June 23, 2024: Despite Weak Close, Markets Still Close Week Up

Despite some market weakness late last week, Dow Jones was up 1.45%, S&P 500 gained 0.6% and Nasdaq composite rose marginally for the week ended June 21. Cerebras, a developer of AI chips, trying to compete with Nvidia, has filed for an IPO confidentially. Brazilian fintech PicPay is working on a US IPO. Investing app, Acorns is eyeing an IPO in the next couple of years. Most stocks hyped as winners from the AI boom have fallen this year, according to Citi. Nvidia plans to design server racks could pressure server designers such as Dell, HPE and Supermicro. Apple on Friday told media outlets that its new artificial intelligence features won’t be available in the European Union because of concerns that the Digital Markets Act could compromise user privacy and data security. Apple has also reportedly halted work on Vision Pro and is aiming to release cheaper Vision headset next year. Accenture expects strong AI demand to power its 2024 revenue growth. Amazon is planning to revamp its Alexa voice assistant business with two tiers of new generative AI features, one of which will charge a subscription fee of US$5 to US$10 a month. Green bonds are on track to hit a total of US$1 trillion of issuance this year. The rush into sustainable debt contrasts sharply with investor outflows from stock funds focused on environmental, social and governance (ESG) metrics. In Canada, Sophic Client, Plurilock announced a US$6 million+ contract with the U.S. Treasury, we sat down with CEO Ian Paterson, for a quick update. Sophic Client, Kraken Robotics received a $2.2 million order for subsea batteries.

Sophic Client Plurilock (PLUR-TSXV, PLCKF-OTCQB) announces US$6.16 million total contract value with U.S. Treasury.

Plurilock announced the signing of a US$6.16 million, five year contract with the United States Department of the Treasury. The contract, which includes a US$1.07 million base first year and four subsequent option years through Q4 2028, is for the provision of Microsoft Unified services and support to the Department, including AI Azure services and support. The contract was awarded through Aurora Systems Consulting subsidiary. “There is an increasing threat against computer systems throughout the world and Plurilock strives to improve the security status of public and private organizations,” said Plurilock CEO Ian L. Paterson. “Our operations through Aurora are key to obtaining and expanding our relationships within these organizations, especially with large government customers who have historically been stable buyers of IT throughout all economic environments.” https://bit.ly/4cmihRj

Sophic Client Kraken Robotics (PNG-TSXV, KRKNF-OTC) receives $2.2 million order for subsea batteries.

Kraken Robotics received repeat orders totalling $2.2 million for subsea batteries from existing Naval clients reaffirming their trust in our cutting-edge SeaPowerTM batteries. Rated for depths up to 6,000 meters, Kraken’s innovative subsea batteries provide up to twice the energy density and weigh 46% less per kWh than traditional pressure-housed batteries, making them the ideal choice for challenging underwater missions. https://bit.ly/3VA2OFI

Sophic Client Plurilock (PLUR-TSXV, PLCKF-OTCQB) CEO Ian Paterson.

Watch this video interview with CEO Ian Paterson to learn more about a recent contract means for the Company and the future growth prospects with other government agencies and commercial clients. https://bit.ly/4cyEonf

Sophic Client Legend Power Systems Inc. (LPS-TSXV, LPSIF-OTC) update with CEO Randy Buchamer.

Watch the interview here. https://bit.ly/3RwTGAA

BDC earmarks $250 million to support underserved entrepreneurs.

The Business Development Bank of Canada (BDC) has unveiled $250 million in new commitments to support women, Black and Indigenous entrepreneurs. The commitment includes two $100 million platforms under its investment arm, BDC Capital, which will be designed to support Indigenous and Black-led businesses, complementing its existing $500 million Thrive platform for women entrepreneurs. It also includes a $50 million loan and training program for underserved entrepreneurs, and the creation of a new internal team at the bank aimed at supporting those entrepreneurs. https://tinyurl.com/53p78fmu

Propulso raises strategic funding to facilitate US expansion.

Data intelligence platform Propulso has secured $2.6 million in strategic funding as it looks to expand its services to the United States by 2025. The funding round closed at the end of February and was led by Anges Québec and AQC Capital, with participation from Investissement Québec. https://tinyurl.com/yc37ww39

Cerebras, an Nvidia challenger, files for IPO confidentially.

Cerebras, a developer of artificial intelligence chips that’s trying to wrestle business from Nvidia, has filed confidentially with securities regulators for an initial public offering, according to a person involved in the decision. The startup has also notified Delaware, the state in which it is incorporated, that it is creating preferred shares priced at a deep discount to its last private funding round. The move could make its shares more attractive to private investors ahead of an IPO and those who participate in the public listing. The IPO plans show the eight-year-old company wants to ride a wave of investor enthusiasm over AI hardware sales that have made Nvidia the world’s most valuable company and boosted scores of other stocks. Cerebras will need to show how it plans to get a piece of the market for AI server chips and loosen Nvidia’s grip on it. The startup’s financial results couldn’t be learned. It said in a blog post in December that it had recently reached “cash flow break-even,” without elaborating. The AI stock boom led by Nvidia has extended to other new stocks. For instance, shares of Astera Labs, which sells data center components to the likes of Amazon Web Services and Microsoft, jumped as much as 76% in its public market debut in March and have remained above its IPO price. Secondary market investors have valued Cerebras between between US$4.2 billion and US$5 billion, according to Caplight, which collects data from broker dealers that handle bids for existing shares. https://tinyurl.com/38uvjj82

Brazilian fintech PicPay is working with Citigroup on US IPO.

PicPay, the Brazilian mobile banking app owned by the billionaire Batista family’s holding company, is working with Citigroup Inc in order to try to do an initial public equity offering in the US, said people familiar to the matter. The company is aiming to do the transaction as soon as market conditions allow. The company filed for a US IPO in April 2021, aiming for a valuation of US$8 billion, Bloomberg News reported. The company withdrew its registration the following June. Created in 2012 as a digital wallet, PicPay was bought in 2015 by J&F Investimentos SA, the holding company behind meatpacking behemoth JBS SA. The payment fintech reported net income of 37 million reais (US$6.8 million) in 2023, compared with a loss of 693 million reais in 2022. It said it broke even for the first time in March 2023. PicPay said it had more than 35 million active customers as of December. https://archive.ph/eQt0R

Investing app Acorns eyes IPO in next couple of years, CEO says.

Acorns, an investing and checking accounts app, will likely hold an initial public offering at some point in the next couple of years, according to Chief Executive Officer Noah Kerner. Founded in 2014, the California-based company enables users to invest cash or spare change in a series of exchange-traded funds and custom portfolios. The app also offers checking accounts, retirement savings and debit cards. Acorns has nearly 6 million subscribers. In April of last year, Acorns acquired London-based child and teen-focused digital banking startup GoHenry for an undisclosed sum. It’s not the first time Acorns has considered transforming into a public company. In January 2022, Acorns called off a US$2.2 billion deal with special purpose acquisition company Pioneer Merger Corp. The deal was canceled due to market conditions, according to Kerner. Kerner said the company is currently breaking even and has no plans to raise more money before it decides to go public. https://archive.ph/4XU7z

Sam Altman says OpenAI could become a for-profit meaning it could eventually IPO.

According to a new report by The Information, Sam Altman is considering making OpenAI a for-profit company that the current non-profit board wouldn’t control. One option being considered is making OpenAI a for-profit benefit corporation, also known as a B-Corp. As a B-Corp, OpenAI wouldn’t only have to consider profits but also its impact on society and the environment, and it’d have to balance the interests of shareholders with the interests of its employees, customers, community, and the environment. It would be legally required to make these considerations should it choose this route. If the company eventually became a for-profit, this could open up the way to an initial public offering where the company gives the public a chance to own its shares. This would be a good way for the company to gain further investment, and given the hype around ChatGPT, it would likely do very well from an IPO. https://tinyurl.com/39ewa52s

Steve Cohen’s Point72 readies new hedge fund targeting AI stocks.

Steve Cohen’s Point72 Asset Management is seeking to raise about $1 billion for a new stock-picking hedge fund focused on artificial intelligence, according to people familiar with the matter. The fund will bet on and against AI hardware and semiconductor companies globally and will be the firm’s first new hedge fund in decades, the people said, asking not to be identified because the information is private. Point72 currently has a main hedge fund along with some venture capital vehicles. Cohen has said he expects the impact of AI to be “transformational” and that it has the power to change how companies work and save them millions of dollars. In 2021, Point72 launched Hyperscale, its first private equity fund that uses AI to modernize and improve efficiency at companies it acquires. The firm also has Point72 Ventures, which was founded in 2016 and invests only Cohen’s cash in early-stage tech startups. https://archive.ph/4fy9y

Most stocks hyped as winners from AI boom have fallen this year.

Most of the stocks that were caught up in last year’s hype around artificial intelligence have fallen this year, suggesting that investors are increasingly trying to separate the wheat from the chaff among companies claiming to be beneficiaries of the AI trend. Massive share price rallies for high-profile groups such as Nvidia, the chip designer that this week became the world’s most valuable listed company, have spurred a growing debate about whether the US stock market is being driven by speculative hype. But the recent declines for dozens of stocks that had benefited from the early enthusiasm suggest that investors are starting to look past optimistic commentary if the companies cannot back up their claims. About 60 per cent of stocks in the S&P 500 have risen this year, but more than half the stocks included in Citi’s “AI Winners Basket” — an index based on the names that were garnering the most excitement among the bank’s clients last year — have declined. More than three-quarters of companies in the AI basket had climbed in 2023. Investment funds that tried to pick a wide spread of AI beneficiaries have had a similar experience. More than half of the individual stocks in BlackRock’s Robotics and Artificial Intelligence ETF, Invesco’s AI and Next Gen Software fund, and First Trust and Nasdaq’s Artificial Intelligence and Robotics ETF have declined this year. Nvidia has more than doubled in value this year, after more than tripling in 2023, and its market cap is now well over US$3 trillion. However, the massive demand for its graphics processing units is such that, measured as a multiple of its sales over the previous 12 months, the stock is actually cheaper than this time last year. In contrast, tech groups such as Salesforce, Snowflake, Intel and Adobe — now far smaller than Nvidia by market value, but classed as large-cap stocks — have fallen sharply after strong gains in 2023. https://tinyurl.com/3akscuhx

Nvidia’s hardware plan could pressure dell and other AI server makers.

Nvidia plans to design server racks for its upcoming GB200 flagship artificial intelligence chips, a job that server designers such as Dell, HPE and Supermicro have long handled, The Information reported. These server makers have benefited from rising sales of Nvidia chips, but the new plan could pressure their profit margins, the report said. None of the companies commented on the report, which was based on interviews with two Nvidia employees involved in the plan. And the server firms’ stocks on Tuesday boomed alongside that of Nvidia, which became the world’s most valuable company by market capitalization. The move by Nvidia is one of several that aim to capitalize on its strong position, develop new lines of revenue and profits, and could make it harder for customers of its chips to switch to alternative, the report said. Nvidia and Microsoft got into a stand-off earlier this year over Nvidia’s request that Microsoft use Nvidia’s server rack design rather than Microsoft’s own design. Nvidia eventually backed down. https://tinyurl.com/yry8t8z8

Apple’s AI Features won’t be offered in European Union because of new laws.

Apple on Friday told media outlets that its new artificial intelligence features won’t be available in the European Union because of concerns that the Digital Markets Act could compromise user privacy and data security. The DMA requires so-called tech gatekeepers to ensure equal access to their operating systems. The iPhone maker said complying with the rules could “compromise the integrity of our products in ways that risk user privacy and data security.” The announcement is likely to disappoint Apple users in Europe, and it could even be a tactic to motivate the E.U. to change or add exceptions to the DMA for Apple. Apple didn’t explain why complying with the DMA in this case could hurt user privacy and security. It’s possible Apple would have to give competitors the ability to run their own AI models on the iPhone, in which case Apple wouldn’t be able to guarantee the privacy and security of the services. Already, Apple has been at odds with the E.U. over other parts of its business, particularly the way it operates its App Store. An Apple spokesperson didn’t reply to a request for comment. https://tinyurl.com/ycep9h2j

Accenture says strong AI demand to power 2024 revenue growth.

Accenture forecast annual revenue growth above expectations on Thursday, bolstered by surging demand for its service that helps businesses integrate artificial intelligence tools in their operations. Shares of Accenture rose more than 6%, after having fallen about 19% this year on market expectations for subdued demand for IT services as elevated interest rates force companies to rein in spending. Accenture’s generative AI business, which helps companies automate operations to save on costs and boost productivity, recorded an about 50% jump in new bookings quarter-over-quarter. That far outpaced growth in Accenture’s other core business as a go-to consultant and outsourcing service provider for companies migrating their operations to the cloud. Analysts expect slow demand for such services as enterprise spending plateaus. Indian rivals Tata Consultancy Services and Infosys have flagged hits to their business from weak spending by U.S. and European clients. https://tinyurl.com/2fr7pkrs

Nvidia agrees to buy software startup Shoreline.

Nvidia Corp. has agreed to buy Shoreline.io, a startup for software developers founded by a former Amazon Web Services executive, people familiar with the matter said. The deal was struck recently and values Shoreline at about US$100 million. https://tinyurl.com/mr2ffmxh

Boyd Gaming makes acquisition approach to Penn Entertainment, sources say.

U.S. casino operator Boyd Gaming has approached Penn Entertainment to express interest in acquiring its peer that has a market value of more than US$9 billion, including debt, according to people familiar with the matter. Penn’s shares jumped 8% on Thursday afternoon in New York to US$19.89 after Reuters reported Boyd’s approach. Boyd’s stock fell 3% to US$51.90. A deal would be the biggest merger among U.S. gambling companies since Eldorado Resorts’ US$17.3 billion acquisition of Caesars Entertainment in 2020. It would be challenging since Boyd, the smaller company with a market value including debt of US$7.8 billion, would need financial firepower to clinch a deal. The companies would also need the blessing of regulators and officials in several states where they both operate. Boyd would also need to win over Walt Disney, which through its sports network ESPN has a partnership with Penn. Penn also acquired Canada’s Score Media and Gaming for US$2.1 billion in 2021. https://tinyurl.com/49cm2mru

EV maker Fisker files for bankruptcy after running out of cash.

Electric vehicle manufacturer Fisker filed for bankruptcy four years after going public in the investor mania over EVs. The company, founded by Danish supercar designer Henrik Fisker, raised and burned through some US$1.5 billion in cash and debt, but failed to overcome manufacturing stumbles and poor cash management. It filed for protection from creditors late Monday with thousands of unsold vehicles in inventory that are likely to go to scrap since consumers are unlikely to buy them. Fisker is at least the fifth EV startup to go bankrupt after Arrival, Electric Last Mile, Lordstown and Proterra. It is the second EV bankruptcy for Henrik Fisker, famed for his work for BMW and Aston Martin. In 2013, Fisker Automotive declared bankruptcy after burning through a similar sum—US$1.3 billion. https://tinyurl.com/2tf3svmc

Apple halts work on Vision Pro, aims to release cheaper Vision headset next year.

Apple is reportedly working on a cheaper, cut-down version of the Apple Vision Pro, scheduled to arrive by the end of 2025, according to The Information. At the same time, the publication says development work on a second-generation high-end model of the Vision Pro has been shelved, seemingly to prioritize the cheaper hardware path. Although it’s unclear at what price point the cheaper Apple Vision headset would hit, anything less than the US$3,500 starting price of Vision Pro will help the company compete with the likes of the Meta Quest. The Information suggests Apple is aiming for a price around US$1500, similar to the cost of a high-end iPhone. Just last week, Apple announced the first international expansion for Apple Vision Pro availability to eight new countries, and previewed new platform software features coming in visionOS 2. https://tinyurl.com/bd4e5yrz

Palmer Luckey says his new headset is “driven by military requirements but it’s also going to be used for non-military stuff.”

Palmer Luckey says his new headset is “driven by military requirements but it’s also going to be used for non-military stuff.” Joking aside, Oculus and Anduril founder Palmer Luckey made good on his promise to announce a new head-mounted display during a talk at Augmented World Expo. He said little about the new project, though, except the quote above — and he suggested it’s still in the early stages. Luckey also mentioned “adult entertainment” could be the most promising VR hardware niche for a small company, since mainstream companies won’t touch it. He emphatically did not say that’s what he’s working on here. https://tinyurl.com/bddv3cba

Amazon reportedly plans Alexa revamp, new paid features.

Amazon is planning to revamp its Alexa voice assistant business with two tiers of new generative AI features, one of which will charge a subscription fee of US$5 to US$10 a month, Reuters reported Friday. The efforts, known as “Project Banyan” internally, would allow users to perform more intricate tasks like sending an email or ordering food from a delivery service. Amazon is aiming to prepare the new version of Alexa, known as “Remarkable Alexa,” by August, the report said. While a tier of the service would be free, as Alexa is now, Amazon is also planning a paid tier. The Alexa updates are Amazon’s latest efforts to catch up to competitors on generative AI, as well a new push to make money from Alexa, which has never turned a profit. Late last year, Amazon cut hundreds of jobs in its devices unit, which houses Alexa teams, shortly after former Microsoft executive Panos Panay joined the company to take over the unit. At the time of the layoffs, devices executives told employees Amazon would increase its investments into developing generative AI tools and would discontinue other initiatives. https://tinyurl.com/36e865jy

Former OpenAI Chief Scientist Sutskever launches rival AI lab.

Ilya Sutskever, the OpenAI cofounder and former chief scientist who tried to oust CEO Sam Altman last year, said Wednesday he had launched a new artificial intelligence lab with startup investor Daniel Gross and another former OpenAI researcher, Daniel Levy. The lab, Safe Superintelligence, has offices in Palo Alto, Calif., and Tel Aviv, where Sutskever and Gross grew up, according to its bare-bones website. The co-founders said they hope to develop AI without the distractions of generating revenue in the short run. They did not disclose their investors, though Gross has raised lots of capital to invest in AI ventures and numerous venture investors have privately said they would be more than happy to back Sutskever. The move means OpenAI will face yet another rival started by alumni. Its primary startup rival, Anthropic, was started by former OpenAI employees, and OpenAI co-founder Elon Musk runs a rival firm, xAI. Superintelligence is a term that refers to software might help humans solve difficult challenges such as curing cancer or colonizing Mars. Sutskever has been concerned about AI that could cause unintended consequences, and at times clashed with Altman and others over their investment in efforts to safeguard the AI they were building, The Information has reported. Sutskever and three other OpenAI board directors ousted Altman on Nov. 17 but an employee revolt about the move prompted them to reverse course. https://tinyurl.com/3wje7raw

Surgeon General calls for warning labels on social media.

U.S. Surgeon General Vivek Murthy called for social media platforms to carry a warning label “stating that social media is associated with significant mental health harms for adolescents.” Murthy made the call in an op-ed article published in the New York Times on Monday. He cited evidence from tobacco studies that warning labels could “increase awareness and change behavior,” while also acknowledging that a warning label wouldn’t make social media safe for young people. Murthy’s article follows years of growing evidence about the impact of social media, such as Meta Platforms’ Instagram, on young people’s mental health. https://tinyurl.com/5t3chsz8

US sues Adobe for ‘deceiving’ subscriptions that are too hard to cancel.

The US government is suing Adobe for allegedly hiding expensive fees and making it difficult to cancel a subscription. In the complaint filed on Monday, the Department of Justice claims Adobe “has harmed consumers by enrolling them in its default, most lucrative subscription plan without clearly disclosing important plan terms.” https://tinyurl.com/5n8jdu2m

TikTok announces AI avatars for advertising.

TikTok announced a new tool on Monday that would allow marketers to use AI-generated avatars to hawk products in their advertisements. Marketers will be able to choose from a set of stock avatars, based on footage of paid human actors, or create custom avatars based on a brand spokesperson or partnered creator. The avatar product allows advertisers to use generative AI to create essentially all aspects of a campaign: They can input product details and TikTok will generate a script and video advertisement including a digital avatar, according to the announcement. The videos will have a small label noting that they are AI-generated. The Information reported in April that TikTok had begun pitching advertisers on a digital avatar product. At the time, staffers said the product wasn’t ready for release, according to people who had talked to them. Videos using the digital avatars generated fewer e-commerce transactions than those featuring human creators, the people said. https://tinyurl.com/35k94jru

Apple scraps in-house buy now, pay later loans.

Apple is shutting down its buy now, pay later operations that allowed customers to pay off purchases of up to US$1000 in installments. Instead, Apple will offer installment loans through credit and debit cards and other lenders including buy now, pay later fintech Affirm when customers use Apple Pay, according to the company. The rollout will result in the closure of Apple Pay Later in the U.S., the company said. Apple launched the Pay Later loans last year, issuing the loans itself while using Goldman Sachs and Mastercard to review the purchases. https://tinyurl.com/3r69s9rv

Green bond issuance surges as investors hunt for yield.

Sustainable debt issuance has hit a record level this year, as investors pile into green bonds and other debt tracking similar themes as a way of signalling their environmental credentials while also locking in an attractive yield. Debt including green, social, sustainable and sustainability-linked bonds, raised US$273 billion in the first quarter of this year, according to a report published on Wednesday by the non-profit Climate Bonds Initiative. Issuance of green bonds — used by countries or companies to pay for environmental projects — jumped 43 per cent on the previous quarter to US$195.9 billion, attracting higher inflows than newer forms of sustainable debt. Green bonds are on track to hit a total of US$1 trillion of issuance this year, CBI predicted. Like more conventional fixed income, demand for sustainable debt has been boosted by high interest rates. But it has also been helped by what some fund managers argue is the erosion of the so-called “greenium” — a discount in the cost of borrowing that issuers of green bonds can enjoy. This means that, in many cases, investors can put money into sustainable debt without sacrificing much, if anything, in terms of yield. After a sluggish 2023, the US was the largest single-country source of green bonds in the first quarter of this year, according to CBI, with a combined US$27.6 billion in issuance. In March, Baltimore-based Constellation Energy became the first US company to issue a green bond that could be used to finance nuclear energy. Constellation planned to use proceeds from the US$900 million, 30-year green bond to back investments such as maintaining and expanding its nuclear reactor fleet, the company said. The rush into sustainable debt contrasts sharply with investor outflows from stock funds focused on environmental, social and governance (ESG) metrics. https://archive.ph/yXN2d