The venture capital (VC) world often follows the general trends of the markets. When social media is the in-thing, investors will flock to all manner of social media startups. The same goes for any area of investing from mobile apps to live-work-play co-working places and everything in between. So too is the investor perspective on artificial intelligence. When it became clear less than a decade ago that AI was the latest, hottest place to build companies that could grow from tiny startups to huge public market exits of acquisitions, the VC community got all in.
In the past few years, it seemed that just the mere mention of AI in your product was attractive enough to raise substantial funding rounds. As a result, startups of all sorts played into this trend adding AI and ML jargon and buzzwords into business plans or marketing material and raising more money than ever. Yet, are these companies actually building solutions that the market is looking for and pusing AI forward, or are they simply “AI-washing” their otherwise unintelligent offerings?
Waves of Investment in AI
We’ve been here before. In fact, this latest wave of AI is the third major wave of AI research, development, and investment, with the first two waves coming roaring in and crashing down in what became known as the AI Winters. Much has been talked about whether this latest AI summer will be permanently here to stay, but we can look at the investor climate as an early warning to see if attention, interest, and resources continue to be strong for AI or we’re already starting to see signs of an impending chill in the market.
During the first wave of AI starting in the 1950’s initial funding was largely supplied by governments. Governments funded R&D efforts around artificial intelligence but as governments lost interest funding dried up and AI projects basically did as well. During the second wave of AI in the 1980’s the market also saw the rise of venture capitalism. This opened up entire new avenues for funding resulting in increased research, projects, and more diverse projects.
This current third wave of AI is being pushed forward by different factors. In addition to government and corporate investment, big data and computing power leveraged by the huge cloud-based technology combined with the emergence of data-hungry deep learning neural network algorithms are powering the latest renaissance in AI. Startups in the AI space are raising significant funds from VC firms all over the world.
However, things are a bit different with AI. Whereas in the past Silicon Valley was by far the overwhelming investor location of choice for technology-focused startups, the AI market is decidedly more global. Chinese-based firms have raised eye-watering sums of money and “unicorn” startups are being founded everywhere from Bucharest to Bangalore. While Silicon Valley has still not been unseated as the top investor location, other locations inside the US as well as overseas are definitely posing significant challenges to that leadership.
Venture funding in AI companies had reached a mind-blowing $61 billion from 2010 through the first quarter of 2020. The majority of these investment dollars are to companies based in the USA or China. Is this investment sustainable? Some would say not. Venture capitalists are mostly driven by finding that unicorn needle in the startup haystack, driving outsized returns to their investors that offset the expected losses in the rest of their investments. As such, the only way so much money would be pumped into this industry is if the market believes that AI is a “transformational” technology that will revolutionize entire industries and markets, in much the same way that mobile, social, cloud, and other technologie have similarly disrupted their markets. Disruption means change. Change means opportunity. And where there’s opportunity, there’s venture capital.
Perspectives from a Venture Capitalist
VC firms still seem committed to the long-haul in their AI-focused investing. On an AI Today podcast, John Frankel of ffVC shared his insights into why like cloud and mobile, AI is here to stay. John founded ff Venture Capital (ffVC) with partner Alex Katz in 2008. The primary interest of the company are emerging technology companies that focus on artificial intelligence, drones, robotics, and cybersecurity.
One cornerstone to their strategy is a partnership with New York University (NYU), with an incubator set up to assist startup companies to accelerate their AI efforts. Part of the reason why New York has had such a strength in AI companies is because of its unique combination of financial strength, research and academic strength, and the location of major corporations that can apply technology. AI is proving its value in many industries and as such being in close proximity to hubs of finance, advertising, insurance, and other markets provides a larger scope of immediate access to markets than possible even in Silicon Valley.
Indeed, VC firms are starting to move beyond the sci-fi aspects of AI to the more mundane applications in industry. Indeed, VCs are investing less in AI “concept” companies and more in applying machine learning and AI to transform existing markets from retail to real estate. According to John Frankel, the big shift he is seeing is the vertical application of AI in which startups are taking technologies that already exist such as image or voice recognition and building industry- and enterprise-specific applications.
John offers a bit of advice when it comes to investors or companies jumping into the AI waves. He says that it’s a bit late at this point to invest in the underlying, infrastructural technology unless there’s a major revolution in the fundamental technology of that company. The large incumbents have significant resources that they are applying to bear in the markets. He points out that AI should be seen as a way to improve or build upon what we had rather than a replacement strategy for things that are not working. While there will be a major shift in some areas such as the type of workers that are needed or products that are being sold, ultimately the technology is going to be used to enrich the experiences of day-to-day customers and citizens and not necessarily just line the pockets of a few well-timed and well-placed investors.
When it comes to investing, don't believe everything you see on TV – TheChronicleHerald.ca
Interest in investing is hitting new highs. Discount brokers are flooded with applications and trading volumes are surging. Despite this renewed focus, some misunderstandings persist about the realities of investing.
To illustrate, let’s deconstruct an investment conversation that you might have with a friend, colleague, or advisor. It goes like this.
“A guy on TV says the economy is strong and stocks are going up. It seems like a good time to invest. I don’t see much downside so I’m buying high-dividend stocks for my RRSP.”
A guy on TV
Many investors think there are people who know where the market is going. Experts who know something the rest of us don’t. The reality is, they don’t. Their insights may be interesting and unique, but any conclusions related to market timing aren’t worth the cup of coffee you’re drinking. It’s impossible to call the market level a week, month or even year from now with enough consistency to be useful. Stock prices are determined by a myriad of factors, many of which we’re unaware of until after they’ve emerged.
The economy looks good. I’m buying.
At the core of most market calls is an economic forecast. This is unfortunate because the connection between what the economy is doing and where the stock market is going is flimsy at best. It’s true that economic activity affects corporate profits, which ultimately drive stock prices, but the relationship is sloppy and unpredictable. Consider the last decade — we had the slowest economic recovery in history and yet profit margins were at or near record levels throughout, as were stock prices.
It bears repeating. Mr. Market is not paying attention to today’s economic headlines. He’s focusing on what the news might be in 12 to 18 months. The corporations you’re investing in aren’t reading the headlines either. They’re too busy trying to move their businesses ahead.
A good time to invest
For an investor with a multi-decade time frame, anytime is a good time. Some points in time, however, will be more prospective than others. These are periods when returns are projected to be higher based on fundamentals like rising profitability, low valuations and/or extremely negative investor sentiment. To be clear, these factors won’t tell you what’s about to happen, but will provide a tailwind over the next three to five years.
Not much downside
When you own a stock, the range of possible outcomes is always wider than you expect. It’s hard to conceive of a holding going down 20, 30 or 40 per cent, especially when things are going well. Unfortunately, recent price moves have no predictive value, they just provide false comfort.
The future for a stock that has recently done well is just as uncertain as one that hasn’t. Indeed, it may be riskier because its price-to-earnings multiple is higher (if profits haven’t kept up with the stock price), its dividend yield is lower and shareholders’ risk aversion, a necessary ingredient for good returns, has melted into complacency.
The higher the better
We all love dividends, but too many investors choose stocks based solely on yield. This is a problem because yield is not a measure of value for a stock like it is for a bond. A company’s worth is derived from it’s potential to earn profits into the future. Dividends are simply the portion of those earnings that get distributed to shareholders.
Yield-obsessed investors often downplay the importance of the stocks’ second source of return — price appreciation. Ask yourself the question: What would you rather have, a $10 stock yielding five per cent that’s worth $8, or a $10 stock with a three per cent yield that’s worth $12?
If you want to focus on dividend income, start with a list of stocks that have an acceptable yield. From there build a diversified portfolio of holdings that are trading at or below what they’re worth.
In your RRSP?
When asked, “What should I do in my RRSP (or TFSA),” I have only one answer. The most important thing driving your RRSP strategy is the strategy you’re pursuing for your overall portfolio (including other registered accounts, taxable accounts, pensions and income properties). Anything you do in your RRSP has to roll up into your household asset mix. In that vein, RRSP contributions are a wonderful tool for adjusting your overall portfolio because transactions have no tax consequences.
Investing is hard enough without basing decisions on false premises. If you find yourself listening to someone pontificate about where the market is going, try to change the subject or look for an escape.
Tom Bradley is
chair and chief investment officer
at Steadyhand Investment Funds, a company that offers individual investors low-fee investment funds and clear-cut advice. He can be reached at
Copyright Postmedia Network Inc., 2020
Apollo Hit Again as Aksia Tells Clients to Delay Investment – BNN
(Bloomberg) — Apollo Global Management Inc. is coming under increasing pressure as more institutional investors hold off committing fresh capital to the Wall Street giant.
Aksia, which advises on more than $160 billion of investor commitments, urged clients not to give money to Apollo amid lingering questions over co-founder Leon Black’s relationship with disgraced financier Jeffrey Epstein, according to people familiar with the matter. On Friday, Connecticut Treasurer Shawn Wooden said the state won’t commit new capital to the firm.
An adviser to pensions, endowments and other large institutions, Aksia has begun communicating the move to its clients, said one of the people, who asked not to be identified because the talks are private. Apollo said this week it was hiring law firm Dechert LLP to investigate the relationship.
“Aksia believes it is prudent to delay any new commitments or investments with Apollo funds until the results of Dechert’s study are disclosed,” Aksia said in a client communication, noting that its recommendation was effective as of Thursday. “Should Dechert’s review uncover that Mr. Black had knowledge of or participated in any illegal activity, investors that recently committed new capital to an Apollo fund could be subject to intense scrutiny.”
A spokeswoman for Aksia didn’t immediately respond to a request for comment.
“We are firmly committed to transparency,” Apollo said Friday in a statement, noting that Black has been communicating regularly with investors. “Although Apollo never did business with Jeffrey Epstein, Leon has requested an independent, outside review regarding his previous professional relationship with Mr. Epstein.”
Aksia’s decision comes after the Pennsylvania Public School Employees’ Retirement System said it would hold off giving any new money to Apollo for the time being. Another investment adviser, Cambridge Associates, is considering not recommending Apollo funds, Bloomberg reported earlier this week.
Investors are stepping back from one of Wall Street’s most successful firms after fresh reports about Black and Epstein brought the issue back into focus. The New York Times said earlier this month that the Apollo chief wired more than $50 million to Epstein in the years following his 2008 conviction for soliciting prostitution from a teenage girl. The article didn’t accuse Black of breaking the law.
Gabrielle Farrell, a spokeswoman for Connecticut’s treasurer, said in an email that the state’s existing commitments to Apollo were “made under the previous administration and we have no plans to commit further capital to their funds at this time.”
Apollo said earlier this week that Dechert will conduct a review to independently evaluate Black’s past descriptions of a professional relationship with Epstein. Black, 69, has said he turned to Epstein for financial matters, such as taxes, estate planning and philanthropy.
The two men had been acquaintances since at least the early 1990s. From time to time, Epstein met with Black at Apollo’s New York offices, and he pitched personal tax strategies to the firm’s executives, Bloomberg has reported.
Apollo conducted an internal review into its involvement with Epstein to ensure that any ties went no further than the firm’s co-founder, people with knowledge of the matter said last year. That included examining emails and records to determine there was no connection between the company and Epstein, one of the people said.
(Updates with Apollo comment in sixth paragraph.)
©2020 Bloomberg L.P.
ASICLine Miners an Investment Opportunity – GlobeNewswire
ST. PAUL, Minn., Oct. 23, 2020 (GLOBE NEWSWIRE) — ASICLine has quickly grabbed the attention of crypto investors around the world since the recent launch of its miners. The two 5nm ASIC miners https://asicline.com from the company website, FirstLine and PowerBox have been designed with the sole objective to create a surefire investment opportunity for all crypto mining enthusiasts regardless of their knowledge and expertise. In order to ensure fastest return on investment, these products offer lightning fast hash rate as well as maximum energy efficiency.
To make things even better, FirstLine offers hash rates of 410 TH/s, 60 GH/s, 15 GH/s, and 3 MH/s for Bitcoin, Litecoin, Ethereum, and Monero respectively. These figures are even more impressive for PowerBox; 1250 TH/s, 180 GH/s, 45 GH/s, and 9 MH/s, in the same order. The power consumptions for these two units are 650 W and 1800 W respectively.
“ASICLine was created with the goal of making crypto mining a profitable investment option for common people. Both our miners are not only superior in terms of their hash rate and mining efficiency, but also super easy to use, even for people without any prior mining knowledge and experience. We are delighted to be able to deliver this viable investment opportunity in these troubled times,” said ASICLine CEO Martin Muller.
To find out more, visit: https://asicline.com/
About ASICLine: ASICLine Inc. was founded by a team comprising of multiple investors dedicated to bringing the latest ASIC technology miners to the market before the so-called technology giants use them for a long time for their own profit and dump them on the market when they are no longer profitable. Whenever a new generation of ASIC is available, ASICLine is committed to bringing it to the public for a price they can afford. The company is now offering an advanced range of ASIC miners with guaranteed profitability.
+1 (206) 965-8243
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