Gravitas Spark CrowdFunding

Tag: technology

  • Keep Your Eyes On The Prize, Not the ICE…

    Keep Your Eyes On The Prize, Not the ICE…

    I know, I know…. we’ve all heard enough of “big piece of ice”, “ICE”, “Iceland”, “hundreds of feet of ice”, “not on the frontlines” etc. And…best not mention the threat to the icy “G” spot (thousands of miles from Melania) which has ‘ruptured’ the rules-based world order. Anyway, it’s Friday and the past week felt like months before closing with the ‘bigliest’ TACO ever at Davos. Not the food version, but the geopolitical clown car currently posing as the leader-for-life of the autocrats anonymous therapy  group, The Board of Peace. Entry fee is a billion, leave your moral compass at the door. Parody is dead, but for investors not quite exhausted by awful, there are genuine investment prizes out there and they are developing nicely despite the Davos noise. The White House brown shirts in ICE might ask you not to believe your eyes and ears in Minneapolis, but for the next 3-4 minutes, just read and believe….

    Smaller companies are doing very well in 2026 on public markets. In fact, the smaller company US equities index, the Russell 2000, has beaten the blue chip S&P 500 index for the 14th consecutive day. That’s the best relative (small vs large) winning streak seen in markets since 1996. So, despite the headlines confidence in markets is actually pretty high. A more esoteric check on confidence can be found in the way bigger (than equities) bond/debt markets. Confidence in high quality company bonds is measured by the gap(extra cost) between US risk-free government bond yields (Treasuries) and the yields of the bonds(debt instruments) issued by companies themselves. The larger the gap(the “spread”), the larger the uncertainty of investors. So, check out current spreads of just 0.71% which are the lowest demanded by investors since 1998. In other words, investor confidence is riding high. That means many investment themes remain intact.

    Best performing US large company stock last year? Good ol’ Sandisk. Yep, it delivered 577% returns to investors in 2025 alone. Its run continues. Sandisk has just clocked another 110% return in January…That’s a 1,300% return in less than one year and a reminder that the ‘picks and shovels’ of AI infrastructure are still hot, hot, hot. Not long ago Sandisk was a stodgy old memory card company (think USB thumb drives) but memory chips have became a major supply bottleneck for AI development. Generative AI models like Gemini, ChatGPT and Claude need ever-increasing ‘context’ as reference data. Or, as we used to call it, memory. An interesting part of this story is Sandisk’s partnership with Japanese manufacturer, Kioxia, whose multi-decade expertise in manufacturing is delivering a significant cost advantage. There will be more Japan surprise cost/value stories this year but it’s no surprise to Gravitas readers of our “Japan Series” of articles in 2025. Take-private buyout deals in Japan hit a record $40 billion in 2025. Now, think about Japan household savings storing up $14 trillion of firepower which equates to more than three times its GDP. However, there’s another Japan story which is worth watching too…

    We keep writing about the bullying power of global bond markets. One of the biggest is Japan’s government bond market (JGBs). Last week witnessed Japanese government bond yields (cost of money) rising to levels not seen since the 1990s. That is a worry because Japan has a lot of debt (but also a lot of savings). However, there is a bright spot in this rising bond yield story. Ordinarily, inflation is a bad thing, particularly for bonds. But… in Japan, monetary authorities and successive frustrated governments have spent decades trying to generate inflation to encourage spending NOW, and not years in the future. Of course, bond yields can’t be let run out of control but if managed/balanced carefully, there will be many more buyout deals, venture capital growth and M&A in the Land of the Rising Sums….of investment capital. The bond yield spike is not just a Japanese phenomenon.

    US monetary authorities have been cutting interest rates since 2024 but bond yields (and mortgage rates) remain stubbornly high. In this instance investors are worried about Fed independence, tariff chaos and the vaporising of the rule of law in Washington. Somebody might have to explain to Agent Orange that bonds and debt instruments are financial contracts. Then again, that never meant much to him or his poor bankers in Manhattan during the ‘90s. However, this inflation uncertainty can be a good thing for particular parts of the investment markets. In particular, you will hear more about real assets. Atoms rather than bits. Anyone seen the silver price this week? Yep, $100 here we come.  Or check out Brazil. It makes and owns lots of real things in the agricultural, mineral and materials spaces. Brazil’s stock market is already up 10% year-to-date while US and European markets are sitting on more restrained returns of 1-2%.

    These are not new themes. Really this article is a reminder, despite the bewildering headlines and global ‘rupture’ (do read Canadian PM Mark Carney’s Davos speech), that investment and economic stories continue to develop along the same trajectories experienced in 2025. Indeed, to use Carney’s words, if there is a new theme/story, it is to look at the ‘middle powers’, not the autocratic gorillas, and explore opportunity in the likes of Japan, Brazil and ….. a Europe which finally stood down a bully with some not-so-subtle assistance from those law-loving global bond markets.

  • Themes And Dreams For 2026

    Themes And Dreams For 2026

    This won’t help my US visa application any time soon. However, it is possible to be on the right side of history and seek investment opportunity too. History may record that 2025 was a dark year of barbarity in Gaza, criminal meat-grinder slaughter in Ukraine, trade tariff chaos, war crimes in Venezuelan waters and full strategic capture of US national security policy by the Kremlin. And, yet I’m hopeful. I will leave it to more mainstream outlets to review 2025. Instead, I’d like to take a look at a number of 2026 investment themes – new and old and not AI – which are developing in potentially unexpected ways. Many, in a good way.  Let’s take a look at the data and start to dream….

    Global Trade: Dare we return to Brexit. Anybody see the UK paying over €600m to re-join the EU’s Erasmus student exchange programme? Don’t worry. We are not going to re-visit Brexit but we are going to cite this as an example of slow-moving sanity repairing self-inflicted harm. Similarly, the “America First” tariff policies in Washington are now beginning to reveal some awkward truths. The mighty US dollar has slipped by 9-10% against other major currencies, US equities (+15%) have underperformed global equities (+29%) and the US manufacturing sector has been losing jobs for 7 months consecutively. Oh, and China, the original bipartisan focus of US trading ire, has just seen its trade surplus exceed $1 trillion for the first time in history. So much winning. What are the chances of US trade policy moving away from tariffs? Well, the polling for US mid-term elections in 2026 is looking pretty bleak for incumbent Republicans. And, the spectacular Vanity Fair quotes (more of them later) from Trump chief-of-staff, Susan Wiles, are prompting Washington insider speculation of a policy re-set or ‘cry for help’ from within the White House. To be clear, nobody sane thinks Wiles (in 11 recorded interviews with Vanity Fair) was unaware of the likely end result.  Bank on that. So…..

    Financials: If you’ve been dazzled by AI you might have missed the massive performance of financial stocks this year.  Financials in the US (+20%) have outperformed technology (+18%) but check out UK banks being tortured by a chaotic Labour government. The FTSE All-Share Banks index is up just the 56%!! In Europe the Euro Stoxx Banks index has clocked a 76% increase in value year-to-date. Meanwhile, Europe’s fintech banking star, Revolut, has completed its second funding round since August. The latest round was eye-catching for the $75 billion valuation achieved (vs $48 billion in August) and the backing of Nvidia’s venture capital arm. That’s a 56% increase in value in just a few months. More importantly, healthy performance in banks and financials usually reflects overall confidence in the global economic cycle despite the dark headlines. Bluntly, banks feel the fear first. It’s not there. In fact, the latest Bank of America investment survey shows investor sentiment at its strongest since 2021. And, that confidence might be showing up in strange places…

    Europe: There appears to be a growing view that Europe has been shocked into taking responsibility for its destiny on the geopolitical stage. The loss of the US as a reliable ally – outlined in the recently published National Security Strategy 2025 – means Europe must back its own. All the way. It was striking to read recently that in Europe, over the past 50 years, just 14 companies started from scratch ended up with valuations over $10 billion. In the US that number is 241!  German defence company, Rheinmetall AG, at €70 billion is now worth more than BMW, VW or Mercedes. Its value has appreciated 15x since the outbreak of the war in Ukraine. Unsurprisingly, Franco-German defence company, KNDS, is eying a €25 billion IPO in Amsterdam in 2026. Furthermore, conditions of ‘war’ have historically driven innovation. So, when the head of the UK’s MI6 intelligence services and its chief of defence staff both warn in the same week of the need “to be ready to fight”, we should expect a massive step up in investment in Europe across the board, to strengthen not just defence but energy grids, communications, technology, supply chains etc. Europe’s prompt for action might be scary but there might be a surprise further east….

    Geopolitics: Europe is still reeling from the stunning geopolitical alignment of Russia and the US sealed with the Kremlin’s approval of Washington’s National Security Strategy “as largely consistent with our vision”. Read that twice, watch the party of Ronald Reagan spin in its grave (yep it’s dead) and remember those famous Russo-proverbial words borrowed by Reagan…. “trust, but verify”. Then think about who is really driving the Ukraine peace talks. In recent weeks we have seen oil hit 5 year lows, the Russian economy battle rampant inflation, the Russian central bank selling its gold reserves and Europe moving to seize ‘indefinitely’ $200 billion of Moscow’s foreign reserve assets. If I were to offer a contrarian view on current peace talks, or even dream, I’d say Russia and Putin has more problems than we think. Furthermore, the unseemly haste of Trump’s agents, Witkoff and Kushner, to rush Ukraine into a Russian-written deal has a ‘frantic’ feel about it. Just a thought, or dream.  Of course, these are not the only deals which could light up 2026 in an unexpected way….

    Private Exits: The IPO pipeline of 2026 could break all sorts of records. Databricks has just completed a $3 billion Series L funding at a $134 billion valuation – yep that’s an “L”. We hear it so often now, but the private market really needs some big exits. OpenAI could be up for a $500 billion IPO. ByteDance ($480 billion) and Anthropic AI ($180 billion) are also on the blocks, as is Stripe with a $100 billion promise. I’m loath to mention the biggest of the lot, SpaceX, which is targeting a whopping $1.5 trillion 2026 valuation and thus pushing its owner Elon Musk in to trillionaire territory. Unless……

    Electric Vehicles: Ford might be grabbing the headlines this week with a monumental $19 billion walk away write-down of its electric vehicle (EV) projects. And, people worry about AI infrastructure over-spend? As China continues to accelerate away from the EV pack in its global dominance of the EV manufacturing ecosystem, whither Elon Musk’s Tesla? First, one can’t miss the opportunity to re-print Trump chief of staff Susan Wiles’s marvellous Vanity Fair assessment of Musk this week among others in this “only the best” Trump inner circle/cabinet. The New York Times summary is best:

     

    Trump’s White House Chief of Staff Susie Wiles describes Trump as an “alcoholic’s personality”, JD Vance as a “conspiracy theorist for a decade” and Elon Musk as “an avowed ketamine user” and an “odd, odd duck” in an interview with Vanity Fair

     

    Hmmm. An odd, odd duck. Tesla might just be reaping the DOGE or DUCK whisperer whirlwind. Tesla currently is valued at $1.5 trillion with a price/earnings valuation of 327x. Yep, 327x – I might raid the ketamine jar too. You’d expect Tesla to be growing, right? Well, the ducks are lining up. November sales for Tesla were the lowest seen since 2022. The brand destruction by Musk’s dive in to right wing politics has been epic. In Europe not a single country achieved sales of more than 750 units, except France. If it walks like a duck, tweets like a duck…….we can only dream.

    Old Economy: Surprisingly, 5 of the “Magnificent 7” tech stocks have under-performed the AI-giddy market this year. In fact, the original perceived AI ‘loser’, Google, has been the stellar performer, up 56% year to date. Now, it might be worth taking another look at other ‘losers’. Defence and banking  stocks are already back in vogue, but in ‘war-like’ conditions the basics become critical too. So, it’s possibly no great surprise that the Basic Materials sector in the US has clocked the best sector performance by far, up 33%. As the race to electrify the global economy accelerates, critical minerals, precious metals and mining stocks stand to benefit from urgency, security and scarcity. Gold is up 65% year-to-date, silver has more than doubled and platinum is up 117%. Keep an eye on Mr Copper too with a 34% uplift in 2025.

    Plenty to think about above, and possibly dream too. What a year! I’ve a feeling I won’t be short of writing material in 2026.

    That’s nearly it folks for 2025. Thanks for reading and the words of encouragement along the way.

     

     

  • Numbers Which Make You Wonder….

    Numbers Which Make You Wonder….

    I’m quite enjoying the “rubber meets road” moment for the leaders whose numbers never add up. In a previous political era they might just have been called liars and shunned by serious media. Now, it’s about eyeballs for the media and their audiences retaining some memory cells. Good ol’ Nigel Farage has moved from trying to avoid discussing the number of white people in ads (thanks to Reform MP Sarah Pochin) to rowing back on previous tax promises. Currently, known as “aspirations”. Like Brexit, more lies. In the US, gold-plated ballrooms and newly minted tech billionaires don’t quite cut it for the 50% of US have-nots who don’t benefit from 401k investment savings. But, the have-nots do have votes…..for now. New York has just voted for a Democrat socialist mayor with the biggest mandate since 1969. Meanwhile public representative seats and offices have flipped this week from MAGA red to Democrat blue in New Jersey, Georgia, California and Virginia. Even Mississippi is turning. In Washington adjacent, Virginia, the political landscape has morphed back to 1987 as Federal workers, either sacked or not being paid, discover some numbers are very real. Here’s a few other numbers flagging change which caught the eye in recent days….

    Sports betting was legalised in the US in 2018. Americans bet over $148 billion on sports last year, which is more than they spent on movies, books, concerts and sports tickets…. combined.  Meanwhile, Disney through its sporting broadcast arm, ESPN, is teaming up with DraftKings as its new sports betting partner. Expect more deals in the sports betting space with $148 billion of US wallets on offer and then wonder about societal shifts. Housing shortages and fewer children seems to be freeing up a lot of discretionary spending power. Watch also prediction marketplaces like Kalshi and Polymarket. The latter is doing over $1 billion of volume each month and is fully crypto-native. More traditional financial businesses are taking notice. Robinhood’s share price is up 235% year-to-date and has reported 2.5 billion prediction contracts (fees of $25m) traded on its platform in just October 2025. That is more than all of the contracts traded in Q3 2025. Any more predictions…?

    You can probably bet on OpenAI doing more AI/cloud infrastructure deals. The famous Financial Times graphic of OpenAI playing a central role in $1 trillion of AI projects is worth revisiting. OpenAI has recently announced a re-jig of its corporate structure to allow for a profit making entity under the stewardship of the original non-profit foundation. The profit bit is going to have to wait. Thanks to Microsoft’s recent results (and a circa 27% stake in OpenAI) analysts have estimated quarterly losess at OpenAI could be as high as $11 billion. Per quarter! Now think about those trillion dollars of projects planned. Then digest this little gem…

    OpenAI is requesting US government support to help guarantee financing for the massive investments in AI chips and data centers it needs for expansion, per Bloomberg.

    The latest OpenAI infrastructure project commitments, per Wall Street analysts, are heading towards $1.4 trillion. UK water utility observers will be familiar with the privatise-the-gains and socialise-the-losses model. It doesn’t end well. And, Fox News and Trump think Zohran Mamdani is the communist….

    On a more capitalist pursuit, M&A deal flow, the news is very encouraging and starting from a less frothy base. Deal research house, Pitchbook, gives the latest update on confidence levels in the C-suite. As we often say, it’s what companies DO, not say, which counts:

     

    “Q3 activity increased by 25.6% in M&A value and 3.8% in deal count as buyers jumped back into the market after macroeconomic headwinds disrupted momentum earlier in the year. Moreover, 2025 is shaping up to be an incredible year for global M&A despite the spooky headwinds present in the market, including geopolitical volatility, stubborn inflation, and a slowing global economy. YTD, there have been 37,096 M&A transactions for an aggregate of $3.4 trillion….. This resurgence in large-scale deals leaves the door open for two consecutive years of M&A deal value growth for the first time in over a decade. Deal count itself is on pace for year-over-year growth, with an active fourth quarter that could see the ecosystem hit nearly 50,000 deals for the year. ”

     

    One can expect more deals in the electricity/power sector. Close to home, Energia was bought by French private equity house, Ardian, and Blackstone bought TXNM Energy for $11.5 billion earlier in the month. It’s all part of the AI infrastructure story but the daddy of the AI rush is Nvidia’s Jensen Huang. He had some sobering thoughts in an FT interview. “China is going to win the AI race.” warned Huang, citing China’s advantages in energy and less‑stringent regulation. He later clarified that China is “nanoseconds behind” the US, adding “it’s vital that America wins by racing ahead and winning developers worldwide.” Huang might have backed away from his original statement but consider that last year China added 426 GW of electricity generation capacity. In the US that number was 30 GW. A growth differential of 14x doesn’t take many ‘nanoseconds’ for China to establish a dominant cheaper electricity base. If electricity is going to decide the global AI race then “drill baby, drill” could cost US industrial policy dearly. Go ask Germany, where manufacturing output is 20% below 2019 levels thanks to disastrous energy policy decisions. But there are prescient decisions to be made too…..

    Investors can see M&A activity pick up, corporate earnings growth above 12% year-on-year, cost of capital shift to a lower trajectory and even the possibility of the US Supreme Court stifling Trump’s ‘emergency’ tariff powers. It’s always awkward to claim ‘emergency’ in court when your lawyer (for US government) agrees the consumer pays 30-80% of tariff costs, and the judges note that tariffs have been imposed on countries like Brazil and Great Britain who actually have trade DEFICITS with the USA. More ketchup on the walls of Mar-a-Lago me thinks. However, the key point is that the investment environment for private investors is picking up momentum. And, Spark Private can help. A flow of new EIIS season deals has just hit our investors’ in-boxes. In this instance, the numbers are real, and do warrant real attention. This is a genuine opportunity to build an exciting diversified portfolio of 8-10 companies with a variety of timing/risk horizons and big thematic exposures in a matter of weeks.

  • Strong Grounds For Optimism, And Action….

    Strong Grounds For Optimism, And Action….

    I should be terrified. Watching Netflix’s House of Dynamite was definitely disturbing. In real life, the guy with the nuclear codes is having another Canada tantrum and refusing to rule out a third presidential term. Meanwhile, financial market headlines are full of ‘bubble’ talk as Hallowe’en approaches and yet…… I’m suddenly very optimistic. It might be Hallowe’en season but there are two other ‘seasons’ in full swing which could bring significant wealth enhancement. Firstly, we are in the middle of corporate earnings results for Q3. Secondly, Irish earners will soon be looking for opportunities before year end to invest in EIIS-eligible deals to reduce their income tax costs and balance their investment portfolios. My sense is that the stars are aligning nicely for a further burst of action in the next few months. As always, companies need to lead so check out the latest developments.

    We mentioned Q3 earnings season but we didn’t mention the “Magnificent 7” superstar tech stocks dominating the financial headlines. Deliberately so. The latest ‘tot up’ of Q3 earnings reveals a much broader participation of companies in healthy earnings reports. So far, 145 companies out of the S&P 500 index have reported Q3 earnings. A whopping 84% of those companies “beat” analysts earnings forecasts which is the highest “beat” rate seen in four years (Source: Bloomberg).  Average earnings growth across the reporting companies is on track for a year-on-year acceleration of 15%. The bottom line, literally, is that operational fundamentals are very strong. Critically, this profit growth is spreading to smaller companies; the Russell 2000 index of smaller companies is clocking an even higher 2025 profit uplift of 25%. You might have to pinch yourself, then check your notes re current challenges faced by companies. Try these for starters:

     

    • Global disruption to supply chains and energy markets due to Ukraine war.
    • Relatively high interest rates since 2022.
    • Tariff and trade chaos thanks to the unstable ‘genius’ in the White House.


    In many ways these are historical known ‘unknowns’ in Rumsfeld-speak. However, the positive twist on this uncertainty is that, if companies are able to generate significant profit growth despite these challenges, then this generation of corporates must be fundamentally very robust. This opens up another possibility, a very exciting one. What if interest rates were now beginning to fall and China and the US were about to agree a trade framework? Well, there’s a 97% chance (per money markets) of the Fed cutting interest rates this week and the news from the Trump trip to Asia is positive on a China deal happening too. Dare we dream of a Ukraine breakthrough? We might ease up on the Kool-Aid there, but we do note a weekend article in The Telegraph about Putin’s fears of a coup. We will continue to dream. However, the deal junkies in the private equity world seem to be picking up on the same fundamental positivity.

    Blackstone’s COO, Jon Gray, in its Q3 results call with Wall Street analysts was certainly pointing to more activity:

     

    “Directionally healthier markets, more liquid markets, better credit markets, better IPO markets; that’s healthier for realizations….The deal dam is breaking.”

     

    Closer to home, private equity exits in Europe’s financial services have reached an all-time high with 77 deals year-to-date worth $31 billion. As we wrote last week…… Banks are SOOOO back! However, it would be a mistake to think this was frothy financial ‘engineering’. In fact, it’s more engineering than finance on a global basis. Private equity investment deals in global infrastructure have rocketed by 44% year-on-year to $25 billion. That’s the second highest total deal value seen in a decade. Clearly, there is a lot more going on than an AI revolution. In the Spark Private world of venture funding and smaller private equity deals we keep a close eye on smaller company activity benchmarks. Two caught the eye this week:

     

    • Smaller company tech equity indices in the US are up 23%…. in just 3 months.
    • Small company industrials are hitting new all-time highs and breaking out on technical charts.

     

    An environment where global trade tensions, interest rates, corporate earnings, smaller company valuations and private equity deal activity are all moving in the right direction will undoubtedly generate more deal opportunities. Pitchbook’s latest review of European private equity (PE) activity is telling:

     

    “A run of large-cap deals in Q3, buoyed by interest rate cuts and improved macro stability, saw European PE dealmaking grow to €177.1 billion (about $206.7 billion) in Q3…….37% of overall PE deal value, €66 billion, came via 19 deals worth over €1 billion—more than Q1 and Q2’s mega-deal value combined. In total, 48 mega-deals took place in Europe over the first nine months of the year. That figure is expected to approach 70 by year-end, making 2025 one of the most active years for such deals in the region on record.”

     

    So enough of the headlines, where’s the action for private investors? The key questions for many investors at this time of year are…

     

    How can I access the deal flow?

     

    Can I do it in a tax friendly manner?

     

    Spark Private can help on both fronts. More specifically, investors can quickly build a well-diversified portfolio of 7-8 companies with top-calibre teams, EIIS tax rebates and genuine structural growth opportunities in a matter of months. Now, for the action…..YOUR action.

  • Virtuous Circle Or Circle Of P..AI..N?

    Virtuous Circle Or Circle Of P..AI..N?

    I’m getting flashbacks. Not good ones. Financial ‘engineering’ was a feature of the world’s last two financial crises. In the TMT bubble collapse, Enron used its stock as collateral in long-term contracts or asset sales which were described as “circular hedging transactions”. The goal or impression sought was to mitigate risk but ultimately all risk was really tied to the Enron share price. In the credit crisis of 2008/2009, new ways of packaging property debt with a bewildering array of acronyms (CLO, CMO, RMBS etc) were supposed to insulate risk within different tranches. Until, they didn’t.

    Now, I’m reading about new ways to finance the AI boom and, again, the risks keep coming back to a very narrow collateral pool. The word “circular” is back and one name keeps cropping up; OpenAI. My newsfeed has been bombarded with multiple graphics from Bloomberg, Goldman Sachs and The Financial Times (see below) illustrating this circularity accompanied by headlines stating that OpenAI is at the centre of a $1 trillion AI infrastructure spending boom. And, I thought they were just building a chatbot (ChatGPT).

     

     

     

    Here’s a few things you might have missed about OpenAI….

     

    A recent funding round valued OpenAI at $500 billion, the world’s most valuable private company, but….

     

    It generates NO cash. Latest figures for H1 2025 reveal revenues of $4.3 billion while incurring a net loss of $13.5 billion. Yep, it’s losing more than 3 dollars for every dollar of sales it generates.

     

    OpenAI has signed up to $1 trillion of deals with the likes of Oracle ($300 billion), Nvidia ($100 billion), AMD ($80 billion) and Coreweave ($22 billion). The Stargate project alone is a $500 billion infrastructure project.

     

    OpenAI’s core product, ChatGPT, has built a weekly user base of 800 million people.

     

    Now, let’s return to the deals. I’m not sure the graphics of circularity really capture what’s going on. In recent weeks the world’s most valuable company, Nvidia, announced a $100 billion investment in OpenAI. In return, OpenAI will buy Nvidia’s graphic chips (GPUs) as it builds out its data centre infrastructure. You can see the circular vendor-financing risk in that deal. However, in the last 24 hours OpenAI has announced a further deal with Nividia rival chip maker, AMD. I’m going to lean on Bloomberg’s excellent Matt Levine in imagining the language of current deal negotiations with the loss-making OpenAI.

     

    OpenAI: We would like six gigawatts worth of your chips to do inference.

    AMD: Terrific. That will be $78 billion. How would you like to pay? 

    OpenAI: Well, we were thinking that we would announce the deal, and that would add $78 billion to the value of your company, which should cover it.  

    AMD: …

    OpenAI: …

    AMD: No I’m pretty sure you have to pay for the chips.  

    OpenAI: Why?

    AMD: I dunno, just seems wrong not to

    OpenAI: Okay. Why don’t we pay you cash for the value of the chips, and you give us back stock, and when we announce the deal the stock will go up and we’ll get our $78 billion back.

    AMD: Yeah I guess that works though I feel like we should get some of the value?

    OpenAI: Okay you can have half. You give us stock worth like $35 billion and you keep the rest.

     

    Levine is spot on. It has been bothering me for weeks now. CEOs in the tech world have spotted that a company’s share price goes up on the announcement of huge spending plans (not profits). In extremis, one could route the “value” of the share price gain to a cash-strapped customer like OpenAI. Funnily enough, AMD’s share price rocketed 35% on the OpenAI deal news adding $60 billion to its market value. And, so the merry go round continues. Sure enough, Nvidia, has responded to the behind-the-back dealing of OpenAI with rival AMD by announcing a $2 billion investment in OpenAI rival, xAI, owned by Elon Musk. The total funding round for xAI will be $20 billion but there’s a few extra ‘engineering’ twists. The $20 billion ($7.5 billion equity, $12.5 billion debt) is going into a special purpose vehicle (SPV – remember them?) which will buy GPU chips for xAI’s Memphis Colossus 2 data centre. The SPV, in turn, will rent out the GPU chips for 5 years, with the debt backed by the chips rather than the company. Hmmmm. The rent and SPV details should raise alarm bells.

    The attraction of constructs like rent, leases and special vehicles is that it increases the complexity of an organization and also makes it more difficult to track the true returns (or not) of a company. Rent and leases are considered off-balance sheet items ie they don’t show up as DEBT on the balance sheet. To complete the circle, I’m reading about Oracle today and its astonishing $380 billion in revenue it will generate by renting out its cloud servers to OpenAI and other AI developers over the next 5 years. Oracle can’t afford a rent default. It is not cash rich like Google or Microsoft. In fact, its debt-equity ratio is a whopping 520%. Michael Cembalest at JP Morgan put it rather well…

     

    “Oracle’s stock jumped by 25% after being promised $60 billion a year from OpenAI, an amount of money OpenAI doesn’t earn yet, to provide cloud computing facilities that Oracle hasn’t built yet, and which will require 4.5 GW of power (the equivalent of 2.25 Hoover Dams or four nuclear plants), as well as increased borrowing by Oracle whose debt to equity ratio is already 500% compared to 50% for Amazon, 30% for Microsoft and even less at Meta and Google. In other words, the tech capital cycle may be about to change.”

     

    Change, yes. But some things never change in credit or investment cycles. OpenAI might be at the centre of a $1 trillion investment revolution driving stock prices ever higher. But, ultimately “other people’s money” will make its presence felt. Bloomberg is reporting that the amount of debt tied to AI has ballooned to $1.2 trillion. This makes AI the largest segment(14%) of the investment-grade market, surpassing US banks. That means more eyes and scrutiny on the circular world of AI. Bluntly, if a problem emerges it won’t be seen in the stock markets first. It will be in the bond markets with its army of credit analysts. As a final thought, and given the scrutiny applied to the track records of key entities in investment ecosystems, what must credit analysts think of OpenAI?

     

    • As recently as 2023, the OpenAI CEO, Sam Altman, was fired, then re-hired.
    • OpenAI co-founder, Elon Musk, is now a bitter and richer rival.
    • The company is a strange governance hybrid with control residing in a non-profit Board.
    • OpenAI and early backer, Microsoft, have been in dispute over their partnership terms.
    • CEO Sam Altman was quoted this week in FT saying becoming profitable was “not in my top-10 concerns”
    • Recent $100 billion investor in OpenAI, Jensen Huang of Nvidia, was not told about the deal with rival, AMD.

     

    None of the above makes OpenAI a bad credit. But, with trillions of dollars of investment capital on the line any loss of confidence in OpenAI could spiral rapidly into a whole new circle of “engineering” PAIN.

  • Follow The Deals…

    Follow The Deals…

    The White House has approved this article. Oh, wait. That’s just my slow-learning chatbot co-writer, Eric, getting nervous. Silly boy. He’s still being trained and doesn’t understand how the world works yet. Of course, as Disney and Jimmy Kimmel have just discovered, if you want to get a deal done in the USA these days you do need the approval of the Dear (or Expensive) Leader. Beijing watchers will know that a centrally controlled economy dictates whether M&A deals get done, or not. For Disney, it needs regulatory approval for a deal acquiring 10% of ESPN in exchange for NFL sports broadcasting rights. For Nextra who cancelled Jimmy early, it is awaiting FCC approval for its $6.2 billion merger with Tegna. This all makes worrying sense, but on a positive note I’m sensing an exciting pick-up in the wider world of M&A outside the truth-strangled US media. Let’s take a look at a few deal developments and note how they tick more than a few thematic boxes.

    A is for AI and we just can’t avoid it. The good news is that the AI ‘space race’ is spilling over into the wider tech world and is not just a ‘Magnificent 7’ phenomenon. Last week we touched on “forgotten” Oracle flagging a $450 billion contract backlog for its AI cloud business. This week it’s struggling chip manufacturer, Intel, receiving the AI love. Fresh from accepting an “invite” from the US government (not China) to take a 10% ownership stake, Intel has just received a $5 billion investment from chip superstar Nvidia in exchange for approximately 4% of the company. Intel’s share pricy duly rocketed 22% in a matter of hours for its best day since… 1987. Back in 2011, Marc Andreessen wrote “software is eating the world”. More recently, we have flagged a significant shift in technology – hardware is hot. AI has focused minds on chips and cloud infrastructure with the most valuable company in the world now a hardware company (ahead of software beast Microsoft). In fact, 5 of the 10 most valuable companies on the planet are technology hardware players. Interestingly, human beings seem to be benefitting from this shift too. Again, Nvidia is splashing the cash.

    We have previously written about the acqui-hire trend; the strategic acquisition of scarce knowledge/skills by buying out early stage start-ups. Enfabrica, its CEO and a handful of its employees have just had $900m waved in front of them to join Jensen Huang and Nvidia. The Enfabrica team’s key IP is the ability to connect more than 100,000 GPUs(AI chips) together.  Oh to be an AI guru, as Meta, Google and Amazon hunt the globe for unique talents and knowledge. The attraction of hiring individuals (not acquiring start-ups) for the acquiror is the avoidance of regulatory scrutiny. The biggest deal of this genre so far was Meta’s $14.3 billion purchase of a 49% stake (dodging control/regulatory process) in Scale AI, its founder Alexandr Wang and his colleagues. Of course, all this talent and  hardware needs electricity to power research, manufacturing and cloud hosting.

    So, it was interesting to see private equity giant, Blackstone, acquire Pennsylvania’s Hill Top natural gas power plant for close to $1 billion. This follows Blackstone’s July announcement that it would invest $25 billion in Pennsylvania to build out its energy and digital infrastructure for the AI revolution. Yep, $25 billion. Meanwhile, Elon Musk’s xAI vehicle has purchased an entire power plant overseas and is shipping it to Memphis where xAI plans to build a data centre hosting 1 million GPUs. Blackstone and other private equity players are clearly taking a view that electricity grid infrastructure is critical to any digital/AI ambitions. Blackstone has been particularly busy with an August announcement of the $11.5 billion purchase of New Mexico’s largest utility, TXNM Energy. So, this focus on electricity infrastructure assets raises a further question, possibly opportunity. We know electric power is critical to the AI revolution but there’s another critical component to the digital world – basic materials. The investment community is correctly focusing on the physical assets of the manufacturing and power generation sectors but the most basic manifestation of infrastructure assets is raw materials. The Chinese have bullied the Expensive Leader on tariffs thanks to control of rare earths supplies but what about other critical metals? Let’s see.

    Silver and gold prices have both recently hit new highs with precious metals funds (ETFs) posting 47% returns year-to-date. But keep your eyes on the global electrification prize. Copper is the critical metal for electricity conduction in transmission grids, renewable power projects and electric vehicles (EVs). So, check out the biggest mining deal in ages. Anglo American is planning to merge with Canadian copper play, Teck Resources, in a $70 billion deal. Given EVs use up to 4 times more copper than traditional cars and wind farms consume 10 times more copper than gas-fired plants, it’s not a surprise to see this deal happen. However, what is surprising is that the GLOBAL publicly quoted mining sector is valued at just over $1.4 trillion. That doesn’t even cover the increase in value of just one tech company, Nvidia, in the past… 6 months! The most valuable US mining company, Southern Copper, is worth $87 billion. For context, note Larry Ellison’s personal wealth increased by $100 billion in just one epic trading session for Oracle on September 9th. Not for the first time in recent giddy weeks, it feels like something doesn’t quite add up. For illustration, the top 6 US tech companies are now valued at a combined $20 trillion, more than the GDP of China. And yet, each of these 6 companies is utterly dependent on rare earths, basic metals etc. to build semiconductor chips or their precious cloud-hosting data centres. I reference China deliberately.

    Not only did China take the long view on the critical role of rare earths in the modern digital economy, they also ‘got’ electricity. In 2010 they finally caught up with the US in terms of electricity generation. But….. today the Chinese electricity generation capacity stands at 2.5x the USA. We read a lot about tech ‘sovereignty’ these days but critical mineral ‘sovereignty’ could be the next frontier of the AI race. Already, the US Department of Defense has taken a 15% ($400m) stake in rare earths mining company, MP Materials. Surely, private equity and its mounting pile of investment  ‘dry powder’ sitting idle will start to look at the mining sector? We shall see, but it must be encouraged by the US Department of Defense taking time out of bravely bombing Venezuelan fishing boats to secure mining resources. Whoops, Eric is getting nervous again…. Best I stop now before I’m Kimmeled, and best you follow those deals.

     

  • Back To School For A Monster Theme…

    Back To School For A Monster Theme…

    I’m running out of expletives. It’s a sort of “FOMO” thing which rules out obsessing on Labour’s implosion or the Epstein “hoax” which mysteriously keeps removing only British citizens from high profile roles. No, the headlines driving my heightened state of anxiety are derived from a familiar theme. However, it’s a theme which is now hitting warp speed. We have previously written that the best pulse-take of the monster AI trend was tracking the “picks and shovels” of AI/cloud infrastructure rather than the “gems” of digital intelligent progression. Well, this week is turning into a “biggie” for the AI infrastructure theme. I’d highlight three key developments and a few other snippets. So, here goes….

    The creation of start-up billion dollar ‘unicorns’ has hardly any scarcity value these days. Maybe, we should think in trillions. Step forward almost 50-years old Oracle. Who knew Larry Ellison’s database software business would rack up a trillion dollar enterprise value at the beginning of this week? Probably nobody. Even the Wall Street analysts paid to follow every line of the Oracle business and financial model were truly shocked by the big reveal in Oracle’s quarterly update. In fact, earnings results were slightly shy of expectations. But, the share price proceeded to rocket 40%. Why? The future contract work backlog in its cloud(AI) infrastructure business grew 359% to $455 billion. I mentioned “warp speed” earlier so here’s what caught the eye. Oracle’s cloud revenues from Amazon, Google and Microsoft grew by 1,500% but the entire division this year is annualising revenues of circa $10 billion. That number will be $144 billion by 2030. Welcome to trickle-down AI economics. Oracle was barely mentioned in AI giddiness a year ago, now its owner is the richest man in the world. Oracle is not the only AI ‘unknown’ making waves.

    Anyone heard of Nebius? No, me neither until this week but I do remember its former Russian search/e-commerce platform, Yandex. Anyway, Russian sanctions forced a sale of the Russian assets leaving Nebius as an Amsterdam-listed company specializing in cloud computing (GPU) infrastructure. This week Microsoft signed an agreement worth up to $19.4 billion for Nebius in exchange for 5 years’ access to its GPU datacentre infrastructure in Vineland, New Jersey. Nebius’ market value before that news was less than $15 billion. Not surprisingly, the share price has roared 50% higher and the company is now seeking to raise $3 billion in fresh funds to accelerate its growth plans. This was not the only Dutch tech/AI zinger story this week…..

    Eindhoven-based ASML is the world’s dominant player in critical lithography technology used in chip manufacturing equipment. A single machine can contain up to 100,000 parts and cost $300-400 million. Clearly, semiconductor chips and AI are thematically closely connected. But investing in an AI start-up caught ASML analysts on the hop. ASML has just invested $1.5 billion in French AI player, Mistral, for a circa 11% stake valuing Mistral at close to $14 billion. Remember, Mistral raised $385m in late 2023 with a $2 billion valuation and early investor support from BNP Paribas, AndreessenHorowitz, Lightspeed Ventures and telecoms entrepreneur, Xavier Niel. Less than 2 years later, the Mistral valuation is racing towards a 7-8x return for those early investors. Apart from being an example of multi-layer AI investment activity, the deal is being hailed as a boost to Europe’s AI and semiconductor chip sovereignty.  And maybe I’m not the only one feeling a bit FOMO….

    It seems Ireland’s Taoiseach, Micheál Martin, has been thinking ‘sovereign’ too and looking at France’s early initiatives in funding AI startups. The Business Post has reported that Martin has sought the help of Eir owner, Xavier Neil (see above), in establishing an AI/tech incubator modelled on his highly successful Station F start-up campus. There might be good reason why Ireland needs to increase the pace of its AI and start-up readiness. I thought the next few little snippets should be focusing minds in Government buildings and elsewhere:

     

    Private investing: The UK debt market is worrying many, but on a more positive note it was interesting to see Hargreaves Lansdowne and Schroders join forces to offer UK retail investors the opportunity to add private assets to their pension pots. Note to Irish government – start-ups need investor incentives first, then campuses.

     

    Consumer behaviour: Wildfire Systems’ 2025 Consumer Shopping Trends Report shows 61% of consumers are now using generative AI tools like ChatGPT as a tool for deal-hunting.

     

    Company growth speeds: Stripe’s Indexing the AI Economy report shows AI companies reaching $1m annual recurring revenues (ARR) 4 months faster than even the fastest growing SaaS/software companies. And… AI companies reaching $5m revenues are reaching that milestone 3x faster.

     

    I feel my back-to-school mantra should read:    The future is private, AI and fast. Very fast.

     

     

  • Who’s Really Losing Power…?

    Who’s Really Losing Power…?

    We sorta knew didn’t we? The Donald really doesn’t ever want to leave power. National Guard troops might be armed and patrolling the streets of Washington DC but we might be missing an even bigger power move. No, neither I nor the South Park writing team are contemplating a horse being appointed as a Senator, or JD Vance as President or Eric Trump …. replacing the horse. Parody and Caligula’s legacy are safe, for now. However, if you’re a fossil fuel investor things are looking anything but safe despite the Orwellian data-denial of the Dear Orange Leader. Let’s start with a few ground truths.

     

    *Oil prices have fallen in three of the last four weeks and are now in the low $60s per barrel pricing region which is close to a 4-year low.

    *Bloomberg recently reported that global oil markets are on track for a record surplus next year as demand growth slows and supplies keep growing [Source: International Energy Agency(IEA)]

    *IEA data shows oil inventories will accumulate next year at a rate of 2.96 million barrels a day, surpassing even the average build-up during the pandemic year of 2020

    *World oil demand this year and next is growing at less than half the pace seen in 2023.

    *But what about “Drill, Baby, Drill” ? Maybe not so much. US drilling activity continued to fall in early August as the oil rig count fell to 539, near its lowest since Dec 2021.

     

    No wonder Texas is trying to re-draw and gerrymander voting districts 5 years early. Texans are unlikely to fall for Fox News fealty to the Dear Leader, but they will be bombarded with untruths. That’s just a no-fact of life in politics these days. However, the strategic problem for the US in this energy leadership crisis is that climate crisis denial has directly impacted investment in renewable energy projects. The facts are stark. The Financial Times has reported a whopping $19 billion worth of projects have been cancelled this year alone. In fact, cancellation rates on all renewable projects are up over 2,000%.

    The most recent cancellation was a biggie in Rhode Island. An off-shore wind project 80% completed by Danish company, Ørsted, was halted by the Department of the Interior citing “concerns related to the protection of national security interests”.  That project would have powered 350,000 homes in Connecticut and Rhode Island. Meanwhile, the rest of the world is rapidly shifting focus away from fossil fuel projects. The graphic below is from the Visual Capitalist team using IEA data and compares global investment from the years 2015 and 2025 (estimated). Renewable energy investment projects have more than doubled to $780 billion and overtaken oil project investment which has shrunk from over $800 billion to $543 billion. Interestingly, electricity grid, storage and efficiency projects are now forecast to reach close to $800 billion in 2025.

     

     

    The slippage of oil, gas and coal in the investment rankings is clear to see in the chart above. A seismic power shift is already happening and it is worth keeping an eye on the headlines and developments listed below. Arguably, the current White House administration, rather than bolstering “national security” is handing the energy keys of the future to more far-sighted leaders elsewhere. Check out these data points:

    In July, China’s single month electricity usage exceeded 1 trillion kw/hours. That’s more than Japan uses in a whole year. Of this total, 25% was generated by wind and solar energy sources.

    In April 2025, China’s solar generation of 95 TWh was larger than the TOTAL ELECTRICITY DEMAND of all but two countries in the same month.

    For the first time in history, despite soaring electricity usage, CO2 emissions in China are falling.

    The UK in Q2 granted planning for 16.1 GW of renewable energy capacity. That’s up 195% on last year.

    Renewables in the UK for the first time in 2024 supplied over 50% of the nation’s electricity over the entire year. Renewables and nuclear energy combined, accounted for 65% electricity generation in the world’s 5th biggest economy.

    In Pakistan, over the last two years private individuals have imported solar panels which equate to 68% of the entire national public grid!

    India’s solar PV manufacturing capacity has increased 50x in 10 years from 2GW to 100GW.

    In May this year, 68% of Germany’s net public electricity was generated from renewable sources.

    The electric vehicle (EV) revolution is not just happening in wealthy economies. 76% of new passenger cars sold in Nepal are electric. In Ethiopia that number is 60%.

    EV sales in Europe took 29% market share in June 2025. The share in Sweden is 65% while China moves in to the tipping point of more than 50% of sales being electric.

     

    The future is fast becoming electric, powered by renewable energy sources. One wouldn’t want to be on the wrong side of history, or your previously loyal customers. Ask Elon Musk and his European sales and marketing team. And…. if you want history to be a guide as to how power can shift slowly, then suddenly,  maybe don’t go to a US museum. Apparently, the Dear Leader doesn’t want US museums like the Smithsonian to raise awareness “too much of the past”, but rather “focus on the future”. Yep museums shouldn’t do history too much. Go figure.

    I’m going to stick my neck out here and risk future US visa issues but ……..it feels like the US energy future is not in good hands, just tiny ones clinging to the wrong power.

  • Are We Watching The Wrong Bear…?

    Are We Watching The Wrong Bear…?

    I am worried now. And, I’m not talking bear markets. Not yet. I’m not even talking about the Russian bear heading for the Alaskan Trump TV-fest. Of course, Europe should be worried about the Dear Orange Leader trading Ukrainian sovereign territory with his Putin pal but this summit feels more and more like a photo op with minimal progress. Another chance for the Donald to host, and hallucinate. Even the Kennedy Centre Awards for the Performing Arts have been threatened with a Trump MC slot. Bill Kristol of The Bulwark amusingly described Trump as claiming “his aides had wept, pleaded, besought him to host the awards personally” with reluctant success.

     

    “I’ve been asked to host—I said, ‘I’m the president of the United States! Are you folks asking me to do that?’” Trump said. “‘Sir, you’ll get much higher ratings.’ I said, ‘I don’t care, I’m the president of the United States. I won’t do it.’ They said, ‘Please.’ And then Susie Wiles said, ‘Sir, I would like you to host,’ I said, ‘OK, I’ll do it.’”

     

    Grown men crying again. The former reality TV star can’t resist the cameras or weepy stories but he’s certainly showing a  curious resistance in one aspect of his gyrating global trade war. China was the original bipartisan focus of US trade deficit ire. Now, not so much. China trade tariffs are now lower than those smacked onto many US allies. In fact, Trump has once more delayed the imposition of escalating 100% + tariffs on China by 90 days. Global trade watchers and geopolitical risk analysts have been left scratching their heads. Apart from China tariff leniency, other developments indicate a shifting Trump focus. Here are three moves which are causing most confusion:

     

    1. Check out US Treasury Secretary Bessent describing to an incredulous Fox TV host, Larry Kudlow, the intention of the US to “appropriate” funds from allies in Europe, UAE and Japan to be invested in their trillions at the whim of the US government. Incredible stuff.
    2. Pity poor Switzerland. They are, as a friendly ally nation, currently topping the global tariff league tables with draconian 39% rates, higher even than China.
    3. After decades of US diplomatic efforts to woo India, the White House now seems determined to provoke the Modi government with tariffs because of their purchases of Russian oil. Never mind that China is in far bigger sanction infringement territory with its oil purchases, and weapons parts supplies.

     

    It has not escaped the notice of most risk analysts that China must be very happy with how things are playing out. Arguably, they might even be encouraged. That’s not good news for Taiwan which sits in Beijing’s crosshairs for ultimate political annexation or military invasion. The bear to watch, in my view, is the China panda bear. We are already seeing the US and Trump caving on rare earths/critical mineral supplies and even the export of high-end AI chips in exchange for a 15% cut of Nvidia and AMD Chinese revenues. Yep, if that sounds like the actions of a Politburo centrally-controlled economy, you’d be very close to the exact definition of same. However, there’s a real danger the US is slipping in the ‘imitation’ stakes of competing in many key technologies.

    We already know China controls close to 90% of electric battery cell production. Its dominance of the entire battery ecosystem from raw materials to processing capacity to battery components looks unassailable. Batteries might not be the only technology of our future racing to Chinese dominance. Research from the Australian Strategic Policy Institute (ASPI) shows that China is now leading the way in 57 out of the 64 technologies assessed by its Critical Technology Tracker, which has been updated to cover the last 20 years. The tracker measures a country’s performance based on the high-impact research it produces, specifically looking at the number of publications its institutions released in the top ten percent of cited papers in that specific field. The data studied was from a range of fields, like AI, cyber, defence, and robotics.

    Yep, even AI might not be the US lead technology you thought it was. Perhaps, looking at share prices and massive AI infrastructure spend by Big Tech might not be the best indicator of future leadership. The WIPO Patent report tracking generative AI patents filed in the period 2014-2023 showed China filed 6x more patents than the US, or 70% of the global total. This feels like a very focused busy China, not quite a playful low-energy panda. Recent visitors to China speak to warp-speed adoption of autonomous transport, delivery, digital currencies, robotics and digital services. Then consider our recent article flagging solar power capacity being built at a rate equivalent to 5 nuclear power stations…..per week!  It’s all about power, political and physical. It’s a language Trump understands, and one wonders has he decided it’s a battle he won’t win? If so, there’s one more focus for the panda.

    Taiwan historically has enjoyed the security protection of the US and its allies in the Asia-Pacific region. Right now, nobody is sure that will continue. China will also be hugely encouraged by the former gameshow host’s preference for transactional relationships, rather than principles or loyalty. Meanwhile, the general risk view in Asia is that we should be very concerned. We missed Ukraine. Dare we miss Taiwan….?

     

  • 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…..