Forget crypto – investors are scrambling to get a slice of artificial intelligence.
Tech giant
Microsoft has made a huge bet on AI, this week confirming a “multibillion-dollar investment” in OpenAI, the company that launched the much-hyped ChatGPT bot late last year.
The excitement is focused on “generative AI” that creates new content like images or text. “But as the tech industry races to foist this new technology on a global audience,
there are potentially far-reaching social effects to consider,” warns west coast editor Richard Waters.
This includes the possibility that it could proliferate misinformation and automate jobs far beyond the obvious roles like in media, he explains, noting that judges – or even lawmakers – will need to lay the ground rules “for the new era of AI”.
If you can’t beat them, join them
Joe Biden’s
Inflation Reduction Act stole the show at Davos. The huge package includes
subsidies and tax breaks to promote US-based green tech.
“It’s a very powerful signal to [global] investors that this is where it’s happening,” said Jonathan Hausman, executive managing director at Ontario Teachers’ Pension Plan.
But not everyone was cheering. Europe is concerned about protectionism and that the bumper offering could tempt continental companies across the Atlantic. The US did not exactly allay fears this week as
officials from states including Michigan, Georgia and Ohio went on a recruitment drive around Europe.
European Commission President Ursula von der Leyen was quick to play catch up, proposing a number of measures including
temporarily loosening state aid regulations on subsidies at Davos.
But there are concerns among some member states. Dutch prime minister Mark Rutte said he would
oppose any new borrowing to fund Europe’s response, arguing that states should look to use existing provisions.
“Lurking behind this is a growing fear that the US is pulling ahead of Europe economically — and that the Ukraine war is hastening this process,” writes chief foreign affairs commentator Gideon Rachman.
Indeed, these economic strains – alongside questions over the future supply of military aid to Ukraine and unease about US-China relations – are all increasing tensions among democratic allies around the world, and he urges them to unite as they did in 2022.
Britain on the backfoot?
As the US and EU became embroiled in their very own green tech investment challenge, Tony Danker, director-general of the CBI, urged the UK government to come up with its own ambitious package – including regulatory changes and state funding.
“It’s become a subsidy arms race,” he said. “We need to come up with our own strategy.”
Danker also took the government to task on their retained EU law bill. The legislation stipulates that thousands of laws that originated in Europe will expire at the end of this year unless ministers want to retain them.
While UK Prime Minister Rishi Sunak plans to scrap the laws, Danker argues that he risks
“throwing industry into some chaos just at the time we’re trying to exit recession at the end of the year”.
His speech reflects broader concerns among British businesses about possible recession and Brexit’s collateral damage. So it is perhaps no surprise that figures show
UK business confidence has hit a two-year low this month.
“The rising cost of living and higher interest rates all meant the rate of economic decline gathered pace again at the start of the year,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.
That comes off the back of figures showing the UK economy avoided going into recession at the back end of last year and even grew slightly in November. This – alongside hot underlying inflation and wage growth – means markets are pricing in a
0.5 percentage point rate raise when the BoE meets early next month.
That will add further pain to the UK Treasury which is already seeing its debt burden increase, in part thanks to increasing interest rates. ONS figures show that
public sector net borrowing hit a record £27.4bn last month – more than double the figure from December 2021.
Investors agitate
Elliott Management has made plenty of headlines this week. The activist fund has built up a significant stake in
Japanese conglomerate, Dai Nippon Printing. Sources suggest initial demands include bolstering the share buyback scheme and divesting real estate holdings.
Executives at Salesforce will be concerned as it was revealed that Elliott has built a multibillion dollar stake in the software company, alongside Starboard Capital and Jeff Ubben (via his new fund Inclusive Capital).
Unpopular acquisitions, a focus on growth over profit and the company haemorrhaging about $170bn from its valuation, all spell trouble.
Meanwhile
Palliser Capital claimed seven scalps at Capricorn Energy. The chief executive, chair and chief financial officer are among those who will leave the Scottish oil and gas company, either immediately or by February. Only two directors survive and a possible merger with Israeli natural gas group NewMed Energy hangs in the balance.
Business columnist Helen Thomas called for
dialogue between boards and investors in UK plc. “Behind the griping and discord is some sense of consensus: that this renewed friction arises, in large part, from changes in the investment industry and particularly the UK market,” she writes.
Investor bases are increasingly global so companies cannot just have a few conversations with important investors any longer. The Investor Forum is right to seek a more collaborative approach, she argues.
