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Future of Capital Allocation

Your weekly newsletter on the fast-evolving world of investing
The week's developments in investing & technology, explained | 30.05.24

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This week we cover AI making big money moves — Elon Musk's xAI has just nabbed a hefty $6B in a bid to catch up to established players like OpenAI.  Meanwhile, new Pitchbook data shows early- and late-stage AI company's VC valuations have far outpaced those in other verticals. Plus, new research shows GPT-4 is crushing it at financial forecasting, but is AI really the crystal ball investors are hoping for?


Elsewhere, we take a look at why a typo triggered a $78 million fine for Citigroup, PE’s record year for gaming deals and how surging AI demand is propelling Nvidia's earnings to new heights.


Read these stories and more below — in our CogX must reads.

— Charlie and the Research & Intelligence Team

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The investment ecosystem

💰 Elon Musk’s xAI snags $6B Series B to chase OpenAI, but can it catch up? Investors like Andreessen Horowitz and Sequoia Capital are backing xAI, but some worry the company may need deeper pockets to compete with established players like OpenAI, Anthropic and Google. 

  • Elon Musk has also told investors he plans to build a supercomputer dubbed "gigafactory of compute" to support the development of his AI startup.


👾 PE firms poured a record $5.4 billion into gaming deals in 2023. This surge comes as traditional VC investors face a tougher market. With IPOs less common and strategic acquisitions slowing, gaming companies with steady revenue are turning to PE for funding and potential exits.


🤖  Humane might be up for sale: Humane had big ambitions to replace your smartphone with their magnetic Ai Pin. But now, after its less-than-stellar launch, the company is reportedly looking for a buyer at a price tag of $750 million to $1 billion.


🤔 Citigroup just learned a $78 million lesson about typos. A data entry error in 2022 saw a $58 million stock sale order balloon to a staggering $444 billion. While Citigroup managed to stop most of the trade, it wasn't enough to avoid a hefty fine from regulators.


Chart of the week

VC firms did really well in 2021 and 2022. However, a recent report from PitchBook says that fundraising, a big reason for this growth, isn't expected to reach its peak levels again until sometime after 2028.


How AI is transforming investing 


🤖 GPT-4 is better than humans at financial forecasting: New research showed OpenAI's GPT-4 can analyse financial statements without needing industry details or narratives. This "chain-of-thought" approach lets it identify trends and calculate ratios, leading to more accurate forecasts. 

  • The large language model achieved a 60% accuracy rate, compared to the low 50% range for human analysts.

🦾 When it comes to VC valuations, AI is in a world of its own. The median early-stage AI valuation now tops $70 million in Q1, dwarfing valuations in other sectors. Fintech, once the darling of VC, is being left in the dust as investors flock to AI.


📈 Nvidia earnings: AI demand smashes forecasts again. Chipmaker Nvidia, the powerhouse powering most of today’s big AI models with its state-of-the-art chips, crushed expectations with a whopping $26 billion in quarterly revenue — up 262% from a year ago.


✍️ DeepL further deepens its deep pockets: The AI translation service just secured a whopping $300 million in funding, skyrocketing its valuation to $2 billion. With this fresh cash injection, DeepL aims to steal market share from giants like Google Translate and Grammarly.


💸 Founders haven't forgotten the rough treatment they received from banks and investors during the financial crisis and recent downturn.  Experts say this emotional "scar tissue" is causing many to avoid debt financing and even consider leaving the startup world altogether.


🗽 French AI darling Mistral is taking its fight to OpenAI's home turf — the US. The company faces giants like Google and well-funded startups, but their open-source approach could be a differentiator.




Noteworthy deals

  • Colendi, a Turkey-based bank-as-s-service fintech, has raised a $65m series B round from investors led by Citi Ventures.

  • Just two months after launching, Syre, a Stockholm based textile recycling company has closed a $100m series A funding led by TGP.

  • Grey Wolf Therapeutics, a UK-based startup developing immuno-oncology agents, has raised $50m in series B funding led by ICG Life Sciences.

  • Ore Energy, an Amsterdam based company developing energy storage batteries using iron-air technology has raised €10m in seed funding from Positron Ventures and SPRIND.


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Disclaimer: This content is for informational and educational purposes only. It does not constitute financial, investment, legal or tax advice.

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