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2024 Tech Sector Dominated by Private Equity Acquisitions, Signals Strong Liquidity Alternatives
5-minute tech market update.
Kristoffer Lindström
August 26, 2024
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TECH BRIEF
Private equity firms have been active players this year in the tech industry, with major take-private acquisitions providing robust liquidity for tech startups and scale-ups. Notable deals include EQT's majority stake in cybersecurity company Acronis valued around $4 billion, and the $600m acquisition of enterprise middleware company WSO2. So far this year, 46 out of 97 take-private deals involved the tech sector, with transactions specifically targeting product-centric companies valued at a minimum of $1 billion. Significant acquisitions include Adevinta ($13bn), Squarespace ($6.9bn), and Nuvei ($6.3bn).
Apple is reportedly exploring robotics as a potential addition to its product lineup. Besides gaining a foothold in consumer homes, the tech giant believes robotics could offer a solution to various first-world problems. A tabletop device featuring an iPad-like display with a robotic actuator is suggested to arrive by 2026 or 2027. Eventually, mobile and humanoid robots could follow. Meanwhile, internal skepticism on this frontier and potential hurdles, along significant costs, pose challenges to this venture.
Venture capitalists are increasingly opting to invest in late-stage AI startups through special purpose vehicles (SPVs), despite the associated risks. These SPVs, housing startup shares, sometimes come at a 30% markup on the previous fundraising round. The trend comes with risks: SPV owners have limited insight, reduced influence over the startup, and could suffer losses if not profitable for those who paid premium prices for the SPV. This move shows intense interest in AI startups, but could potentially signal a bubble.
Reddit, following its March IPO, drives its digital ad strategy by targeting user interests, bucking the traditional approach of using personal data. Reddit's primarily anonymous user base opens opportunities to serve ads based on time-aligned interests found in its detailed subreddits. Despite its turbulent history, Reddit has witnessed promising returns with its text-based platform reporting strong sales and better-than-expected growth through interest-based advertising, even as it competes with Meta and Google.
Nvidia, the world's second largest listed company, expects another strong quarter due to its booming AI and data centre businesses. Notably, the firm's revenues reached $26 billion in the run up to April, outperforming industry forecasts. With clients like Meta, Amazon, and Microsoft, Nvidia's second-quarter revenue and operating profits are predicted to double to $28.6 billion and $18.7 billion respectively. Investors are especially keen on Nvidia's outlook for the remainder of the year.
Despite U.S. sanctions, China's tech giants Alibaba, Tencent, Baidu, and ByteDance have doubled their spending in AI infrastructure, investing $7bn in the first half of this year. Most of the expenses have been geared towards purchasing processors and building infrastructure to power AI language models. Alibaba reported its servers running at full capacity and ByteDance, backed by a cash pile of over $50bn, is investing heavily in AI.
Mark Gurman predicts Apple Intelligence will play a pivotal role in the sales pitch for iPhone 16 at Apple Stores. Retail employees are already undergoing training for the same. Despite its roll-out being delayed to October's iOS 18.1, analysts forecast AI could potentially enhance iPhone 16 sales by 10 million units.
A court order disclosed Elon Musk's X shareholders. This includes Bill Ackman, Sean 'Diddy' Combs, Binance, and several notable VC firms, echoing Musk's Twitter takeover efforts.
Bolt is attempting to raise $200 million in equity and $250 million in marketing credits, pushing for a $14 billion valuation. Controversial founder Ryan Breslow will return as CEO.
Telegram's CEO Pavel Durov was apprehended in Paris over concerns regarding the app's lenient moderation, allegedly allowing criminal activities. His indictment could come as soon as Sunday.
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