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Ukraine crisis re-focuses world investment themes – The Globe and Mail

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“A major geopolitical realignment is taking place,” which, like 9/11, “shapes major governments’ foreign and military policies unpredictably for years to come.”

So wrote Citi’s market strategy team at the weekend in response to the unprecedented financial sanctions imposed on Moscow by many nations – and some remarkable policy U-turns in European capitals – after Russia invaded Ukraine.

If a global geopolitical shift of that magnitude is under way, it surely follows that a similarly seismic, multiyear shift in the global investment landscape is also upon us.

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The immediate playbook for investors will be to “de-risk,” and pile into the safest or most liquid assets. This means moving out of stocks, credit, and emerging market assets, and into U.S. Treasuries, top-rated government bonds and the dollar.

But then what? Out of crisis always emerges opportunity.

“We are likely to see military, infrastructure and cybersecurity spending in the West not only increased but also speeded up,” Stefan Kreuzkamp, chief investment officer at DWS, wrote on Tuesday.

Defence and aerospace stocks have soared since German Chancellor Olaf Scholz’s bombshell on Sunday that Germany will commit about 100 billion euros (US$118 billion) to a fund for its military and ramp up defence spending to more than 2 per cent of gross domestic product, finally meeting a NATO target set out 16 years ago.

If all NATO countries agree to the 2 per cent of GDP target, billions more will flood into defence and related sectors.

Germany’s Rheinmetall AG jumped a record 25 per cent on Monday and gained a further 18 per cent on Tuesday to hit a new high of 159 euros a share. Military sensor maker Hensoldt rocketed 42 per cent on Monday and added a further 20 per cent on Tuesday to 25 euros a share.

“That is an area you would expect to see continued growth, especially if this extra spending from Germany and Europe comes through,” said Crit Thomas, investment strategist at Touchstone Investments, which oversees US$34 billion in assets.

If so, it would be a reversal of the “peace dividend” that followed the collapse of the Soviet Union and end of the Cold War three decades ago. The idea then was less defence spending would help reduce government borrowing, potentially paving the way for tax cuts.

That may flip in the coming years.

Focus on valuations

JPMorgan economists said Berlin’s defence pivot is one of a “number of profound political and policy implications” resulting from the Russia-Ukraine war that will reverberate for years to come.

Others may prove equally important. Take energy.

As worries intensify over supply and the impact of sanctions, near-term prices are spiking higher. Brent crude oil has leapt back above US$100 a barrel, and some analysts say European natural gas prices for the 2022-23 winter could be even higher than this winter.

Europe, which depends on Russia for about 40 per cent of its natural gas, will reduce that dependency and seek alternative sources. Italy’s foreign minister said on Monday that Rome will buy more from Algeria.

These changes will take a long time to come into effect, but once they do, the upshot may be that greater supply from other countries simply raises aggregate global supply. If so, price pressures may eventually be to the downside, not the upside.

Not only is Europe seeking to wean itself off Russian energy, it is leading the world’s climate-driven shift away from fossil fuels.

Germany’s government is preparing to speed up passage of the Renewable Energy Sources Act through its parliament so that it can come into force by July, according to a document seen by Reuters.

European offshore wind companies Vestas Wind Systems, Nordex and Orsted on Monday jumped more than 15 per cent, 13 per cent and 10 per cent, respectively. Investor interest in clean and renewable energy is only liable to increase.

On a broader index level, equity strategists at Citi note that investors’ response to most geopolitical events of recent decades has been simply to “buy the dip.”

But Phil Toews, who oversees US$2.2 billion at Toews Asset Management, reckons this approach can no longer be taken for granted because inflation is so high now that borrowing costs are bound to rise. Perhaps significantly.

He argues that the medium-term to long-term outlook boils down to valuation as much as sector. He notes that the S&P 500 index’s 12-month trailing valuation is still above 20 times earnings, consistent with a bear market.

When it is back down to the historical average around 15 times earnings, then it’s game on.

“Once valuations are washed out, regardless of the geopolitics, you can approach the markets with a new perspective. There will be potentially very good opportunities out there eventually,” Toews predicts.

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Amazon completes $4B Anthropic investment to advance generative AI – About Amazon

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Amazon concludes $4 billion investment in Anthropic.

Customers of all sizes and industries are using Claude on Amazon Bedrock to reimagine user experiences, reinvent their businesses, and accelerate their generative AI journeys.

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The work Amazon and Anthropic are doing together to bring the most advanced generative artificial intelligence (generative AI) technologies to customers worldwide is only beginning. As part of a strategic collaborative agreement, we and Anthropic announced that Anthropic is using Amazon Web Services (AWS) as its primary cloud provider for mission critical workloads, including safety research and future foundation model development. Anthropic will use AWS Trainium and Inferentia chips to build, train, and deploy its future models and has made a long-term commitment to provide AWS customers around the world with access to future generations of its foundation models on Amazon Bedrock, AWS’s fully managed service that provides secure, easy access to the industry’s widest choice of high-performing, fully managed foundation models (FMs), along with the most compelling set of features (including best-in-class retrieval augmented generation, guardrails, model evaluation, and AI-powered agents) that help customers build highly-capable, cost-effective, low latency generative AI applications.

Earlier this month, we announced access to the most powerful Anthropic AI models on Amazon Bedrock. The Claude 3 family of models demonstrate advanced intelligence, near-human levels of responsiveness, improved steerability and accuracy, and new vision capabilities. Industry benchmarks show that Claude 3 Opus, the most intelligent of the model family, has set a new standard, outperforming other models available today—including OpenAI’s GPT-4—in the areas of reasoning, math, and coding.

“We have a notable history with Anthropic, together helping organizations of all sizes around the world to deploy advanced generative artificial intelligence applications across their organizations,” said Dr. Swami Sivasubramanian, vice president of Data and AI at AWS. “Anthropic’s visionary work with generative AI, most recently the introduction of its state-of-the art Claude 3 family of models, combined with Amazon’s best-in-class infrastructure like AWS Tranium and managed services like Amazon Bedrock further unlocks exciting opportunities for customers to quickly, securely, and responsibly innovate with generative AI. Generative AI is poised to be the most transformational technology of our time, and we believe our strategic collaboration with Anthropic will further improve our customers’ experiences, and look forward to what’s next.”

Global organizations of all sizes, across virtually every industry, are already using Amazon Bedrock to build their generative AI applications with Anthropic’s Claude AI. They include ADP, Amdocs, Bridgewater Associates, Broadridge, CelcomDigi, Clariant, Cloudera, Dana-Farber Cancer Institute, Degas Ltd., Delta Air Lines, Druva, Enverus, Genesys, Genomics England, GoDaddy, Happy Fox, Intuit, KT, LivTech, Lonely Planet, LexisNexis Legal & Professional, M1 Finance, Netsmart, Nexxiot, Parsyl, Perplexity AI, Pfizer, the PGA TOUR, Proto Hologram, Ricoh USA, Rocket Companies, and Siemens.

To further help speed the adoption of advanced generative AI technologies, AWS, Anthropic, and Accenture recently announced that they are coming together to help organizations—especially those in highly-regulated industries including healthcare, public sector, banking, and insurance—responsibly adopt and scale generative AI solutions. Through this collaboration, organizations will gain access to best-in-class models from Anthropic, a broad set of capabilities only available on Amazon Bedrock, and industry expertise from Accenture, Anthropic, and AWS to help them build and scale generative AI applications that are customized for their specific use cases.

Deepening our commitment to advancing generative AI, today we have an update on the announcement we made to invest up to $4 billion in Anthropic for a minority ownership position in the company. Last September, we made an initial investment of $1.25 billion. Today, we made our additional $2.75 billion investment, bringing our total investment in Anthropic to $4 billion. To learn more about the broader strategic collaboration between Amazon and Anthropic, of which this investment is one part, check out the stories below:

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Amazon doubles down on Anthropic, completing its planned $4B investment – TechCrunch

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Amazon invested a further $2.75 billion in growing AI power Anthropic on Wednesday, following through on the option it left open last September. The $1.25 billion it invested at the time must be producing results, or perhaps they’ve realized that there are no other horses available to back.

The September deal put $1.25 billion into the company in exchange for a minority stake, and certain tit-for-tat agreements like Anthropic continuing to use AWS for its extensive computation needs.

Amazon reportedly had until the end of the first quarter to decide whether to increase its investment to a maximum of $4 billion, and here we are just before the deadline, and the company has decided to throw in the maximum amount.

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Anthropic’s AI models are one of very few that compete at the highest levels of capability (however you define it) yet are available at scale for enterprises to deploy internally or in user-facing applications. OpenAI’s GPT series and Google’s Gemini are the others up there, but upstarts like Mistral may soon threaten that fragile triumvirate.

Lacking the capability to develop adequate models on their own for whatever reason, companies like Amazon and Microsoft have had to act vicariously through others, primarily OpenAI and Anthropic. The two have reaped immense benefits by allying with one or the other of these moneyed rivals, and as yet have not seen many downsides.

What we can take from Amazon’s decision to invest the maximum after (one must assume) getting a pretty close look at how they make the AI sausage over there is, really, pretty scant.

It makes too much strategic sense for these companies, which possess enormous war chests saved up for exactly this purpose (outspending rivals when they can’t out-innovate them), to pour cash into the AI sector. Right now the AI world is a bit like a roulette table, with OpenAI and Anthropic representing black and red. No one really knows where the ball will land, least of all the companies that couldn’t predict or create this technology themselves. But if your bitter enemy puts their chips down on red, it only makes sense for you to bet on black.

Especially if you can bet on black at a discount — which is what Amazon got here, since it could invest at Anthropic’s September valuation, which is most certainly lower than it is today.

That said, if things were looking sketchy over there — the way they must have looked at Inflection before Microsoft pounced on it — Amazon could have backed out or just invested less than the full supplemental $2.75 billion. But that might have sent a confusing signal no one wants getting out there, least of all existing multibillion-dollar investors.

We know Anthropic has a plan, and this year we’ll find out what Amazon, Apple, Microsoft and other multinational interests think they can do to monetize this supposedly revolutionary technology.

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Canada to tighten foreign investment rules for AI, other sectors

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Canada will require foreign companies to warn the government in advance before making investments or acquisitions in artificial intelligence, quantum computing and space technology, Bloomberg News reported on Tuesday, citing an interview with Innovation Minister Francois-Philippe Champagne.

The move will aid the government in conducting a national-security review before transactions get too far advanced and would-be investors may be restricted in their access to target companies’ user data or other property while the inquiry is taking place, the report said.


Click to play video: 'Canadians concerned about risk of AI generated fraud'
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Canadians concerned about risk of AI generated fraud

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The tougher rules will also apply to investments in critical minerals and potentially other sectors, Champagne said to Bloomberg.

Earlier this month, Champagne said Canada will crack down on foreign investment in the interactive digital media sector to stop state-sponsored actors from endangering national security.

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