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We haven’t seen anything like this since the capital region was the epicentre of a global boom in fibre-optic technology.
We haven’t seen anything like this since the capital region was the epicentre of a global boom in fibre-optic technology.
With Tuesday morning’s revelation by Kanata-based Rockport Networks that it has secured US$48 million in fresh equity, the region’s tech sector has accumulated nearly US$500 million in venture capital just since October.
Adjusted for inflation, that’s just shy of the US$540 million landed by Ottawa’s tech firms during the blowout fourth quarter of 2000.
No quarter before that or since had come close. Until now.
The contrast between then and now is stunning. Two decades ago, the emphasis was on Internet hardware and wavelengths of light. Now, investments are targeted at e-commerce, software and the many uses to which the latter can be put.
That’s true even of Rockport, whose co-founder Doug Carwardine spent the early part of his career steeped in communications hardware at Newbridge Networks, the legendary Kanata startup that was snapped up by Alcatel for US$7 billion in 2000.
After he helped to launch Rockport in 2012, Carwardine pushed the development of clever software for reducing congestion on communications networks. By making do without hardwired switches, Rockport’s products can move data more quickly, while consuming less energy.
Certainly, these were the attributes that convinced Northern Private Capital of Toronto to lead Tuesday’s investment.
Carwardine and his colleagues are patient builders. So, too, were British immigrants John Roberts and Girvan Patterson, the co-founders of Kanata-based GaN Systems, which last month finalized a US$150 million venture investment. Pioneers in Ottawa’s tech scene, Roberts and Patterson spent a decade developing semiconductors built with gallium nitride rather than the traditional silicon and selling these to automakers and consumer electronics firms, among others. Gallium nitride chips are lighter and consume less energy, making them ideal for many green applications.
By the time Roberts and Patterson retired in 2016, they had sold the technology to more than 500 customers and established the firm as the globe’s number one supplier of gallium nitride chips. GaN Systems continues its expansion under CEO Jim Witham who announced the recent venture financing deal aimed at accelerating the momentum.
The biggest local investment in the fourth quarter to date — US$250 million — was hauled down by Fullscript, which physicians and other wellness practitioners use to personalize nutrition regimes for more than half a million patients.
Fullscript, too, has been many years in the making but has grown at great speed. Co-founders Kyle Braatz and Brad Dyment launched their venture in 2011 and quickly developed an enthusiastic following — helped along by a merger with an Arizona wholesaler of nutritional supplements. The company’s base of practitioners tops 30,000. Revenues this year are expected to reach US$300 million.
Rounding out the venture capital recipients is a pair of relatively young software companies with the missions of making life easier for online corporations. Knak and Fellow.app raised US$25 million and US$24 million respectively in the current quarter.
Knak, run by Pierce Ujjainwalla, has developed products for measuring the effectiveness of corporations’ global marketing campaigns.
Fellow.app, led by Aydin Mirzaee, has developed a software assistant to help managers focus their relations with employees throughout the year, and never lose sight of commitments. His all-important first customer? Local e-commerce giant Shopify.
With any luck, this blowout quarter for venture financing will turn out much differently than the last one.
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BWX Technologies (BWXT) in Cambridge is investing $80-million to expand their nuclear manufacturing plant in Cambridge.
Minister of Energy, Todd Smith, was in the city on Friday to join the company in the announcement.
The investment will create over 200 new skilled and unionized jobs. This is part of the province’s plan to expand affordable and clean nuclear energy to power the economy.
“With shovels in the ground today on new nuclear generation, including the first small modular reactor in the G7, I’m so pleased to see global nuclear manufacturers like BWXT expanding their operations in Cambridge and hiring more Ontario workers,” Smith said. “The benefits of Ontario’s nuclear industry reaches far beyond the stations at Darlington, Pickering and Bruce, and this $80 million investment shows how all communities can help meet Ontario’s growing demand for clean energy, while also securing local investments and creating even more good-paying jobs.”
The added jobs will support BWXT’s existing operations across the province as well as help the sector’s ongoing operations of existing nuclear stations at Darlington, Bruce and Pickering.
“Our expansion comes at a time when we’re supporting our customers in the successful execution of some of the largest clean nuclear energy projects in the world,” John MacQuarrie, President of Commercial Operations at BWXT, said.
“At the same time, the global nuclear industry is increasingly being called upon to mitigate the impacts of climate change and increase energy security and independence. By investing significantly in our Cambridge manufacturing facility, BWXT is further positioning our business to serve our customers to produce more safe, clean and reliable electricity in Canada and abroad.”
The semiconductor sector is undergoing a correction as interest rate cut expectations dwindle, prompting concerns about the impact on these high-growth, technology-driven stocks. Wedbush Enterprise Hardware Analyst Matt Bryson joins Yahoo Finance to discuss the dynamics shaping the chip industry.
Bryson acknowledges that the rise of generative AI has been a significant driving force behind the recent success of chip stocks. While he believes that AI is shifting “the way technology works,” he notes it will take time. Due to this, Bryson highlights that “significant investment” will continue to occur in the chip market, fueled by the growth of generative AI applications.
However, Bryson cautions that as interest rates remain elevated, it could “weigh on consumer spending.” Nevertheless, he expresses confidence that the AI revolution “changing the landscape for tech” will likely insulate the sector from the effect of high interest rates, as investors are unwilling to miss out on the “next technology” breakthrough.
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance.
This post was written by Angel Smith
BRAD SMITH: As rate cut bets shift, so have moves in one sector, in particular. Shares of AMD and Intel, both down over 15% in the last 30 days. The Philadelphia Semiconductor Index, also known as Sox, dropping over 10% from recent highs, despite a higher rate environment.
Our next guest is still bullish on the sector. Matt Bryson, Wedbush Enterprise Hardware analyst, joins us now. Matt, thanks so much for taking the time here. Walk us through your thesis here, especially, given some of the pullback that we’ve seen recently.
MATT BRYSON: So I think what we’ve seen over the last year or so is that the growth of generative AI has fueled the chip stocks. And the expectation that AI is going to shift everything in the way that technology works.
And I think that at the end of the day, that that thesis will prove out. I think the question is really timing. But the investments that we’ve seen that have lifted NVIDIA, that have lifted AMD, that have lifted the chip stock and sector, in general, the large cloud service providers, building out data centers. I don’t think anything has changed there in the near term.
So when I speak to OEMs, who are making AI servers, when I speak to cloud service providers, there is still significant investment going on in that space. That investment is slated to continue certainly into 2025. And I think, as long as there is this substantial investment, that we will see chip names report strong numbers and guide for strong growth.
SEANA SMITH: Matt, when it comes to the fact that we are in this macroeconomic environment right now, likelihood that rates will be higher for longer here, at least, when you take a look at the expectations, especially following some of the commentary that we got from Fed officials this week, what does that signal more broadly for the AI trade, meaning, is there a reason to be a bit more cautious in this higher for longer rate environment, at least, in the near term?
MATT BRYSON: Yeah. I think certainly from a market perspective, high interest rates weight on the market. Eventually, they weigh on consumer spending. Certainly, for a lot of the chip names, they’re high multiple stocks.
When you think about where there can be more of a reaction or a negative reaction to high interest rates, certainly, it has some impact on those names. But in terms of, again, AI changing the fundamental landscape for tech, I don’t think that high interest rates or low interest rates will change that.
So when you think about Microsoft, Amazon, all of those large data center operators looking at AI, potentially, changing the landscape forever and wanting to make a bet on AI to make sure that they don’t miss that change, I don’t think whether interest rates are low or high are going to really affect their investment.
I think they’re going to go ahead and invest because no one wants to be the guy that missed the next technology wave.
It’s time to ask a rude question: Is Canada still worth investing in?
Before you rush to deliver an appropriately patriotic response, think about the issue for a moment.
A good place to begin is with the federal government’s announcement this week that it is forming a task force under former Bank of Canada governor Stephen Poloz. The task force’s job will be to find ways to encourage Canadian pension funds to invest more of their assets in Canada.
Wooing pension funds has become a high-priority matter for Ottawa because, at the moment, these big institutional investors don’t invest all that much in Canada. The Canada Pension Plan Investment Board, for instance, had a mere 14 per cent of its massive $570-billion portfolio in Canadian assets at the end of its last fiscal year.
Other major Canadian pension plans have similar allocations, especially if you look beyond their holdings of government bonds and consider only their investments in stocks, infrastructure and real assets. When it comes to such risky assets, these big, sophisticated players often see more potential for good returns outside of Canada than at home.
This leads to a simple question: If the CPPIB and other sophisticated investors aren’t overwhelmed by Canada’s investment appeal, why should you and I be?
It’s not as if Canadian stocks have a record of outstanding success. Over the past decade, they have lagged far behind the juicy returns of the U.S.-based S&P 500.
To be fair, other countries have also fallen short of Wall Street’s glorious run. Still, Canadian stocks have only a middling record over the past 10 years even when measured against other non-U.S. peers. They have trailed French and Japanese stocks and achieved much the same results as their Australian counterparts. There is no obvious Canadian edge.
There are also no obvious reasons to think this middle-of-the-pack record will suddenly improve.
A generation of mismanagement by both major Canadian political parties has spawned a housing crisis and kneecapped productivity growth. It has driven household debt burdens to scary levels.
Policy makers appear unwilling to take bold action on many long-standing problems. Interprovincial trade barriers remain scandalously high, supply-managed agriculture continues to coddle inefficient small producers, and tax policy still pushes people to invest in homes rather than in productive enterprises.
From an investor’s perspective, the situation is not that appetizing. A handful of big banks, a cluster of energy producers and a pair of railways dominate Canada’s stock market. They are solid businesses, yes, but they are also mature industries, with less than thrilling growth prospects.
What is largely missing from the Canadian stock scene are big companies with the potential to expand and innovate around the globe. Shopify Inc. SHOP-T and Brookfield Corp. BN-T qualify. After that, the pickings get scarce, especially in areas such as health care, technology and retailing.
So why hold Canadian stocks at all? Four rationales come to mind:
How compelling you find these rationales will depend upon your personal circumstances. Based strictly on the numbers, Canadian stocks look like ho-hum investments – they’re reasonable enough places to put your money, but they fail to stand out compared with what is available globally.
Canadians, though, have always displayed a striking fondness for homebrew. Canadian stocks make up only a smidgen of the global market – about 3 per cent, to be precise – but Canadians typically pour more than half of their total stock market investments into Canadian stocks, according to the International Monetary Fund. This home market bias is hard to justify on any rational basis.
What is more reasonable? Vanguard Canada crunched the historical data in a report last year and concluded that Canadian investors could achieve the best balance between risk and reward by devoting only about 30 per cent of their equity holdings to Canadian stocks.
This seems to be more or less in line with what many Canadian pension funds currently do. They have about half their portfolio in equities, so devoting 30 per cent of that half to domestic stocks works out to holding about 15 per cent of their total portfolio in Canadian equities.
That modest allocation to Canadian stocks is a useful model for Canadian investors of all sizes. And if Ottawa doesn’t like it? Perhaps it could do more to make Canada an attractive investment destination.
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