December 29, 2024: Waiting For Santa Claus Rally

Even as markets rallied for most of last week, and closed up, Friday could have given some investors pause. Last week, Dow Jones gained 0.35%, S&P 500 rose 0.7%, Nasdaq Composite was up 0.8%. Palantir and Anduril, are in talks with about a dozen competitors to form a consortium that will jointly bid for US government work in an effort to disrupt the country’s oligopoly of “prime” contractors. The consortium is planning to announce as early as January that it has reached agreements with a number of tech groups. Companies in talks to join include SpaceX, OpenAI, Saronic, and Scale AI. xAI, which develops conversational artificial intelligence in competition with OpenAI, said Monday it raised a US$6 billion in equity financing round from a slew of investors, including new ones from the Middle East. xAI is also testing a standalone iOS app for its Grok chatbot. OpenAI on Friday revealed more details about its plan to get its for-profit arm out from under its nonprofit’s control. Microsoft is reportedly eyeing alternatives to OpenAI in its Copilot product. Big Tech’s spending frenzy on artificial intelligence will continue until the end of the decade, according to the head of Broadcom. Senior Spotify executives and board members have sold US$1.25 billion worth of the company’s stock in 2024 — including US$900 million in payouts for its two co-founders. In Canda, Payfare will be acquired by Fiserv, for $4.00/sh in cash, for total consideration of ~$201.5 million. The Purchase Price represents a premium of ~90% to the closing price on December 20, the last trading day prior to the announcement, and a premium of ~92% to the 60-day VWAP. Sophic Client, NowVertical Group’s LATAM leadership invests in the Company’s future growth through a debt-to-equity conversion. An aggregate of US$1.25 million will be settled via the issuance of 5,432,954 shares at a price of $0.33/sh per share, resulting in cash savings of US$770K in 2025. Bench, a Vancouver based bookkeeping startup that had raised more than US$100 million from well-known venture capital firms, has cut off its service to customers, effectively immediately.

Payfare (PAY-TSX) enters into definitive agreement to be acquired by Fiserv (FI-NYSE).

Payfare entered into a definitive arrangement agreement (the “Arrangement Agreement”) with 1517452 B.C. Ltd. the “Purchaser”), an affiliate of Fiserv, whereby the Purchaser will acquire the Company, subject to obtaining shareholder and other customary approvals (the “Transaction”). Under the terms of the Arrangement Agreement, the Purchaser will acquire all of the issued and outstanding common shares of the Company for $4.00 in cash per share (the “Purchase Price”), for total consideration of approximately $201.5 million. The Purchase Price represents a premium of approximately 90% to the closing price on the Toronto Stock Exchange (the “TSX”) of the common shares on December 20, 2024, the last trading day prior to the announcement of the Transaction, and a premium of approximately 92% to the 60-day volume weighted average trading price of common shares as at that date. The Arrangement Agreement includes customary non-solicitation provisions applicable to the Company and provides for the payment of an approximately $10 million termination fee to the Purchaser if the Transaction is terminated in certain circumstances. The Arrangement Agreement also provides for reimbursement of the expenses of the Purchaser in certain circumstances. https://tinyurl.com/4a9hp5v2

Sophic Client NowVertical Group (NOW-TSXV) LATAM leadership invests in future growth through debt-to-equity conversion.

NowVertical Group entered into a debt settlement agreement (the “Agreement”) with the former owners of CoreBI S.A. and CoreBI S.A.S. (the “Vendors”) whereby the Vendors agreed to defer certain payments due in 2025 and settle an aggregate entitlement of US$1,250,000 through the issuance of shares of NowVertical. Subject to receipt of TSX Venture Exchange approval, the Company will issue an aggregate of 5,432,954 Class A subordinate voting shares in the capital of the Company at a price of C$0.33 per share (collectively, the “Settlement Shares”). 2,825,136 Settlement Shares will be issued to the Vendors in satisfaction of US$650,000 of owed earn-out liabilities and 2,607,818 Settlement Shares will be issued to the Vendors in satisfaction of US$600,000 of deferred payment liabilities. As a result of the Agreement, the deferred liabilities due through 2025 have also been reduced from US$1,135,000 to US$535,000. https://t.co/MsJahGEvOD

Accounting firm Bench, which raised over US$100 million, shutters.

Bench, a Vancouver, Canada-based bookkeeping startup that had raised more than US$100 million from well-known venture capital firms, has cut off its service to customers, effectively immediately, according to a message posted to its website and an e-mail sent to customers. The company also laid off staff, according to several employee posts on LinkedIn. The shutdown comes toward year-end, an especially busy time for taxes and bookkeeping services, leaving some customers without support or access to financial information. “We know this news is abrupt and may cause disruption, so we’re committed to helping Bench customers navigate through the transition,” the website reads. It’s unclear what triggered the shutdown. Launched in 2012, Bench had raised over US$100 million from investors including Shopify, Techstars, Primary Venture Partners, Bain Capital Ventures, Contour Venture Partners, Altos Ventures and Inovia Capital. The company’s last known financing round was for US$60 million in 2021, when investor enthusiasm for startups was high. Ian Crosby, co-founder and former CEO of Bench, said Friday that he was “very sad” to see Bench shutting down. In a statement also posted to X, he said a board member had told him in 2021, after the financing round and the company had rejected an acquisition offer, that Bench needed a professional CEO. Crosby was fired from the company, he said. https://tinyurl.com/55tsbx4w

Palantir and Anduril join forces with tech groups to bid for Pentagon contracts.

Palantir and Anduril, two of the largest US defence technology companies, are in talks with about a dozen competitors to form a consortium that will jointly bid for US government work in an effort to disrupt the country’s oligopoly of “prime” contractors. The consortium is planning to announce as early as January that it has reached agreements with a number of tech groups. Companies in talks to join include Elon Musk’s SpaceX, ChatGPT maker OpenAI, autonomous shipbuilder Saronic, and artificial intelligence data group Scale AI, according to several people with knowledge of the matter. The move comes as tech companies seek to grab a bigger slice of the US government’s huge US$850 billion defence budget from traditional prime contractors such as Lockheed Martin, Raytheon and Boeing. Palantir’s share price has skyrocketed by 300 per cent in the past year, giving the company a market capitalisation of US$169 billion — larger than Lockheed Martin. Meanwhile, SpaceX was valued at US$350 billion this month, making it the world’s largest private start-up, and OpenAI has soared to a valuation of US$157 billion since it was founded in 2015. https://archive.ph/kMlRc

Elon Musk’s xAI raised US$6 billion from UAE, Saudi Arabia, Qatar, Nvidia and others.

Elon Musk’s xAI, which develops conversational artificial intelligence in competition with OpenAI, said Monday it raised a US$6 billion in equity financing round from a slew of investors, including new ones from the Middle East. The company did not disclose a valuation but it had previously discussed a US$45 billion figure, up from a US$24 billion valuation earlier this year. New investors in xAI include MGX, a US$100 billion sovereign wealth investment firm from Abu Dhabi in the United Arab Emirates, and Qatar Investment Authority, a major investor in Musk’s buyout of Twitter, now called X. XAI also announced that Nvidia, which supplies xAI with advanced AI server chips, and AMD—a chip rival to Nvidia—had invested in the round, Many existing xAI investors also put more into the company, including Andreessen Horowitz, Sequoia Capital, Vy Capital and others. It isn’t clear which investor wrote the biggest check in the round. According to a securities filing, 97 investors participated in the financing and the minimum investment accepted was US$77,593. The announcement confirmed a report in The Information from October that the company was raising US$5 billion from many of these investors. The financing comes seven months after xAI raised another US$6 billion investment from firms and individuals that have previously financed Musk’s companies. While XAI was founded only last year, it has surprised some AI rivals by quickly developing a chatbot, which is now part of the X app, and setting up a state-of-the-art data center for training new AI in Memphis. Grok 3, a new AI model, is currently training, according to a statement from the company. https://tinyurl.com/54hnzxpv

OpenAI announces plan to become Delaware public benefit corporation.

OpenAI on Friday revealed more details about its plan to get its for-profit arm out from under its nonprofit’s control. In a blog post, the ChatGPT maker said it planned to convert its existing for-profit entity into a Delaware-based public benefit corporation, a structure similar to the one used by rivals like Anthropic and xAI to prioritize social goals along with profit-making. OpenAI also said its nonprofit would receive shares in the public benefit corporation at a valuation negotiated by independent financial advisors. The Information has previously reported that the nonprofit is expected to own at least a 25% stake in the for-profit—which on paper would be valued at about US$40 billion based on the company’s last financing round. OpenAI said that such changes were necessary to raise billions of dollars it needs to develop advanced artificial intelligence. The company has two years to complete the conversion process before investors in its most recent capital raise can ask for their money back, plus interest—a total of about US$7.2 billion. As part of the for-profit conversion, OpenAI and its largest investor, Microsoft, are negotiating details including the size of Microsoft’s stake in the for-profit entity and how long Microsoft will maintain rights to use OpenAI’s intellectual property in its products as it pleases. https://tinyurl.com/ym93kftc

Broadcom chief Hock Tan says AI spending frenzy to continue until end of decade.

Big Tech’s spending frenzy on artificial intelligence will continue until the end of the decade, according to the head of Broadcom, which has soared to a valuation of more than US$1 trillion on growing investor excitement about its AI chips business. Hock Tan, Broadcom’s chief executive, told the Financial Times his clients in Silicon Valley were drawing up AI infrastructure investment plans spanning “three to five years in a very big hurry”. “They are investing full-tilt,” he said. “They will stop when they run out of money or when shareholders put a stop to this.” Tan’s comments come after Broadcom’s stock price jumped 24 per cent in a single day last Friday, after it revealed that its AI revenues had surged by 220 per cent to $12.2bn in the 2024 fiscal year. This added more than US$200 billion to its market capitalisation, vaulting the chipmaker past US$1 trillion in market value for the first time. Tan told investors last week Broadcom could see tens of billions of dollars in additional annual revenue from AI chips by 2027. Broadcom does not name its chip clients but analysts say the Silicon Valley-based group has worked with Google, Meta and TikTok’s parent ByteDance to design custom processors that accelerate training and deployment of AI systems. OpenAI and Apple are also reportedly working with Broadcom to develop their own AI server chips, as tech companies seek alternatives to Nvidia, the US$3 trillion chipmaker that dominates the market for the powerful processors needed to train large language models. xAI’s “Colossus” facility in Memphis boasted 100,000 Nvidia graphics processing units when it came online in September, setting a new bar in the race for AI computing power. But by 2027, Broadcom’s customers will be building clusters of as many as 1 million AI chips, according to Tan. Although the “jury is still out” on the value of generative AI to help regular businesses save money, Tan said Big Tech’s “hyperscalers” saw huge opportunities to generate more revenue. “They need to train [AI] on a scale that the world has hardly ever seen before,” he said. “That consumes huge amounts of silicon. That’s where we show up.” Even 1 million chips may not be enough to reach the ultimate goal of OpenAI and rival AI start-up Anthropic: to create artificial general intelligence, or machines that are smarter than humans. “I don’t think anybody knows,” Tan said. “But the opportunity is too hard to resist to say, let’s try it.” https://archive.ph/fZen7

Spotify executives cash in as streaming service stock price soars.

Senior Spotify executives and board members have sold US$1.25 billion worth of the company’s stock in 2024 — including US$900 million in payouts for its two co-founders — as they capitalise on the music streamer’s soaring share price. The sum of US$1.25 billion was cashed out by about 20 executives and board members during the year, with stock sales ramping up in November and December, according to a Financial Times analysis of filings to the US Securities and Exchange Commission. Shares of Spotify, which is listed on the New York Stock Exchange, have nearly tripled in 2024, hovering near a $100bn market capitalisation. It is a sharp turnaround from 2022 and 2023 when the group’s share price dropped to its lowest ever, trading at a market capitalisation of less than US$20 billion. Some of the Spotify share sales were executed pursuant to pre-arranged divestiture plans common among chief executives compensated in company stock, while others were not, securities filings show. “As part of their long-term financial planning, several Spotify executives have sold some of their Spotify shares,” a company spokeswoman said. https://archive.ph/Brci1

Microsoft eyeing alternatives to OpenAI in Copilot product.

Microsoft is preparing to incorporate large language models developed in-house, and certain LLMs from third parties, as alternatives for OpenAI’s LLMs in Microsoft 365 Copilot, its main generative AI product, Reuters reported. Microsoft’s goal is to make Copilot’s AI features faster and less expensive to run. This is the latest in a string of examples that show how Microsoft, which has invested more than US$13 billion in OpenAI over the last five years as part of a landmark partnership between the companies, has been trying to reduce its reliance on the startup’s large language models. Microsoft reportedly wants to use large language models that it can customize in the Copilot product, and it already offers access to these kinds of LLMs from Meta and Mistral through its Azure cloud. Microsoft’s in-house LLMs, called Phi, are much smaller and require less computing power than OpenAI’s models, which could help Microsoft cut the cost of adding future Copilot features. Moving Copilot—a digital assistant that helps users write and summarize content using applications like Word—off of OpenAI LLMs could also reflect the fact that Microsoft and OpenAI are increasingly competing for corporate AI spending. https://tinyurl.com/ypsuhwck

To sell more artificial intelligence, Microsoft has bundled its Copilot AI assistant—which is similar to ChatGPT—with its Office 365 productivity apps in Australia and Southeast Asia for individual customers.

It’s also charging them a higher subscription for the new bundle, prompting at least one customer to switch to Google Apps, the Wall Street Journal reported. Microsoft first announced the move in a blog post in October. It’s a calculated gamble for the company, which wants to get Copilot in front of a wider audience to justify the more than US$13 billion it has invested in OpenAI. It also hopes to sell customers on upcoming products, such as AI agents that aim to automate multistep tasks. Microsoft has a long history of using bundles to get customers to use newer products. At the same time, forcing customers to use products and features, especially when it comes at a higher price, is a risky move that could cause some customers to jump to rival products. So Microsoft will have to tread carefully before rolling out the changes to bigger markets such as the U.S. and EU. https://tinyurl.com/37cur24x

xAI is testing a standalone iOS app for its Grok chatbot.

Elon Musk’s AI company, xAI, is testing out a standalone iOS app for its chatbot, Grok, which was available only to X users until now. The app, currently live in Australia and a few countries in beta, can access real-time data from the web and X, and offers generative AI features like rewriting text, summarizing long paragraphs, a little bit of Q&A, and can generate images from text prompts, too. “Grok is an AI-powered assistant designed to be maximally truthful, useful, and curious. Get answers to any question, generate striking images, and upload pictures to gain a deeper understanding of your world,” the listing reads. xAI is also preparing a dedicated site, Grok.com, to make the chatbot accessible on the web. Currently, the site says “coming soon” when you log in with an xAI account. Grok was available only to X’s paying subscribers until recently. In November, the company started testing a free version of the chatbot, and rolled it out to all users earlier this month. The company says its chatbot’s image generator model excels at “photorealistic rendering,” and doesn’t apply major restrictions on its image-generation capabilities, allowing users to create images using pictures of public figures and copyrighted material. https://tinyurl.com/52649wby

Apple considers making a Ring doorbell rival.

Apple is in the early stages of developing a Ring-like doorbell camera as the company prepares to make a broader push into the smart home market, Bloomberg reported. The device is expected to use a feature akin to Face ID on iPhones that will allow people to unlock their front doors with their faces by using a smart deadbolt that communicates with the doorbell, Bloomberg said. If Apple decides to move forward with the device, it likely wouldn’t be released before the end of next year, according to Bloomberg. Apple is working on other smart home products including security cameras and a smart home hub with a display for video conferencing and controlling other devices, Bloomberg has previously reported. https://tinyurl.com/29vacj2t

Meta to add displays to Ray Ban smart glasses in 2025.

Meta plans to add displays to its Ray-Ban smart glasses as soon as the second half of 2025, The Financial Times reports. The second-generation glasses—which Meta released in partnership with eyewear giant EssilorLuxottica in November 2023—already offer a slew of AI integrations. The glasses can remember your spot in long-term parking for you and let you record and send voice messages on WhatsApp and Messenger on the go. But we’re not going to see the US$300 sunglasses become a full-fledged augmented reality device like the Apple Vision Pro after the update. The new small display will instead be used to show notifications or responses from Meta’s virtual assistant. The Financial Times’ sources said plans to turn its augmented reality glasses prototype, Orion—unveiled in September—into a consumer product had been “brought forward,” though its release is still likely to “be years away.” The reports come as more big tech firms are announcing their entry into the mixed-reality glasses space. In September, Qualcomm CEO Cristiano Amon said that the chipmaker is partnering with Samsung and Google to develop mixed-reality glasses that can be connected to a wearer’s smartphone. Meanwhile, Apple may be targeting a cheaper version of the Apple Vision Pro for release at some point after 2027, supply chain analyst Ming-Chi Kuo predicts, offering an alternative to the $2,500 headset for budget-conscious audiences. https://tinyurl.com/yfptpm9e

Netflix’s Christmas Day NFL games reach 24 million U.S. viewers.

Netflix said its exclusive live streams of two Christmas Day NFL games on Wednesday drew more than 24 million viewers, on average—a high point in live sports streaming but typical for what NFL games attract on broadcast TV. In total, Netflix said its two NFL telecasts reached nearly 65 million viewers in the U.S., citing data from TV measurement firm Nielsen. The first game, between the Kansas City Chiefs and Pittsburgh Steelers, drew an average of 24.1 million viewers per minute, with the second game, between the Baltimore Ravens and Houston Texans, attracting 24.3 million viewers, per minute. And for those really keeping score, the U.S. viewership during the Ravens-Texans game peaked at 27 million viewers during the “Beyoncé Bowl” halftime show. Those figures are likely going to be even higher as Netflix aired both games globally. The company said it will release global viewership figures and other data about the games on December 31. https://tinyurl.com/57uc5wyr

Lawyers for Trump urge Supreme Court to pause TikTok ban.

Lawyers for president-elect Donald Trump told the Supreme Court Friday that Trump opposes banning TikTok in the U.S. “at this juncture” and would like to “resolve the issues at hand” once he takes office. The brief by Trump’s lawyers was one of several filed Friday about the law, which bans the app in the U.S. unless Chinese parent ByteDance sells its stake. The law is set to take effect on Jan. 19, one day before Trump is sworn in as president. The Supreme Court is due to hear oral arguments on Jan. 10 for TikTok’s appeal of a lower-court decision upholding the law. (Read The Information’s outline of the different ways this could play out.) In another brief filed with the court Friday, lawyers for TikTok said the company does not “contest Congress’s compelling interest in protecting this Nation’s security, or the many weapons it has to do so. But that arsenal simply does not include suppressing the speech of Americans because other Americans may be persuaded.” https://tinyurl.com/6se3nwsj