Major indices fell to multi month lows last week. So far, earnings have been a negative catalyst for stocks, coupled with heightened geopolitical risk going into the weekend. Dow Jones fell 2.1%, S&P 500 lost 2.5%, and Nasdaq composite was down 2.6% during the week. Google has committed US$2 billion to Anthropic, an OpenAI rival. Google has previously taken a roughly 10% stake in Anthropic. This follows Amazon’s US$1.25 billion investment into the company. Crusoe Energy, one of several emerging cloud providers that rent out Nvidia’s in-demand chips for artificial intelligence, raised US$200 million in debt using Nvidia chips as collateral. Intel is expanding to the AI software business, and Apple is rumored to follow ChatGPT with generative AI features on iPhone as soon as iOS 18. Microsoft reported revenue growth of 13% as AI sales accelerated Azure cloud growth. Revenue growth at Alphabet parent Google accelerated for a third straight quarter. Amazon reported better-than-expected results, as revenue jumped 13%. The company’s ad growth was driven mostly by search, not video, and the company launched AI tools for ad sellers. Amazon is considering offering veterinary telehealth as it looks to compete with Walmart. Meta reported a return to robust growth rates after nearly two years of weaker expansion caused by an anemic ad market, Apple’s ad targeting changes and competition from TikTok. A coalition of 41 states and the District of Columbia are filing lawsuits alleging that Meta Platforms has intentionally built its products with addictive features that harm young users of its Facebook and Instagram services. Ford delayed US$12 billion in EV investments as the automaker wrestles with demand. In Canada, Well Health acquired two cybersecurity businesses, for an undisclosed amount. Google and Nvidia-backed, Toronto based CentML secured $37 million to help companies deploy AI amid chip shortages.
Canadian Technology Capital Markets & Company News
Well Health (WELL-TSX) acquires two cybersecurity businesses, Seekintoo and Proack.
Well Health is beefing up its cybersecurity business unit, Cycura, with two new acquisitions. The firm announced it has acquired Seekintoo and Proack for an undisclosed amount. Well Health’s CEO Hamed Shahbazi said the company expects to achieve over $750 million in revenue in 2023. https://tinyurl.com/2p94w393
OUTFRONT Media to divest its Canadian business to Bell Media.
OUTFRONT Media and Bell Media announced today that they have entered into an agreement to sell the Canadian business of OUTFRONT Media to Bell Media, a wholly-owned subsidiary of BCE. The purchase price is C$410 million in cash, subject to certain adjustments and a holdback. The transaction is expected to close in 2024, subject to regulatory approval and other closing conditions. As of December 31, 2022, OUTFRONT Media’s Canadian business operated 9,325 total displays in the country and generated revenues of US$91.9 million during that year. https://tinyurl.com/yc8mmt53
Google and Nvidia-backed CentML secures $37 million to help companies deploy AI amid chip shortages.
As companies race to adopt artificial intelligence (AI) amid chip shortages, Toronto-based CentML is developing a solution to help customers make the most of existing supplies. Developing and deploying machine learning (ML) models is already a time-consuming and expensive affair. As AI use has accelerated over the past year, so has demand for related resources as companies have scrambled to access the computing power required to train ML models. Enter CentML, which has secured $37 million in seed funding and support from a host of big-name investors as the startup looks to help companies figure out what hardware they can use to boost the performance and reduce the cost of their ML models. CentML’s seed round, which closed in early September, was led by Gradient Ventures, Google’s AI-focused venture fund. It saw support from strategic investors including chip giant Nvidia, Deloitte Ventures, and Thomson Reuters Ventures, as well as existing backer Radical Ventures. The round consisted of an undisclosed combination of equity and simple agreement for future equity (SAFE) funding. Radical Ventures led CentML’s initial $4.8 million pre-seed round in June 2022. https://tinyurl.com/39sxxw7x
GGV Capital US backs Arteria AI’s digital makeover for financial document creation.
Data makes the world go ’round, but only if you can get what you need and know how to put it to good use. With about 90% of enterprise data unstructured, and organizations using about less than 1% of that data to make decisions, it’s clear that enterprises have a giant unstructured data problem. Meet Arteria AI, a company taking a data-first approach to all that unstructured data, focusing on contracts for institutional finance. It now announces a $30 million Series B financing round led by GGV Capital U.S., with participation from all existing major investors, including Illuminate Financial, Information Venture Partners, BDC Capital and Citi. This brings Arteria AI’s total funding to $50 million to date. https://tinyurl.com/25nwryae
PacifiCan invests $9.9 million into Innovate BC’s cleantech adoption initiative.
The Pacific Economic Development Agency of Canada (PacifiCan) is investing $9.9 million into Innovate BC to help grow the agency’s Integrated Marketplace initiative. The Integrated Marketplace, launched last year, aims to help BC-based technology companies develop and operate new innovations that address business challenges and advance climate goals. The new funding for the Integrated Marketplace is in addition to an $11.5 million investment from the provincial government. Delivered by Innovate BC, the program builds a network of industry partners to identify challenges and put in place technological solutions that help large-scale organizations decarbonize, increase competitiveness, and improve health and safety. https://tinyurl.com/39h22d38
Federal, Québec governments invest over $7.6 million into quantum telecom testbed.
The federal government and the Government of Québec are jointly investing over $7.6 million into a testbed that will allow businesses to experiment with quantum systems and applications for telecom networks. The new investment consists of $3.6 million in federal funding, and $4 million in provincial funding. The provincial government previously committed $2.5 million to the project in 2022, bringing the total government support for this initiative to over $10 million. The project is being deployed and operated by Numana, a Québec-based technology think tank and non-profit, which first announced the creation of the quantum testbed in June 2022. The federal government is also taking a keen interest in the emerging technology. This year, it unveiled a $360 million National Quantum Strategy in January, which seeks to position Canada as a global frontrunner in quantum computing. https://tinyurl.com/35uy4v42
QuoteMachine adds $3.7 million in new funding to streamline the sales stack for merchants.
Montréal-based retail tech startup QuoteMachine has raised $3.7 million in new seed financing as the startup looks to personalize the online selling experience for merchants. The investment was led by San Francisco-based Manresa Ventures, with participation from Clocktower Technology Ventures and Precursor Ventures. To date, QuoteMachine has raised $4.6 million. https://tinyurl.com/yk2vxmbf
PADS Financial secures $3 million in pre-seed funding, launches online mortgage platform.
Montréal-based FinTech startup PADS Financial has secured $3 million in pre-seed funding for its now-launched online mortgage platform. The company said the funding was raised from angel investors it described as “leaders in the Québec real estate market,” but declined to disclose who specifically participated in the round. https://tinyurl.com/2jdav6e6
British Columbia pension fund joins AAA bond club at expensive time.
British Columbia Investment Management Corporation, which manages C$233 billion (US$170 billion) of assets mostly for public sector pensioners in the western province, is issuing its debut bond sale in Canadian dollars even as borrowing costs hover near historic highs. The asset manager plans to raise C$1.25 billion by selling 10-year bonds at a spread of 90.5 basis points over similar tenor government securities, according to people with knowledge of the matter. The notes are expected to garner the highest investment-grade designation by three ratings companies, including Moody’s Investors Service. Canada’s 10-year government bond yields are at 4.05% — or just about 19 basis points from their highest since 2007, Bloomberg-compiled data show at 12:13 p.m. in Toronto. Central banks may be forced to keep interest rates at the highest level in decades for longer than expected as inflation remains above target levels. A representative at BCI declined to comment. BCI is following other pension plans in adding bond programs to their arsenal for more flexibility to implement investment strategies. Canada Pension Plan Investment Board, a regular issuer whose debt is also top rated, sold C$1 billion of 10-year bonds on Sept. 26 at a spread of 78 basis points over the benchmark, Bloomberg-compiled data show. The 4.75% CPPIB notes were quoted at a spread of about 78.7 basis points on Monday, according to Bloomberg indicative bid prices. https://archive.ph/uaTE7
Global Markets: IPOs, Venture Capital, M&A
Google to commit US$2 billion to Anthropic.
Google has committed US$2 billion to Anthropic, a rival to OpenAI, according to two people familiar with the talks. The size of the investment illustrates the big checks large cloud providers are willing to write to back AI startups. Google has previously taken a roughly 10% stake in Anthropic. Google has invested US$500 million upfront into OpenAI rival Anthropic, with a promise to add US$1.5 billion more over time, one of the people said. The startup is still raising additional capital for the round and is looking for a lead investor to set a price. It’s been looking at a valuation between US$20 billion to US$30 billion, including the new capital, The Information previously reported. Amazon has previously said it would invest US$1.25 billion, and could expand that investment by another US$2.75 billion. Google’s investment, like Amazon’s, comes in the form of a convertible note that would turn into stock when Anthropic secures a lead investor for the round, according to the person. The Wall Street Journal first reported the details of the Google commitment. https://tinyurl.com/n5wwp543
Nvidia cloud ally raised US$200 million in debt financed by AI chips.
Crusoe Energy, one of several emerging cloud providers that rent out Nvidia’s in-demand chips for artificial intelligence, raised US$200 million in debt usings Nvidia chips as collateral, The Information reported Monday. Crusoe struck the deal with Upper90, a New York-based investment firm whose leader called Nvidia’s graphics processing units a “new asset class” for debt. Crusoe is separately completing a US$150 million fundraising in the form of debt that converts to equity shares, according to a person with direct knowledge of the deal. Crusoe, valued at US$1.4 billion in a financing round last year, has raised equity funding from investors including Founders Fund, Valor Equity Partners and the sovereign wealth funds of UAE and Oman. https://tinyurl.com/9y65yrnb
Intel expands AI software business.
As Intel tries to benefit from the artificial intelligence boom with chips that compete with Nvidia’s, the company is trying something different: selling AI software and services, The Information reported on Wednesday. It’s a rare move for the U.S. chipmaker, especially since its software is hardware-agnostic, meaning it doesn’t matter whether its customers use Intel’s chips. Intel developed tools to help enterprise customers build ChatGPT-like apps, and it is targeting firms that perhaps don’t have the expertise to do it on their own. Intel is helping customers figure out which AI models they should use depending on the problems they are trying to solve. The company plans to announce the initiative in the coming months. https://tinyurl.com/5dwprwav
Apple rumored to follow ChatGPT with generative AI features on iPhone as soon as iOS 18.
Apple plans to start implementing generative AI technology on the iPhone and iPad in late 2024 at the earliest, according to Jeff Pu, an analyst who covers Apple’s supply chain for Hong Kong-based investment firm Haitong International Securities. In a research note on Wednesday, Pu said his supply chain checks suggest that Apple is likely to build a few hundred AI servers in 2023, and significantly more next year. He believes Apple will offer a combination of cloud-based AI and so-called “edge AI,” which involves more on-device data processing. He added that patience will be required with Apple’s rollout of generative AI, as the company considers how to use and process personal data in a way that aligns with its commitment to customer privacy. If met, the late 2024 timeframe would mean that Apple could begin rolling out generative AI features starting with iOS 18 and iPadOS 18, but it remains to be seen how it uses the technology. The Information last month reported that Apple plans to incorporate large language models into Siri to let users automate complex tasks, a feature that would involve deeper integration with the Shortcuts app. The report said this feature is expected to be released in an iPhone software update next year, so it could be part of iOS 18. In August, supply chain analyst Ming-Chi Kuo said Apple’s generative AI efforts were “significantly behind its competitors,” so it’s unclear if the late 2024 timeframe is realistic. It is possible the technology will not be ready until 2025 and onwards. https://tinyurl.com/aatkhkjm
Biden aims to boost investment in clean energy, biotech, semiconductors with tech hubs.
The Biden administration on Monday named 31 regions spanning 32 states and Puerto Rico as technology hubs, a move by the White House to spur private investment and create jobs. President Joe Biden announced the program alongside Commerce Secretary Gina Raimondo. The creation of the tech hubs was authorized through the CHIPS and Science Act, which Biden signed into law last year. Raimondo in May announced the launch of the tech hub program with the aim of dispersing US$500 million in grants. The goal is to spread technological innovation across the country rather than have it centered primarily in cities like San Francisco, New York, Boston and Austin. The hubs are focused on fostering innovation across industries including clean energy, artificial intelligence, semiconductors, biotechnology, medicine, quantum computing and critical minerals. Regions selected for the hubs span the entire U.S. and include Oklahoma, Massachusetts, Colorado, Ohio, South Carolina, Washington, Alabama and Pennsylvania. https://tinyurl.com/37azjmxy
UPS will acquire happy returns from PayPal.
PayPal is selling Happy Returns to UPS, the delivery firm said Wednesday, as the payments giant’s new CEO looks to slim down its operations. Happy Returns was acquired by PayPal in 2021, six years after its 2015 founding. The service, which raised nearly US$25 million from investors including Maveron before PayPal bought it, allows shoppers to drop off returned merchandise without boxes or labels at partner locations, including UPS stores. Happy Returns also offers software to help merchants upsell customers and prompt them to make more purchases. Happy Returns cofounder and CEO David Sobie will join UPS as part of the deal, the companies said. Financial terms of the deal weren’t disclosed. PayPal had once envisioned creating a “super app” that would combine banking, e-commerce and other features in one place, and the original acquisition was part of a wave of e-commerce and payments companies scrambling to beef up their returns capabilities and gain an edge with merchants. Those ambitions have been thwarted more recently by slowing growth and a CEO change—former Intuit executive Alex Chriss replaced Dan Schulman as PayPal’s CEO in late September. https://tinyurl.com/z3h7p65t
Stellantis takes US$1.6 billion Leapmotor stake to revive China fortunes.
Stellantis said on Thursday it is buying a 21% stake in EV maker Leapmotor in a US$1.6 billion deal that will give it a fresh shot in China, the world’s biggest car market by sales, and the smaller Chinese carmaker a European foothold. Legacy international carmakers are playing catch-up in the shift to electric vehicles and the deal gives Stellantis (STLAM.MI) access to Leapmotor’s advanced technology. Meanwhile, a growing number of Chinese EV makers are launching lower-cost models across Europe. “The Chinese offensive is visible everywhere,” Stellantis CEO Carlos Tavares told reporters. “With this deal we can benefit from it rather than being the victims of it.” Stellantis, formed at the start of 2021 through the merger of France’s PSA with Fiat Chrysler (FCA), has struggled to sell cars in China and has sought a reset in the country, where it has a joint venture with Dongfeng Motor Group. https://tinyurl.com/y32f8nzf
Silver Lake, Thoma Bravo-Backed SolarWinds is weighing potential sale.
SolarWinds Corp., a publicly traded software company controlled by Silver Lake Management and Thoma Bravo, is exploring options including a potential sale, according to people familiar with the matter. The Austin-based company is working with financial advisers to prepare a sale process that is expected to kick off early next year, said the people, who asked to not be identified because the details aren’t public. No final decision has been made and SolarWinds could opt to remain independent, the people said. SolarWinds fell 0.5% to close at US$8.89 in New York trading Thursday, giving the company a market value of about US$1.5 billion. The stock has fallen about 44% since going public in October 2018, according to data compiled by Bloomberg. With more than 300,000 customers, SolarWinds provides software to information technology workers to help manage corporate infrastructure functions, according to its website. It comes to market as private equity funds prowl for software oriented businesses, which are appealing take-private candidates because of their steady cash-flow and consolidation prospects. In late 2020, SolarWinds was at the center of major cyber-attack by hackers tied to the Russian government, which inserted a vulnerability into updates from one of its products. SolarWinds said at the time that as many as 18,000 customers may have been exposed. https://archive.ph/RXrdd
Silver Lake looks to take Hollywood talent giant Endeavor Private.
Private-equity firm Silver Lake said it’s working on a proposal to take Hollywood talent giant Endeavor private. This comes shortly after Endeavor announced that it was exploring strategic alternatives for the company, which could include a sale of its assets. Silver Lake said it owns approximately 71% of the voting stake in Endeavor. Endeavor owns the talent agencies WME and IMG and has other assets including the marketing firm 160over90. Endeavor is also a majority owner of TKO Group Holdings, a new public company it spun out after merging MMA promoter UFC, which Endeavor owned, with wrestling entertainment giant WWE. That deal closed in September and Endeavor said it is not considering a sale or “disposition of” its majority interest in TKO. Silver Lake, meanwhile, said it is not interested in selling its shares in Endeavor or entertaining bids for the company’s assets. Endeavor’s stock has been down 16% since the beginning of the year. “Given the continued dislocation between Endeavor’s public market value and the intrinsic value of Endeavor’s underlying assets, we believe an evaluation of strategic alternatives is a prudent approach to ensuring we are maximizing value for our shareholders,” Endeavor’s CEO Ari Emanuel said in a statement. In September, Endeavor’s chief rival Creative Artists Agency sold a majority stake to Artemis, an investment firm controlled by French billionaire François-Henri Pinault. https://tinyurl.com/dh73a3wy
Amazon reports better-than-expected results, as revenue jumps 13%.
Amazon reported third-quarter earnings and revenue on Thursday that sailed past analysts’ estimates. The stock climbed in extended trading. Here are the results: Earnings per share: 94 cents vs. 58 cents expected by LSEG, formerly known as Refinitiv. Revenue: US$143.1 billion vs. US$141.4 billion expected by LSEG. Amazon said fourth-quarter sales, which include the key holiday period, will be between US$160 billion and US$167 billion. Analysts were expecting revenue of US$166.6 billion, according to LSEG. At the mid-point of its guidance range, revenue of US$163.5 billion would represent growth of 9.6% from US$149.2 billion a year earlier. Revenue jumped 13% in the third quarter, a sign that the business is seeing some acceleration after a difficult 2022 that was marred by soaring inflation and rising interest rates. https://tinyurl.com/57ptmak5
Microsoft revenue rises 13% as AI sales accelerate Azure cloud growth.
Microsoft on Tuesday said revenue grew 13% in the September quarter to US$56.5 billion compared to the same quarter a year ago. That means total revenue growth has accelerated for three straight quarters after hitting a low point of 2% growth in the fourth quarter of 2022. Results were buoyed by 29% growth in the cloud business that includes Azure server rentals and other services. Microsoft shares rose 4% in after-hours trading. CEO Satya Nadella attributed the company’s growth to its new artificial intelligence products, including services that let people access or develop AI models on Azure. The Azure business grew at a slightly faster rate year-over-year than it did in the June quarter, ending more than two years of gradual deceleration. More than 18,000 customers are accessing OpenAI’s software through the Azure OpenAI Service, Nadella said on Tuesday, up from 11,000 as of the July quarter. Microsoft doesn’t disclose how much revenue comes from Azure, but the broader cloud unit that includes Azure, GitHub, SQL Server, and other cloud software services generated US$24.3 billion, up 13% from the year-ago period. The Azure-specific growth outpaced rival Google Cloud, which on Tuesday said it grew 22% in the third quarter. Revenue in the business unit that includes Microsoft’s Office 365 software grew 13% to US$13.7 billion. Nadella said the company has seen customer interest in its new AI-powered features that automatically generate documents based on written prompts, but those products won’t be broadly available until November. https://tinyurl.com/4ajfkknb
Google revenue accelerates but stock drops as AI fails to boost cloud sales.
Revenue growth at Alphabet parent Google accelerated for a third straight quarter, thanks to rebounding ad sales, but its investments in artificial intelligence so far have failed to move the needle for its cloud business. Overall revenue rose 11% in the third quarter compared to the same period a year ago, an improvement from the 3% and 7% year-over-year growth that the company posted in the first two quarters of 2023. Operating income grew 24.5% to US$21.3 billion in the third quarter. Still, Google’s stock initially fell more than 5% in after-hours trading, possibly reflecting decelerating growth at its cloud-server rental unit. Cloud sales rose 21.8% to US$8.4 billion from the same period a year ago, a slower growth rate than during the first two quarters of 2023, when Google Cloud grew about 28% year over year. That suggests Google hasn’t gotten a boost from the sale of large language models to outside companies as it sought to keep pace with Microsoft and OpenAI, which have gained some traction from LLM sales. (Microsoft’s Azure cloud business grew 29% in the third quarter, the company reported Tuesday.) Google Cloud reported a US$266 million profit for the quarter, though that was smaller than the US$400 million profit the unit posted in the second quarter. Meanwhile, Google’s unallocated corporate costs, which includes its AI team DeepMind, jumped nearly 40% to US$1.6 billion in the quarter. DeepMind has been developing a new set of LLMs called Gemini that it hopes will boost the cloud business. Google hardly added any employees in the quarter, with total headcount increasing by just 583, or 0.3%. A number of Alphabet units, including Waymo, Verily and Google News, have laid off staff in recent weeks as the tech industry resumes layoffs. https://tinyurl.com/2p9dkr69
Meta’s Q3 revenue rises 23% in return to healthy growth rate.
Facebook owner Meta Platforms reported 23% higher revenue of US$34 billion, a return to robust growth rates after nearly two years of weaker expansion caused by an anemic ad market, Apple’s ad targeting changes and competition from TikTok. The results showed the impact of Meta’s cost-cutting, including two rounds of layoffs over the past 12 months, when combined with surging revenue. The company’s operating profit margin doubled to 40% while net income nearly tripled to US$11.6 billion. Still, there are signs that Meta is ramping up its investments again. The company forecast that payroll expenses would grow next yar as it hires people “to support priority areas,” while its metaverse and AR/VR division Reality Labs would “increase meaningfully” operating losses in 2024. https://tinyurl.com/5n93xky6
Intel stock rises on earnings beat and strong revenue guidance.
Intel shares rose about 7% in after-hours trading after the company reported third-quarter earnings on Thursday that beat expectations for profit and sales, even as its revenue declined from the year-earlier period. Intel CEO Pat Gelsinger told analysts on a call the company would cut costs by about $3 billion this year. Chief Financial Officer David Zinsner said that Intel’s earnings per share benefited from the company controlling expenses, with operating expenses declining 15% from a year ago. Intel said it has 120,300 employees, down from 131,500 last year. https://tinyurl.com/5n98f7zy
Google in 2021 paid US$26.3 billion for search deals with Apple, others.
Google paid US$26.3 billion to companies including Apple, Samsung and Firefox owner Mozilla in 2021 to be the default search engine on their devices and web browsers, according to testimony on Friday in a Google antitrust trial. The U.S. Department of Justice wants a federal judge to deem such secretive agreements illegal because they help solidify Google’s monopoly in web search and prevent a level playing field for competitors. The figure emerged as U.S. antitrust lawyers cross-examined Google’s search chief Prabhakar Raghavan. Google’s payments represented roughly 58% of Google’s total “traffic acquisition costs” in 2021. Google paid Apple roughly US$18 billion in 2021 to be the default search provider in Safari web browsers on its devices, The New York Times reported. And Google has sought to use its deal with Apple to limit its moves in search. The trial is expected to wrap up next month, and the judge will issue a ruling sometime after that. https://tinyurl.com/mwyufuft
Chinese iPhone sales fell 10%, as Huawei reemerges as competitor.
A new market intelligence report suggests that Chinese iPhone sales fell 10% year-on-year, between Q3 2022 and the same quarter this year. This was significantly worse than the overall 3% decline in the Chinese smartphone market. Several explanations are offered, but a key one is the surprise reemergence of Huawei as a competitor – with US sanctions-busting or industrial espionage suspected. Counterpoint Research says that China’s smartphone market declined 3% year-on-year, a smaller fall than has been seen in recent quarters, and a sign that a return to growth may be in sight. Most brands saw their sales fall, with the iPhone experiencing a 10% drop. One explanation offered was simply tight supply at launch, as the quarter only includes the first week of sales. The big story of the quarter was Huawei’s reemergence as a serious player in the premium smartphone market. While the only other brands to see their sales climb were Mi and Honor, with modest gains of 5% and 3% respectively, Huawei saw its own sales rocket up by 37%. All that changed last year, when the US government imposed sanctions on China, preventing the export of advanced US chips to the country. Among other things, that blocked Huawei from buying 5G radio chips for its smartphones from Qualcomm and Broadcom. You can’t expect to sell many premium smartphones without 5G capabilities, so that saw sales of Huawei phones drop like a brick, with Apple by far the biggest beneficiary. Huawei launched the Mate 60 Pro with full 5G capabilities thanks to a Chinese-made chip, something US experts had believed impossible. Either way, Huawei back in action as an Apple competitor is likely to hurt Chinese iPhone sales for some time. https://tinyurl.com/bdzdjcm2
China rushes to swap Western tech with domestic options as U.S. cracks down.
China has stepped up spending to replace Western-made technology with domestic alternatives as Washington tightens curbs on high-tech exports to its rival, according to government tenders, research documents and four people familiar with the matter. Reuters is reporting for the first time details of tenders from the government, military and state-linked entities, which show an acceleration in domestic substitution since last year. China has spent heavily on replacing computer equipment, and the telecom and financial sectors are probably the next target. The number of tenders from state-owned enterprises (SOEs), government and military bodies to nationalize equipment doubled to 235 from 119 in the 12 months after September 2022, according to a finance ministry database seen by Reuters. In the same period, the value of awarded projects listed on the database totaled 156.9 million yuan, or more than triple the previous year. While the database represents only a fraction of tender bids nationwide, it is the largest collection of state tenders publicly available and mirrors third-party data. China spent 1.4 trillion yuan (US$191 billion) replacing foreign hardware and software in 2022, marking a year-on-year increase of 16.2%, according to IT research firm First New Voice. In a 2023 American Chamber of Commerce (AmCham) in Shanghai report, 89% of the organization’s tech business members named procurement practices favoring domestic competitors as a regulatory obstacle. It was the highest percentage of any sector. Despite heavy spending on domestic substitution, however, foreign firms are still dominant suppliers for banking and telecoms database management. Non-Chinese companies held 90% of market share for banking database systems at the end of 2022, according to EqualOcean, a tech consultancy. https://tinyurl.com/2hntxx4e
Tencent-backed logistics giant’s stock market debut fails to impress.
The closely watched Hong Kong stock market debut of J&T Global Express, a major Asian courier service provider backed by Tencent and Hillhouse, is looking lackluster. J&T’s initial public offering, which raised about US$500 million, is one of the biggest IPOs this year in Hong Kong. On Friday, the company’s shares started trading at the same price as its IPO price and remained sluggish in the afternoon local time. The environment for new listings in Hong Kong has been extremely challenging so far. Hong Kong’s IPO market this year could hit its lowest fundraising level in 11 years, Deloitte China said last month. J&T, founded in 2015 in Indonesia by executives of Chinese smartphone maker Oppo, became a major logistics provider in both China and Southeast Asia by working with e-commerce giants such as Pinduoduo and Shopee. https://tinyurl.com/4tc4x6zb
Unilever is selling Dollar Shave Club after 7 long, awkward years of trying to make it work.
Dollar Shave Club, the brand that pitched cheap razors with quirky commercials, is being sold by Unilever, its multinational owner. The sale ends seven years of awkward partnership. The boundary-breaking brand helped shape the direct-to-consumer segment but never quite fit in at the more button-up multinational company. Unilever is selling most of its stake in the brand to private equity firm Nexus Capital Management, the company said Thursday. Unilever will keep a 35% stake in the brand. The price of the deal wasn’t disclosed. Nexus owns a portfolio of other consumer brands, such as shoe maker Toms. Unilever acquired the brand for US$1 billion in 2016 because it had “a very distinctive appeal to a growing number of largely millennial men,” CFO Graeme Pitkethly told investors at the time. https://tinyurl.com/2f66ptc9
Amazon considers offering veterinary telehealth as it looks to compete with Walmart.
Amazon is considering an expansion into veterinary telehealth in its latest bid to compete with Walmart, which began offering the service to Walmart+ subscribers earlier this year, people familiar with the matter told CNBC. The e-commerce giant, which has already expanded into human health with its acquisition of One Medical, is a dominant player in pet food and supplies. But it has not so far meaningfully invested in pet health, which is expected to drive growth in the US$137 billion pet market. As Amazon’s efforts to expand its health-care business show mixed results, the company has signaled that the pet market is a priority. Earlier this year, it spent big on a heartwarming Super Bowl ad that featured a rescue dog and how its family turned to Amazon when it needed supplies. https://tinyurl.com/335dbpfw
British Navy unveils novel ‘Proteus’ surveillance ship that can detect underwater threats from adversaries like Russia.
Concerned by threats to underwater pipes and cables that connect it with Europe and the rest of the world, Britain this month formally dedicated a new and unusual surveillance ship called the RFA Proteus. The 6,000-tonne vessel will be crewed by 26 sailors and “augmented by” 60 Royal Navy specialists “responsible for the undersea surveillance, survey and warfare systems,” according to the Royal Navy. The Proteus was dedicated on October 10 at a ceremony in London, less than a year after Britain’s Ministry of Defense began work on it, converting a commercial vessel that had previously been used for subsea construction and maintenance work on oil platforms. The ship’s dedication follows two high-profile attacks on underwater infrastructure: The September 2022 sabotage of the Nord Stream gas pipeline and, just this month, the destruction of an undersea gas pipeline and telecommunications cable connecting Finland and Estonia. https://tinyurl.com/h2y6mhpy
California agency pulls Cruise’s commercial robotaxi permit following DMV action.
The California Public Utilities Commission (CPUC) has suspended Cruise’s authority to carry and charge passengers for its robotaxi service, following similar action from the state’s Department of Motor Vehicles. The CPUC is also “independently carrying out investigatory activities into recent incidents involving passenger service,” Terrie Prosper, director of news and outreach at the CPUC. The agency’s decision comes just three months after it awarded Cruise the final necessary permits to charge passengers for robotaxi rides in San Francisco. Until then, Cruise had been running a free service in the city. https://tinyurl.com/4dyutrk6
Media, Streaming, Gaming & Sports Betting
Apple raises prices for Apple TV+, other subscription services.
As most major streaming services raise prices to boost revenue, Apple is joining the party. The tech giant will increase the monthly cost of Apple TV+ by US$3 to US$9.99 per month—a 43% increase. It’s also reportedly raising the prices of other subscription products including its videogame service Apple Arcade, Apple News+ and Apple One, a bundle of its various services. Apple’s price hike follows similar moves by streaming rivals including Netflix and Disney. Last week, Netflix raised the price of its most expensive ad-free tier by US$3. This was right after Disney implemented previously-announced price hikes of US$3 a month on both Disney+ and Hulu. Meanwhile, Amazon will require Prime Video subscribers to pay an additional US$3 per month next year if they want to keep streaming without commercials. Streaming giants are instituting these price hikes to boost revenue. For traditional media giants such as Disney it’s also in the hopes of generating profits from streaming, which so far have resulted in billions of dollars in losses. Apple generated US$21.2 billion in services revenue in the quarter ended in July, an 8% increase over the previous year. Other subscription products in this segment include Apple News+, which will also see a $3 price increase to US$12.99 per month, and Apple Arcade, which will go from US$4.99 to US$6.99 per month. https://tinyurl.com/4k56wzjz
Social media platform X rolls out audio, video calling.
Social media platform X, formerly known as Twitter, is launching an early version of video and audio calling for some users, according to chief technology officer and owner Elon Musk, as the billionaire pushes for X to become an “everything app”. Musk described a post on the platform instructing users on enabling the feature as an “Early version of video & audio calling on X”. The latest functionality comes amid a series of new features and changes to the platform’s core experience under Musk, who acquired the social media company nearly a year ago. https://tinyurl.com/3nhpz8kf
Zuckerberg: Threads on track to be a billion-person app that’s ‘more positive’ than its competitor.
While people on Twitter (currently known as X) are quick to downplay the popularity of Threads, all indications are that the platform is thriving. During Meta’s quarterly earnings call, CEO Mark Zuckerberg offered an update on the Threads, saying that the service has “just under” 100 million monthly active users. When Threads launched in July, the app quickly rocketed to having 100 million users within just a few days. While that growth is believed to have slowed down, as expected when something takes off so quickly, Zuckerberg says the service is currently at almost 100 million active users. Note the difference in terms, too. Having 100 million “users” is one thing, while having 100 million monthly active users is quite different – and more impressive. The number is also impressive when you consider that Threads isn’t available to the millions of people who live in the European Union. As noted by The Verge, Zuckerberg also reiterated today that Meta’s goal is to turn Threads into a “billion-person public conversations app” that is “a bit more positive” than some of the competition. According to Zuckerberg, Threads is on the way to achieving that goal. Elon Musk is clearly spooked by Threads as well, threatening to sue Meta for hiring some of the employees he fired. https://tinyurl.com/55s3yxr3
Adtech, Privacy & Regulatory
Amazon’s ad growth driven mostly by search, not video.
Growth in Amazon’s advertising business is being driven primarily by merchants paying to boost their items in search results, while spending on video ads for streaming services is slowing down, the company’s chief financial officer said on Thursday. The e-commerce giant’s ad business continues to be its fastest growing operation, generating 26% higher revenue in the third quarter. But Amazon CFO Brian Olsavsky said that ads at the “top of the funnel”—those that build broad awareness of a brand, such as television commercials—had been “slowing down this year.” In contrast, “we’re seeing strength” in ads “further down the funnel,” a reference to search ads in the shopping site, he said. His comments suggest that despite Amazon’s efforts to expand its video ad business in streaming—including by producing commercials for brands in exchange for spending commitments—its growth continues to be in the older part of its ad business tied to e-commerce. That part of Amazon’s ad business has been scrutinized by the Federal Trade Commission, which argued in an antitrust lawsuit filed in September that Amazon’s ability to “degrade the quality of its shopper-facing search results” without “losing sufficient business to change its behavior” is evidence of its monopoly power. https://tinyurl.com/2bcesutw
Amazon launches AI ads tool for sellers.
Amazon on Wednesday launched an artificial intelligence tool that generates images for merchants to use in advertising campaigns. Plans for the feature were first reported by The Information in May. Based on a generic image of a product and short text prompt, Amazon’s tool can spit out customized images that make for more appealing ad campaigns, the company said in a press release. For example, a seller who has a picture of their crockpot on a blank white background can generate images showing the item in an upscale dining room or next to a pumpkin. The new AI tool is the latest example of how Amazon is trying to sell brands on its less popular ad formats. In another such effort, Amazon has started producing streaming video advertisements for brands in exchange for spending commitments, The Information reported last week. https://tinyurl.com/ycyt55y5
States sue Meta alleging harm to young people on Instagram, Facebook.
A coalition of 41 states and the District of Columbia are filing lawsuits alleging that Meta Platforms has intentionally built its products with addictive features that harm young users of its Facebook and Instagram services. The lawsuits, in federal and state courts, say Meta misled the public about the dangers of its platforms for young people. The states also allege that Meta knowingly has marketed its products to users under the age of 13, who are barred from the platform by both Meta’s policies and federal law. The states are seeking to force Meta to change product features that they say pose dangers to young users. The lawsuits follow failed settlement talks with Meta, according to people familiar with the situation. https://archive.ph/jbdOE
Tesla discloses DOJ probes over vehicle range, personal benefits and more.
In a third-quarter financial filing out Monday, Tesla disclosed that the U.S. Department of Justice has been investigating, and in some cases issued subpoenas, to Elon Musk’s automaker regarding its driver assistance systems marketed as Autopilot and Full Self-Driving, or FSD, options; the range of the company’s electric vehicles; as well as “personal benefits, related parties,” and “personnel decisions” at the company. The specific related parties were not listed in the filing. The term generally refers to a company’s executives, directors, largest shareholders and sometimes to other businesses they own. In the filing out Monday, Tesla also disclosed that a data breach at the company has resulted in several individual and prospective class action lawsuits filed against it. In its disclosure, Tesla wrote, “a foreign news outlet reported that it obtained certain misappropriated data.” This appears to reference Handelsblatt, a German news outlet, that reported on 100 GB of leaked “Tesla files” in May this year including thousands of customer complaints regarding Tesla’s driver assistance features. https://tinyurl.com/3k8ajc
Chipmaker TI forecasts dull fourth-quarter as industrial weakness deepens.
Texas Instruments on Tuesday forecast fourth-quarter revenue and profit below estimates, as the analog chipmaker was forced to slash some production after demand across its key industrial market worsened. Shares of the Dallas, Texas-based company fell 4.5% in trading after the bell. Sales from the industrial market – Texas Instruments’ biggest by revenue share – was down in the mid-teens percentage in the third quarter, with the weakness pervading all regions except Japan, Dave Pahl, head of investor relations at TI, told analysts. The company forecast current-quarter revenue between US$3.93 billion and $4.27 billion, compared with analysts’ average estimates of US$4.49 billion, according to LSEG data. TI forecast profit per share between US$1.35 and US$1.57, below estimates of US$1.76 per share as it had to lower its factory loadings in the third quarter to reduce inventory and protect its gross margin. The forecast paints a picture that demand will deteriorate further and that the weakness will likely persist for at least the next couple of quarters, Edward Jones analyst Logan Purk said. Revenue at all other segments except automotive was also down in the three months ended September. Automotive sales rose 20% in that period. Revenue fell 14% to US$4.53 billion, compared with estimates of US$4.58 billion, while earnings per share of $1.85 beat estimates. https://tinyurl.com/yrryfxzx
Ford delays US$12 billion in EV investments as automaker wrestles with demand.
Ford is delaying about US$12 billion in planned investments on EVs, including construction of a second battery plant with joint venture partner SK On due to softening demand for higher priced premium electric vehicles. CFO John Lawler emphasized Thursday during the company’s third-quarter earnings call that the company wasn’t backing away from its next-generation EV vehicles. However, he along with CEO Jim Farley acknowledged that while EV sales have grown, consumers aren’t willing to pay a premium for an EV over a gas or hybrid vehicle. That price pressure has squeezed profits, and in the case of Ford’s EV business caused losses to grow. https://tinyurl.com/3u2uzacz
Sophic Capital Client Insights
Sophic Client Reklaim (MYID-TSXV, MYIDF-OTC): Bridging the gap between consumers and their data.
In our 3 previous reports, we outlined how governments and corporations are focusing on consumer privacy data protection as well as increased consumer concern about the security and use of their data. This report will demonstrate how this shift in regulation and company compliance relates to Sophic Capital client Reklaim. Reklaim allows consumers to confirm their identity and unveil data that businesses have collected and sold without the consumer’s explicit consent for years. Consumers can take back control of this data by setting up a Reklaim account where, should they choose to, they can be compensated for their data. Through Reklaim, consumers can also subscribe to a SaaS-based privacy tier that reduces the amount of data leaking from their devices while alerting them to any third-party data or password breach for an annual or monthly fee. https://bit.ly/3SudyTe
The information and recommendations made available through our emails, newsletters, website and press releases (collectively referred to as the “Material”) by Sophic Capital Inc. (“Sophic” or “Company”) is for informational purposes only and shall not be used or construed as an offer to sell or be used as a solicitation of an offer to buy any services or securities. In accessing or consuming the Materials, you hereby acknowledge that any reliance upon any Materials shall be at your sole risk. In particular, none of the information provided in our monthly newsletter and emails or any other Material should be viewed as an invite, and/or induce or encourage any person to make any kind of investment decision. The recommendations and information provided in our Material are not tailored to the needs of particular persons and may not be appropriate for you depending on your financial position or investment goals or needs. You should apply your own judgment in making any use of the information provided in the Company’s Material, especially as the basis for any investment decisions. Securities or other investments referred to in the Materials may not be suitable for you and you should not make any kind of investment decision in relation to them without first obtaining independent investment advice from a qualified and registered investment advisor. You further agree that neither Sophic, its, directors, officers, shareholders, employees, affiliates consultants, and/or clients will be liable for any losses or liabilities that may be occasioned as a result of the information provided in any of the Material. By accessing Sophic’s website and signing up to receive the Company’s monthly newsletter or any other Material, you accept and agree to be bound by and comply with the terms and conditions set out herein. If you do not accept and agree to the terms, you should not use the Company’s website or accept the terms and conditions associated to the newsletter signup. Sophic is not registered as an adviser or dealer under the securities legislation of any jurisdiction of Canada or elsewhere and provides Material on behalf of its clients pursuant to an exemption from the registration requirements that is available in respect of generic advice. In no event will Sophic be responsible or liable to you or any other party for any damages of any kind arising out of or relating to the use of, misuse of and/or inability to use the Company’s website or Material. The information is directed only at persons resident in Canada. The Company’s Material or the information provided in the Material shall not in any form constitute as an offer or solicitation to anyone in the United States of America or any jurisdiction where such offer or solicitation is not authorized or to any person to whom it is unlawful to make such a solicitation. If you choose to access Sophic’s website and/or have signed up to receive the Company’s monthly newsletter or any other Material, you acknowledge that the information in the Material is intended for use by persons resident in Canada only. Sophic is not an investment advisor nor does it maintain any registrations as such, and Material provided by Sophic shall not be used to make investment decisions. Information provided in the Company’s Material is often opinionated and should be considered for information purposes only. No stock exchange or securities regulatory authority anywhere has approved or disapproved of the information contained herein. There is no express or implied solicitation to buy or sell securities. Sophic and/or its principals and employees may have positions in the stocks mentioned in the Company’s Material and may trade in the stocks mentioned in the Material. Do not consider buying or selling any stock without conducting your own due diligence and/or without obtaining independent investment advice from a qualified and registered investment advisor. The Company has not independently verified any of the data from third party sources referred to in the Material, including information provided by Sophic clients that are the subject of the report, or ascertained the underlying assumptions relied upon by such sources. The Company does not assume any responsibility for the accuracy or completeness of this information or for any failure by any such other persons to disclose events which may have occurred or may affect the significance or accuracy of any such information. The Material may contain forward looking information. Forward-looking statements are frequently, but not always, identified by words such as “expects,” “anticipates,” “believes,” “intends,” “estimates,” “potential,” “possible,” “projects,” “plans,” and similar expressions, or statements that events, conditions or results “will,” “may,” “could,” or “should” occur or be achieved or their negatives or other comparable words and include, without limitation, statements regarding, projected revenue, income or earnings or other results of operations, strategy, plans, objectives, goals and targets, plans to increase market share or with respect to anticipated performance compared to competitors, product development and adoption by potential customers. These statements relate to future events and future performance. Forward-looking statements are based on opinions and assumptions as of the date made, and are subject to a variety of risks and other factors that could cause actual events/results to differ materially from these forward looking statements. There can be no assurance that such expectations will prove to be correct; these statements are no guarantee of future performance and involve known and unknown risks, uncertainties and other factors. Sophic provides no assurance as to future results, performance, or achievements and no representations are made that actual results achieved will be as indicated in the forward looking information. Nothing herein can be assumed or predicted, and you are strongly encouraged to learn more and seek independent advice before relying on any information presented.