feeling the heat. A loss of purchasing power to the tune of 11% in just 6 months has not happened since Richard Nixon was President, and then he wasn’t. We might not want to draw a dreamy historical parallel but it is curious how quiet the bond market has been since the passing of the Big Beautiful Bill and its reckless debt implications. If the US dollar is pointing to a credibility issue and ultimately a US bond market BUST, it could be European savings pools which will be needed to stabilise things. The price will be a hell of a lot more than tariff tweaking and that’s not wishful thinking. Even if you’re on the beach, it’s worth following the money right now but do keep an eye on the bond market too.

     

  • AI…AI…AI…AI…I Just Don’t Know

    AI…AI…AI…AI…I Just Don’t Know

    I’m going to have to up my game. Not just tennis. As a frequenter of the occasional business discussion panel, this week threw up a very different type of panelist. The Dublin Tech Summit at the RDS hosted a panel discussion on AI which featured contributions from a meta-human avatar created by AI, named Anja. Quite unnerving in a way. If it had been a horse on the panel, I don’t think it would have unsettled me more. Mind you, the no-clothes Emperor Taco Trump guy can’t be far away from appointing a horse to the Senate soon. Anyway, I digress as humans do. Back to AI, and I was thinking it would be no harm to highlight a few significant AI datapoints and developments which have caught my eye in recent weeks. First, the data.

    The Stargate data centre project backed by OpenAI, Japan’s Softbank, Oracle and Nvidia and to be built in the UAE is estimated to eventually have the capacity to consume 5GW of power, For context, that’s the power consumption equivalent of the entire island of Ireland. And, Ireland would already be considered a global leader in terms of data centre capacity as a proportion of the total energy grid, about 21%. Clearly, AI and its critical data centre/cloud infrastructure is moving at pace to meet expected future AI usage demand. The pulse-take on AI investment pace has been chip-maker, Nvidia, who reported quarterly results this week. Revenues for Nvidia (despite Trump China tariffs/blocks) are still growing at almost 70% but this doesn’t quite capture the scale of growth. Two years ago, at the time of ChatGPT’s launch, quarterly revenues at Nvidia were $6 billion. Now, they are at $44 billion. Furthermore, Nvidia plans to invest $500 billion to build AI infrastructure in the US. Note, things have also moved on from  ChatGPT and other Gen AI tools (like Gemini and Claude) as the drivers of AI investment. The big move now is to “Agentic AI” or “AI Agency”.

    Agentic AI is not a pilot or learning model wanting users to test its knowledge. No, this is the real “doing” stuff which companies are now paying to integrate in their work flows. According to CB Insights research, enterprise AI and copilots will generate $13 billion of revenues by the end of 2025 across a variety of activities from sales to coding to customer service. That’s a growth rate of 155% year-on-year and a wake-up call for most companies; the reality is that their competitors are likely deploying AI to dramatically improve productivity and costs. One wouldn’t want to be in the spectator seats for too long and it’s not just a corporate caution. At a sovereign level, Dubai has offered all its citizens free access to the premium ChatGPT Plus service which normally costs $20 per month. The digital information race is truly ‘on’ but there’s also a hardware story emerging.

    OpenAI has just acquired  Jony Ive’s AI hardware start-up, Io Products. The former Apple key man, whose design credits include the iPhone and iPad, will now lead design at OpenAI as the company pushes deeper into hardware. The move highlights a trend of VC-backed companies buying one another amid a shifting tech landscape and a hunger for talent. However, it is worth noting that this is the largest private-to-private acquisition ever at $6.4 billion. Indeed, over 40% (7) of all-time $1B+ private-to-private acquisitions have happened in just the last year. OpenAI, Databricks, and Stripe have each spent over 15% of their total funding to date on acquisitions in the last 2 years. Don’t forget Anja too. Venture capital investment in humanoid robots are estimated to double this year to over $2 billion per CB Insights data. Then consider that there are 660 million people in Asia (average age 27) using digital companions. That disturbing little gem came from anthropologist, Dr Lollie Mancey, in a recent RTE interview and….. I just don’t know. I’m not alone.

    The fascinating story of Irish recycling software company, AMCS, and its $2 billion wealth creation story was told by its founder, Jimmy Martin, at the Renatus/Fitzgerald Power “Real Deal” SME conference in Goffs this week. When asked about AI, he wisely declined to predict the future but did make one very interesting and more definitive point. As a hugely successful observer of ‘margin’ in industry ecosystems, Martin was quick to identify the monopolistic power of the big 3 cloud infrastructure players, Microsoft, Amazon and Google. For me, the unanswered question of who will be the winner(s) will focus on the following :

     

    1. The manufacturers of the critical semiconductor chips
    2. The owners of data centre infrastructure
    3. The providers of energy/power capacity
    4. Sovereign/digital alignment (China, Europe or US).

     

    I really don’t know, particularly the geopolitical/sovereign and energy/power questions. However, I do think it interesting that in recent days companies exposed to the nuclear power industry have seen big share price moves. Not coincidentally, the US and a number of European countries have been embracing a nuclear industry revival at the same time. Plenty to ponder, not all of it comfortable. Isn’t that right, Anja?

  • What Returns Can Investors Expect In A Private World?

    What Returns Can Investors Expect In A Private World?

    Well, I can’t promise you a future with a beachfront property in “Gaza Lago”. In fact, in the world of investing there are no guaranteed returns. As promised in our recent Private Portfolio Thoughts newsletter, I wanted to address expectations as to what long-run returns a private investor should be looking for in a portfolio of private assets.  First, let’s take a look at ‘industry standard’ expectations based on global historic data compiled by research house, Pitchbook. Of course, these are just averages and no doubt are ‘skewed’ by supra-normal returns for a small number of successful funds in each asset class. However, the table below gives an approximate guide to expectations over various time horizons and types of investment.

     

    The Spark focus is probably towards the top of this table summarising 5-year and 10-year returns for private equity (PE) and early-stage investing through venture capital (VC). However, if we strip out debt and real asset products the double-digit (%) performance picture is pretty similar across the board for private assets. The annual rates of return (IRR) implied by the performance of these private assets (in aggregate) are 13.4% over 5-years and 12.5% over 10-years.

    Let’s be more conservative and suggest that portfolios of private assets after 10 years SHOULD have grown in value at a rate of 12%. In real terms (and compounding those rates of return) that equates to an initial investment of €10,000 growing to €31,000 over 10 years. For context, a fund with publicly listed equities would be expected (by financial planners) to generate 7% returns per annum and thus turn €10,000 into €19,600. Of course, the extra return earned by the private asset portfolios is the compensation required by investors for the higher risk exposure(reduced liquidity, business failure) compared to the shares of large established businesses trading every day. These return numbers (based on history) can be described as “hurdle” rates which investors are expecting to match or beat in order to justify putting their capital at risk over long periods of time. So, let’s apply some hurdles to our world of very young companies (VC) and small businesses (private equity).

    We know that the industry standard in more mature private capital investment strategies is looking to turn €10,000 into something north of €30,000 over 10 years. We might describe this as an expectation to generate 3x your initial investment amount. Arguably, for higher risk investments in our earlier-stage world, investors could expect/demand an even higher return for their portfolios. If investors wanted 4x returns or €40,000 after 10 years that equates to a 15% annual return which is what private equity strategies have achieved(see table). So, that expectation is not unreasonable. But…. how realistic is it in a high risk portfolio of mainly early-stage business failure? We should touch on the key ‘push backs’ we get from investors who are wary of investing in start-up businesses or smaller private equity deals. The following are the most common perceived wisdoms….

     

    “80-90% of start-ups fail”

    “ Exits are more difficult as IPO markets for smaller companies have struggled”

    “I can just buy publicly listed equities and earn similar returns”

     

    There is an element of historic truth to all these statements but I’m going to use the most dangerous words in the investing lexicon by stating “this time it’s different”. First, the history of start-up failure should take into account the characteristics of older vintages of businesses. Let’s think about old economy businesses investing heavily in premises, equipment, overseas expansion facilities, logistics etc. These are, in most cases, “sunk costs” in capital-heavy businesses. Inevitably, if the business gets into trouble these ‘assets’ are not just worthless but can have an actual negative value due to ongoing liabilities/leases, maintenance costs, security, insurance etc. Now, think about many of today’s “asset light” businesses leveraging digital infrastructure and building value through the experience of the founders/team, the data gathered by the business and the development of relationships with clients and partners.

    These businesses don’t have the same level of sunk costs/liabilities (as old economy businesses) which can swamp the value of the operational “franchise”. Instead, the value within a business which might not be meeting growth targets can be recognised by a third party and lead to another form of exit which doesn’t involve liquidation. In the Spark portfolio we have seen a number of businesses acquired by third parties in the same sector in exchange for shares in the acquiring company. These shares clearly have a value and also change the traditional calculations around start-up failure.

    In the world of debt/credit one of the key financial terms/metrics is historic “recovery value”. In main street terms, this is the typical expected percentage of the debt which can be recovered when a business fails in a particular sector. You will see such sector recovery data displayed as a percentage of the debt ie 20 cents, 30 cents in the dollar. So, in the world of start-ups there is normally no debt and the equity in the business is a complete ZERO in the case of struggle or failure. But, now that’s not quite the case. If an acquiring business is offering a share exchange then the “recovery value” could by 20-50% of the original investment. And, the reason for ‘value’ being found in the business is the experience of the acquired team, the database and client relationships. This is happening on a far bigger scale elsewhere.

    Ever heard of the term ‘acqui-hiring”? This refers to a situation in which a company acquires another company primarily for its talented team or employees, rather than its products, technology, or other assets. In an acqui-hire, the acquiring company may not be interested in continuing the acquired company’s business or product, but rather wants to bring the talent into its own organization. Now, here’s another bit of jargon monoxide…. ever heard of CVC? Well, you know what venture capital (VC) does but there’s a subset of the VC ecosystem called Corporate Venture Capital(CVC). This form of VC funding is in reality larger corporations investing in smaller businesses whose franchises/technology could ultimately be relevant and value-creating for the parent company.

    So, you might think Sequoia, Index Ventures, Tiger Global and Andreessen Horowitz are the kings of VC investing. Now, think again. Amazon, Google, Microsoft and Nvidia are hugely active in the VC funding space. As an illustration, Nvidia deployed $1 billion in 50 VC funding rounds in 2024 alone. Furthermore, Google has acquired a whopping 222 start-ups over the years, and in 2023 the “Magnificent 7” tech stocks participated in 208 VC deals. So, the IPO market might not be as start-up friendly as in the past but Big Tech certainly is stepping up to the plate as a new and highly active exit event option.

    Of course, there will always be those investors who believe they can earn approximately similar returns to private asset strategies by choosing a selection of publicly listed companies. Yep, the likes of Domino’s Pizza, Paddy Power, Apple and Nvidia tick those boxes but there’s also an assumption investors will avoid the temptation of selling while on the multi-decade rocket ride. However, the more significant point is about business failure. Think it’s only start-ups?  Sixty years ago the average life-span of a company in the S&P 500 was over 50 years. Today, it’s less than 15 years! By 2027, almost 75% of companies who were quoted in the S&P 500 in 2016 will have disappeared (Source: McKinsey). Not for the first time, I’d suggest it’s worth a read of the excellent The Future is Faster Than You Think to grasp how fast business and technology leadership is changing.

    We can’t forecast the future. However, we should recognise that the world of start-ups today has changed dramatically. As a final illustration, start-up funding was traditionally populated by a majority of consumer-focused businesses – think retail, textiles, manufacturing, food, fashion etc.  The term “B2C” would be used to describe these business-to-consumer companies. Well, that’s changed too. Certainly, for Spark. A whopping 70% of funding deals completed by Spark have been business-to-business (B2B) opportunities. It should also be noted that our vetting process turns away approximately nine in every ten opportunities. Arguably, we are selecting the top decile of quality in the opportunity universe. No doubt we will get it wrong along the way, but this is still a robust risk starting point. And, it’s not the only starting point…

    The purpose of this article is to set the scene for a follow-up piece on how these structural shifts can impact the average private portfolio and future expectations using sample portfolios and outcomes. But always remember…. if I could truly forecast the future, “Gaza Lago” might personally have an entirely different meaning and location.

  • Big Numbers That Can’t Be Missed

    Big Numbers That Can’t Be Missed

    Now, it’s my turn. I get to vote this week. For lots of busy good reasons, I haven’t read a huge amount on our own election but there’s no doubt it is important. However, I’m conscious I’m just one of 4 billion people voting in the current 12 month period. This also prompts another nagging feeling that it is external events over the lifetime of the next government which will define it. From Ukraine, to Utah, to even Mars, our planet is at an inflection point. The ‘world order’ is dangerously shifting as North Korean troops enter a European conflict zone for the first time, and yet, it would be ill-advised to down tools and just wait. There are other themes and trajectories already established and unlikely to change. Simply put, the numbers are now too big. And, we will continue to watch SIX in particular.

    Artificial Intelligence: It is striking to see various commentaries question the real ‘value’ of AI. During the summer, Goldman Sachs estimated that tech companies were about to spend $1 trillion on AI but queried whether they would ever earn a return on this capital expenditure. Fair question, but there’s another point to be made. The ‘winner takes all’ nature of this tech arms race is existential. The poster child of the AI revolution is Nvidia. Yet again, it smashed analyst forecasts this week in its latest quarterly results. My takeaway is that, of course, there will be misallocation of capital in this existential race but tech companies are going to continue to spend to stay in the race. ‘Exhibit A’ must be Nvidia’s own revenues in its data centre chip division. A whopping $30.8 billion revenues generated in the last quarter revealed a growth rate of 112% vs a year ago. Also, for context, this division has increased its quarterly revenue 7-fold since the early quarters of last year. Note, data centres are the battle ground where AI models are tested and trained, and this trend is set to continue.

    Cleantech: European cleantech suffered a blow this week as Northvolt sought Chapter 11 bankruptcy protection from its creditors. It’s a significant blow to Europe’s efforts to decouple from its dependency on China for electrical vehicle (EV) battery materials, chemistry, design and manufacture. Northvolt tried to deliver in all four process functions and received $15 billion of investment backing to do so. This has been a very expensive way to experience execution risk; both Goldman Sachs and VW have written off investments in Northvolt of $1 billion each. However, just like AI, loss is a recurring feature in any new technology area. So, keep an eye on the big numbers. In this instance, the EU is outspending the US with a $125 billion spend in 2023 (vs $86 billion). But….. China is really the cleantech benchmark. The Middle Kingdom spent $390 billion in 2023 across renewables, carbon capture, utilization and storage, hydrogen, batteries and nuclear power.

    Space: Elon Musk’s SpaceX is the most valuable private company on the planet with a recent funding mark indicating a $250 billion valuation, ahead of ByteDance (parent company of TikTok) on $225 billion. At current pace, it is launching its Starlink satellites (via Falcon 5 rockets) every 2.8 days. If you’re just about getting your head around that launch frequency think about Space X’s massive re-usable Starship which completed its 7th test flight last week. Its payload capacity is 150 tonnes and the plan is for Starship to do two launches…. daily. Now, what if the entire tonnage launched into space in history has been just shy of 40,000 tonnes? That means in the very very near future, Starship alone would be capable of repeating the entire payload history of space in just over 4 months. I’m not sure we have grasped the enormity of this feat and the implications for industries like telecommunications, mining, military defence, tourism, manufacturing or even housing (on Mars?).

    Crypto/Blockchain: Bitcoin is on the cusp of breaking the $100,000 mark. However, we need to start thinking about the entire crypto/blockchain ecosystem. Check out MicroStrategy which on the face of it is a loss-making software business but since 2020 has been investing in Bitcoin. If you thought Nvidia was the best performing share price in the world you’d be nearly correct – it has delivered 2660% returns to shareholders in the last 7 years. But….. MicroStrategy has rocketed by 3420%. Its current market value is $117 billion, making it more valuable than Nike, UPS or Starbucks. Of course, MicroStrategy is a leveraged play on Bitcoin but there are other ways to ‘leverage’ the rapid expansion of stablecoins, crypto funds, tokenisation, blockchain etc. The crypto asset ecosystem has just passed the $3 trillion valuation mark which exceeds the asset value of most countries’ stock markets. These numbers, and the opportunities to plug into this investment pool, are too big to miss…or ignore.

    Banks: It would be easy to move on to the ‘next shiny thing’ in the space or crypto universe but the banking sector is worth watching right now. Governments are finally getting good selling prices (even premia) for rescued bank shares as the UK (Nat West), Germany (Commerzbank), Ireland(AIB), Greece (Piraeus Bank), the Netherlands (ABN-AMRO) and Italy (Monte dei Paschi) all reduce sovereign shareholdings or exit altogether. As an aside, and interesting contrast to ‘shiny new things’  Monte dei Paschi began commercially lending 20 years before Christopher Columbus’s trip to America was financed. Anyway, old or not, the bank sector is hotting up. Breaking news over the weekend suggests Italy’s Unicredito will make a €10 billion + bid for rival BPM, and note Unicredito is already circling Germany’s Commerzbank. Also, it is worth noting that the tax/accounting professional services arm of UK wealth player, Evelyn Partners, has just been bought by private equity (Apax) for £700m. That is significantly more than the £500 million price tag suggested by City analysts.

    Technology Rotation: We have written previously about the particularly strong comeback for technology hardware thanks to AI, semiconductors, EVs and iPhones. The world has become very used to these themes powering the “Magnificent Seven” – Microsoft, Apple, Nvidia, Google, Meta, Amazon and Tesla – to all-time-highs but this analysis of last week’s technology price action in the newsletter, Clouded Judgment, caught the eye:

     

    This week saw the rapid acceleration of an interesting trend that started not too long ago – Magnificent 7 underperformance and software outperformance. Might this be the start of a rotation into software and growth (ie more risky assets)? Meta was down 3% over the last week. Amazon was down 7%. Microsoft down 3%. Google down 6%. Nvidia flat. Apple / Tesla were slightly up. QQQ was down 1.5%. Meanwhile, the WCLD index was up 6% over the last week! In addition to that, there were some really big moves in individual names. Snowflake was up >30% on Thursday after reporting earnings on Wednesday, which lifted the rest of the software market. Also just on Thursday Mongo was up 14%, Confluent / Datadog / Cloudflare were each up 7%.

     

    As a reminder, the Magnificent 7 have an aggregate value of $13.5 trillion which is more than the GDPs of India, Germany and Japan combined. The potential risk of an investor rotation OUT of the Magnificent 7 is a multi-trillion dollar consideration, and also can’t be missed.

    Clearly, my vote can’t change any of the big numbers above. However, these are the numbers which are far more likely to define our investing and business futures on this island.

     

  • Is The World Going Full Oligarch?

    Is The World Going Full Oligarch?

    The lettuces won’t be happy. It looks like the UK’s new Chancellor of The Exchequer, Rachel Reeves, and her Autumn Budget 2024 will survive a relatively benign financial market reaction. So far, government debt (Gilts) markets are stable and the domestic-focused FTSE 250 stock index has bounced slightly. Liz Truss will shake her head in delusion but the more understanding reality of today’s world is that the government of the world’s 5th biggest economy was brought down by international asset traders back in October 2022. It probably won’t be the last sovereign state to lose power to commercial interests and yes, money. Simply put, at exactly the wrong moment in time, many of the world’s governments’ ATM spending cards are about to be declined. Check out the following recent headlines:

     

    Interest payments on the national debt (US) top $1 trillion as deficit swells  –   CNBC

     

    IMF warns Japan of debt deterioration in the event of future shock   –   The Japan Times

     

    Why France’s fiscal freak out matters to the world  – Axios

     

    China’s Fiscal Package Aims To Ease Debt Woes, Property Crisis   –  Asia Financial

     

    There’s never a good time for fiscal capacity to be tight. But… literally the planet’s survival is at stake. The climate crisis is everyone’s crisis but governments are expected to lead. Indeed, according to the IEA, governments globally in 2023 spent $1.3 trillion or 1.2% of global GDP on clean energy investment. That bill will surely rise but there’s a big question mark over how the clean energy transition will be funded by stretched governments running record deficits and the highest debt burdens in history. For a clue to that question, let’s take a look at another spending race.

    This race depending on your perspective also has an existential angle. The race, of course, is AI and Packy McCormack’s excellent piece in his Not Boring newsletter has identified a shift in commercial goal – “companies are spending for capability as opposed to straightforward ROI”. Why the ditching of seeking returns on investment? Apparently, the first company to create the AI “Digital God” boils down to an existential pursuit. Loser companies die. Indeed, Larry Page of Google fame has reportedly said many times internally…..

     

    “I am willing to go bankrupt rather than lose this race”

     

    That feels like extremely high stakes thinking. It might explain another development in the world’s most advanced technology economy. It’s one thing for a government to depend on a private company, SpaceX, to conduct an international space rescue mission. But, it’s quite another to see SpaceX’s owner Elon Musk in the words of VP hopeful, Tim Walz, “skipping like a dipshit” at various Trump rallies. Musk may cause me involuntary eye-rolls every time I read him on X or see him on TV but he’s a super-successful builder of future technologies. In fact, he has feet in both existential races with Tesla (climate) and xAI (AI) which is about to raise funds at a $40 billion valuation. If the latter doesn’t feel like an existential race, maybe the monies will convince you. In 2023, just 4 companies – Facebook, Amazon, Google and Microsoft – spent $196 billion or 0.72% of US GDP on AI research and infrastructure. Remember, these companies are really only ‘getting ready’. Furthermore, they are arguably investing at levels which historically would have only been within the compass of sovereign governments.

    I remember reading first about social media companies becoming effectively supra-sovereign powers. At the time, Facebook had 2.5 billion people on its platform, multiples of any other country populations on the planet. Now social media steers business and moves elections, but tech money might be about to go one step further. Forget about tech companies currently rolling out nuclear power for their hyper-scaling data centres. What about a seat in government?  Well, Elon Musk is on the cusp of entering a Trump ministerial cabinet with a role brief focused on cost cutting. I will give you a clue; plenty of those cuts will be in the regulatory, business and tech governance areas. Musk is not alone. Racist rallies in Madison Square Garden or not, big business is keen to put on the Orange war paint for Trump chaos and……… commercial insurance or favour. Check out the latest Trump luvvies from the world of business:

     

    Winklevoss Twins donate $1m each to Trump as champion of cryptocurrency  – The Guardian

     

    Steve Schwarzmann says Trump would be “efficient and effective” president this time – Business Insider

     

    Silicon Valley’s Andreesson Horowitz give Millions to Trump  – Bloomberg

     

    Billionaire Ken Griffin says “expectation today is that Donald Trump will win the White House” –  Fortune

     

    Washington Post flooded by cancellations after Bezos non-endorsement decision  –  NPR

     

    Ooooohh what would Washington Post legends Katherine Graham or Ben Bradlee think in this “Fat Nixon” era? It would appear big tech and big money “broligarchs” see Trump support as commercial insurance at the very least, and possibly a route to unfettered, compliance-light opportunity. One could become dispirited about the overt involvement of big business in politics. But, in reality business was always there in the Washington background. However, it’s not just a US phenomenon.

    Europe has had its share of big business influence on policy. In the UK, they have had trade and Brexit. In Germany, it was the powerful industrial sector and its push for cheap(then) dependency on Russian energy. We will say no more on either policy disaster, except there might be an intellectual reason why US business leaders are in a different universe of wealth creation compared to their strategically inept European counterparts.

    On a final more serious note, perhaps the difference this time is that governments really do need the balance sheets, cash and spending power of big tech. Just six US technology companies – Apple, Amazon, Google, Meta, Microsoft and Nvidia – have a combined market value of $15 trillion. For context, that $15 trillion equates to the  GDP of China as recently as 2020. In this writer’s reluctant view, politicians have two options – tax these guys or become partners. It might seem distasteful but public-private partnership is now an existential fact of life….or death.

    Gotta dip with the dipshits.