TheChek News Flow

Trend of scaling back and reviewing plans highlights difficult economics of transitioning away from fossil fuels

A number of major European power companies have scaled back or are reviewing their targets to develop renewable energy because of high costs and low electricity prices, in a sign of the difficulties of transitioning away from fossil fuels.

Statkraft, Europe’s largest renewable energy producer, said this month that it was reviewing its annual targets for new renewables capacity, while Portuguese energy company EDP is cutting back its plans, citing high interest rates and lower power prices.

At the same time, Denmark’s Ørsted — the world’s largest offshore wind developer — has slashed its renewable targets for 2030 by more than 10GW, enough to supply potentially millions of homes, after it was forced to abandon two large projects in the US because of rising costs.

“We are seeing continued growth [of renewables], but at a slower pace,” Birgitte Ringstad Vartdal, chief executive of Statkraft, which is owned by the Norwegian state, told the Financial Times. 

Spanish energy giant Iberdrola said in April it would adopt a more “selective” approach to renewables and increase its focus on electricity grids. It no longer has an 80GW renewables target for 2030, but highlights its pipeline of 100GW.

Italian utility Enel announced in November that it would cut its investment in renewables, from €17bn between 2023 and 2025 to €12.1bn between 2024 and 2026. However, the company said it planned to continue increasing renewables capacity with partners to reach its target of 73GW by 2026.

“There has been a big reality check around renewables growth,” said Norman Valentine, head of renewables research at consultancy Wood Mackenzie. “There’s been a huge change in the cost environment.”

The picture is not universal: Germany’s RWE significantly increased its renewables target in November last year, from 50GW by 2030 to 65GW. 

There is a growing political focus on the need to develop renewables, with countries agreeing at the COP28 climate summit in November to work towards tripling capacity to 11,000GW by 2030. 

However, rising interest rates over the past few years have pushed up the costs of financing new projects, creating difficulties for some developers. Raw material costs have also risen, while in some markets, electricity prices have fallen. The often slow process of regulatory approval also creates challenges.

Some companies, including Enel, have said they want to invest more in upgrading electricity networks, which will be vital in the transition from fossil fuel to clean electric power. Iberdrola is planning to spend about 60 per cent of a planned €41bn of investment in the electricity grid. 

Ralph Ibendhal, head of Emea energy transition at RBC Capital Markets, noted that high interest rates meant renewables developers had to compete harder for investors.

“A 7-9 per cent return at project level looks less attractive when base rates are 5 per cent,” he said. “Many utilities also have opportunities to invest in other areas of their business (such as regulated networks) instead.”

Deepa Venkateswaran, head of utilities at Bernstein, said that companies were investing more in networks in the expectation of improved returns given their importance to the energy transition.

Iberdrola and French utility Engie have also recently cut or delayed targets for producing “green” hydrogen — a potential replacement for fossil fuels in several industries that is heavily dependent on subsidies. Iberdrola said it was “still waiting for funds to come through” for projects.

Despite the current challenges, Vartdal at Statkraft said she was confident the economics of projects would improve. Ibendhal, at RBC, agreed. 

“These things happen in waves — at the moment we are on a more downward part of the curve, but it will come back,” he said. 

It was again not a bad week for raising big. Two rounds to U.S.-based startups this week hit a quarter-of-a-billion dollars or more, and there were eight rounds of $100 million or more. Once again, biotech made up nearly a third of the list while some other sectors that don’t usually make the list — developer platform and analytics — were represented.

1. Uniquity Bio, $300M, biotech: It has become pretty much the norm to start off these lists with a big biotech raise. This week it was a brand new company launched by Blackstone Life Sciences — a unit of the private equity giant — along with a sizable $300 million investment. The new startup is a clinical-stage drug development company focused on immunology and inflammation. The company already has FDA acceptance of its Phase 2 investigational new drug application for one of its medicines.

2. Vercel, $250M, developer platform: Vercel, a platform that allows companies to develop web applications in the cloud, locked up a $250 million Series E at a valuation of $3.25 billion. The round was led by Accel, with participation from other existing investors including CRV, GV, Notable Capital (previously GGV Capital), Bedrock, Geodesic Capital, Tiger Global, 8VC and SV Angel. The new round is an upround from Vercel’s 2021 raise, when it secured $150 million in a Series D funding at a $2.5 billion valuation led by GGV Capital. The San Francisco-based company allows developers to use an open-source framework to create web applications, and tries to simplify the process to migrate websites to cloud infrastructure to help with accessibility. Vercel has a number of big-name customers such as Under Armour, Unity and Nintendo. The company said it recently surpassed $100 million in annualized revenue and more than 1 million monthly active developers. Founded in 2015, the company has raised $568 million, per Crunchbase.

3. Sigma, $200M, analytics: Cloud analytics startup Sigma raised a $200 million Series D co-led by Spark Capital and Avenir Growth Capital. Similar to Vercel, it was an upround from the company’s last financing. The San Francisco-based company said the valuation was a 60% increase from its $300 million Series C led by D1 Capital Partners and XN in 2021 and it was reported the new valuation was $1.5 billion. Founded in 2014, the company has raised $581 million, per Crunchbase.

4. Restaurant365, $175M, accounting: It was only about a year ago that Restaurant365 made this list, and now the startup is back with an even bigger raise. The Irvine, California-based startup raised a $175 million round led by ICONIQ Growth this week, after locking up a $135 million round co-led by KKR and L Catterton at a $1 billion valuation last May. Restaurant365 offers enterprise management software for restaurants, helping them take care of accounting, payroll, supply chain and more. Founded in 2011, the company has raised more than $438 million, per Crunchbase.

5. The Bot Company, $150M, robotics: No one likes cleaning the house, and perhaps soon you won’t have to anymore. Kyle Vogt, founder and former CEO of autonomous car startup Cruise, unveiled his newest startup this week. The Bot Company aims to develop robots that do “chores” for people. Nothing else much was disclosed about the company or what exactly those “chores” will be. The $150 million seed funding came from the likes of Quiet Capital, Stripe’s Patrick Collison and John Collison and others. Vogt left Cruise last year after a Cruise car hit and dragged a woman in San Francisco, causing regularos to suspend Cruise’s license to operate in California.

6. Weka, $140M, data: Weka locked up a $140 million Series E — raised in both a primary and secondary transaction — that values the data platform at $1.6 billion. The valuation is more than double what the company was last valued at after a $135 million Series D led by Generation Investment Management in late 2022. At the time, it was reported that the Campbell, California-based startup had a $750 million valuation after the raise. The new round was led by Valor Equity Partners. Weka helps companies move data between sources faster and more efficiently — something mandatory for companies building AI projects. Founded in 2013, Weka has now raised $375 million, according to Crunchbase. Its new round is just the latest big raise for an AI infrastructure company. In February, Lambda which offers cloud computing services and hardware for training artificial intelligence software, hit unicorn status after a $320 million Series C at a $1.5 billion valuation. And earlier this month, AI cloud infrastructure startup CoreWeave locked up a $1.1 billion round led by Coatue that values the company at $19 billion, per The Wall Street Journal.

7. Lycia Therapeutics, $107M, biotech: South San Francisco-based Lycia Therapeutics, a biotech company developing therapeutics that degrade extracellular and membrane-bound proteins that drive autoimmune and inflammatory diseases, completed a $106.6 million Series C led by Venrock Healthcare Capital Partners. Founded in 2019, the company has raised nearly $227 million, per Crunchbase.

8. Alkira, $100M, cloud infrastructure: San Jose, California-based Alkira, which allows companies to manage hybrid cloud assets, closed a $100 million Series C led by Tiger Global Management. Founded in 2018, Alkira has raised $176 million, per the company.

9 (tied). Ajax Therapeutics, $95M, biotech: Cambridge, Massachusetts-based Ajax Therapeutics, which is developing a drug for the bone marrow cancer myelofibrosis, raised a $95 million Series C led by Goldman Sachs Alternatives. Founded in 2019, the company has raised $135 million, per Crunchbase.

9 (tied). ByHeart, $95M, nutrition: New York-based ByHeart, an infant formula brand, locked up a $95 million of financing from undisclosed investors. The company also announced two new production facilities in Oregon and Iowa — allowing ByHeart to triple its supply capacity. Founded in 2016, ByHeart has raised a total of $395 million from investors including D1 Capital Partners, Polaris Partners and others.

Michael Burke has discreetly left his position as CEO of LVMH’s Fashion Group several weeks ago, less than three months after starting on Feb.1, sources with first-hand knowledge of the matter have said.

Burke’s unexpected departure has prompted LVMH CEO Bernard Arnault to call back his predecessor Sidney Toledano, delighting the former Dior boss. Toledano does not like the word retirement. The LVMH veteran, who turns 73 in July, has never made a secret of his desire to remain in charge in some capacity or another at the group for as long as Arnault would let him.

The management reshuffle highlights how difficult is LVMH’s changing of the guard. The men Arnault trusts the most have reached retirement age and many of his new lieutenants have not yet passed the test of time.

Arnault did not expect Burke, 67, to depart so abruptly. His stalwart associate left for personal reasons, several people close to the matter said on condition of anonymity. The Franco-American led many of the group’s businesses, including its main profit maker Louis Vuitton, until last year.

Burke’s nomination, which Miss Tweed was the first to report in April last year, took a long time to come – a sign he was not certain to take the job. And now, Burke is going back to real estate deals, which he first did when he began working with Arnault in the United States in the 1980s, before the two friends started building LVMH together. He is currently working on the group’s acquisition of some buildings in the United States and elsewhere, several industry sources said. Burke did not reply to requests for comment. A spokesman for LMVH denied the management reshuffle at the Fashion Group.

Arnault rewards loyalty. Toledano has been at LVMH for 30 years. His re-appointment was a quick short-term measure to prevent the Fashion Group from being headless for too long, the sources said.

However, Toledano is not alone at the helm of the Fashion Group. He is seconded by Pierre-Emmanuel Angeloglou, who was appointed managing director on March 11. At the time, LVMH said he would take over the “direct responsibility of a portfolio of brands within the Fashion Group division which include Fendi, Kenzo Mode, Marc Jacobs, Pucci, Stella McCartney, Patou and Off-White.” It’s not clear whether Angeloglou, who spent 23 years at L’Oréal and four years at Louis Vuitton, has the right profile to become CEO of the Fashion Group but eventually, Toledano will have to be replaced.

The fact that Arnault did not think of a potential replacement for Burke highlights how complicated it is for him to give the keys of the house of the Fashion Group to the new generation.

Burke’s exit comes just after the departure of another pillar of the group’s top command — Toni Belloni. In March, the Italian resigned as group managing director, a position he held for 23 years. Belloni also relinquished his post as chairman of the executive committee but stays within the group as president of LVMH Italy. He was replaced by Stéphane Bianchi, who previously looked after the group’s watches and jewelry division, a job occupied now by Frédéric Arnault. Bianchi has not been with LVMH for very long. He led Yves Rocher for many years and groomed Bris Rocher, the grandson of the company’s founder before joining the luxury group in 2018. Bianchi is said to be an authoritative figure that many in the group fear. He has never accepted to speak with Miss Tweed.

DELPHINE ARNAULT

At the Fashion Group, Toledano will be seconded by the eldest of Arnault’s five children, Delphine. She became CEO of Dior in February last year after being Executive Vice President for a decade at Louis Vuitton in charge of products.

The 49-year-old is the only Arnault child sitting beside the father on LVMH’s executive committee. She will help Toledano choose new creative directors, something she has already done successfully, having recruited designers such as Jonathan Anderson for Loewe and Nicolas Ghesquière for Louis Vuitton more than a decade ago.

It’s not clear whether Delphine Arnault will be given an official title at the Fashion Group on top of her responsibilities at Dior. “Nothing has been announced yet,” several sources close to the group said when asked about her role and the return of Toledano as CEO. As of Friday, Toledano had not yet replaced Burke on the executive committee, according to LVMH’s official website.

For the moment, Arnault does not wish to communicate about the move, several people with first-hand knowledge of the matter said. “It looks disorderly – just a few months after he started,” one of the sources said.

LVMH has never clearly spelled out the responsibilities of the person in charge of the Fashion Group. These include the appointment of CEOs, designers and key positions at the 13 brands that fall under its umbrella: Celine, Fendi, Loro Piana, Loewe, Givenchy and Kenzo, among others. The CEO also validates each brand’s merchandising and marketing plan and oversees budgets for new boutiques as well as their location. “It’s an HR and strategic advisory job,” one source close to the group explained.

TO-DO LIST

The management upheaval comes as important strategic decisions need to be taken at several of the Fashion Group’s brands. High up on Toledano’s to-do list is the need to appoint a new creative director at Fendi. The brand’s sales have been underperforming its peers for many years and were in decline in 2023.

Some fashion experts believe Pierpaolo Piccioli, who left Valentino in March, would be great to replace Kim Jones as creative director of Fendi. Piccioli would help build a strong Roman identity, tapping into his vast knowledge of the city’s art and history, and celebrate in style Fendi’s 100th anniversary next year.

But he comes with some drawbacks. Piccioli is great with haute couture and evening wear, but not so strong in daytime ready-to-wear. Also, his latest bag collections for Valentino were not a huge success. That could be a concern when considering him for Fendi, fashion head-hunters say. But these are not insurmountable obstacles.

Another brand that needs a new designer is Givenchy. It’s been actively looking for a replacement since its creative director Matthew Williams left on Jan. 1st. Some industry sources say John Galliano, who designed two beautiful collections for Givenchy in 1996, is one of the many names in the hat. But his candidacy is a tricky one as the man has baggage.

Galliano is known as one of the most difficult designers for CEOs to handle due to his personality and character. He wants to control everything, which is not something LVMH would be comfortable with. But in terms of creativity and building a brand’s desirability, he’s one of the best in the industry. Galliano is now doing wonders at Maison Margiela, part of Renzo Rosso’s OTB group. His March show inspired by the underbelly of Paris was the most applauded collection during Fashion Week. At the Met Gala in New York earlier this month, many ladies — including red carpet superstars such as actress Zendaya — paraded in his flamboyant dresses. Galliano has a natural talent for showmanship. His outfits are theatrical and designed to impress.

He was hugely successful at LVMH’s Dior for many years until 2011, when he was sacked after being caught on camera making anti-Semitic rants in a Paris bar. It’s far from certain that Toledano, who was the person who kicked him out, feels comfortable taking him back, industry sources say. But Galliano would surely give the brand a convincing creative impetus.

There is also Celine with designer Hedi Slimane is on his way out, as Miss Tweed was first to reveal last month. Sales growth there has slowed down markedly in the past year, industry sources say. Celine’s sales are now estimated at €2.1 billion. The brand has inundated the market with its Triomphe leather bags with the double C golden lock that looks a lot like that of Chanel. Many customers have grown tired of it, industry experts say. Now Celine needs to produce something new.

The timing of Slimane’s exit has not yet been determined. It depends on how easily a replacement is found. Managing that transition is not going to be easy for Toledano and Delphine Arnault.

KENZO

Kenzo is also on the list of problems to solve. The brand founded by Kenzo Takada in 1970 has been struggling to reinvent itself. Few designers have been able to make it relevant since the departure of designers Carol Lim and Humberto Leon in 2019. The brand’s creative director today is Japan’s Nigo, who speaks neither French nor English. He has been producing mainly T-shirts and sweatshirts – what he knows best - but his designs have not seduced many clients. The demand for €150 T-shirts is not great in the current depressed environment. People want value for their money and are less willing to overpay for fashion.

Kenzo’s sales have not been growing for many years and are now estimated to be around €250 million. Nigo’s style has little in common with the relaxed chic tailoring and the leopard, zebra and other animal prints Kenzo was once known for. The brand today does not ooze the refinement it once had. Hence, consumers are unwilling to pay high prices for its wares.

Some fashion critics argue Nigo is not well coached by Kenzo’s CEO Sylvain Blanc. He really could do better in terms of design, they say. The Japanese designer is close friends with Pharrell Williams, the popstar singer who is the menswear creative director at Louis Vuitton. “While Pharell is at Vuitton, I don’t think they will get rid of Nigo as Pharrell keeps wearing Nigo’s clothes.” However, LVMH may eventually decide to part ways with Nigo if the group finds a suitable replacement.

Another of the Fashion Group’s problem children is Stella McCartney. The environmentally friendly brand founded by the daughter of former Beatles star Sir Paul McCartney continues to lose vast sums of money. Its costly boutiques generate too little revenue, some industry sources say. Arnault invested in the brand to strengthen LVMH’s “green” aura and benefit from McCartney’s sustainable fashion expertise. However, he probably never expected that business would cost the group so much money.

And then there’s Off-White, whose intellectual property rights belong to LVMH but whose license for its manufacture and distribution belongs to Farfetch’s New Guards Group (NGG). NGG has been on the market for many months and has yet to find a buyer. Patou, led by the talented designer Guillaume Henry, is also under the Fashion Group umbrella. It has been developing nicely, but it's still tiny compared to its sister brands. As a result, it does not benefit from the same management attention and budgets as other bigger brands.

MARC JACOBS

LVMH has been quietly trying to trim the Fashion Group’s portfolio in recent months, putting the Marc Jacobs brand on the market to test investors’ appetite. The French group did not receive offers that matched its expectations, as Miss Tweed reported last week. Investors are not crazy. They know that the brand’s peak is behind it and has hardly any boutiques left. It sells mainly through wholesale channels, outlets and online. The brand’s 61-year-old founder Marc Jacobs is tied to the brand only until 2027. Without him, no one knows what will become of the New York-based label.

Luckily for Angeloglou and Toledano, there are a few strong success stories at the Fashion Group. The “quiet luxury” ready-to-wear brand Loro Piana has been exploding, thanks to its sober and elegant designs and white-soled suede loafers that are a huge hit, even among young consumers. There is also Loewe, whose original and creative handbags are high up on fashionistas’ wish lists. The brand’s fashion authority and aura keep growing year after year under the creative leadership of Jonathan Anderson. Loewe and Loro Piana enjoyed growth of more than 40 percent last year in a tough global market, several sources close to the group said. Loewe’s revenues this year could reach as much as €1.5 billion, they forecast.

Pucci is another brand that is thriving even if it is still small compared to other labels in the Fashion Group. The popularity of these three brands will help make Toledano’s job easier. But the list of problems he needs to solve remains impressively long.

Mark Zuckerberg has trained his ‘Eye of Sauron’ on Meta’s AI strategy, which comes with risks as rivals unveil free products

Mark Zuckerberg has an unusual plan for winning the artificial-intelligence race: giving away his company’s technology free.

Like many of its rivals, Zuckerberg’s Meta Platforms META -0.28%decrease; red down pointing triangle is spending tens of billions of dollars on high-end computer chips, top-flight computer scientists and gigawatts of electricity to build the most powerful AI tools it can. Unlike any of those rivals, some of whom made AI announcements last week, Zuckerberg is giving away the fruit of that investment—Meta’s most advanced chatbots and the technology that drives them.

Behind the contrarian strategy is a bet that making Silicon Valley’s hottest new technology free will drive down competitors’ prices and spread Meta’s version of AI more broadly, giving Zuckerberg more control over the way people interact with machines in the future.

“What you don’t want in a situation like this is for other people to own the unique technology you don’t have access to,” said Jerome Pesenti, Meta’s former vice president of AI and now the founder of Sizzle AI.

Meta felt the cost of not controlling its own destiny when Apple decided in 2021 to cut off its ability to gather data on their users without asking for permission—something Meta had relied on to target ads. The company said it took a hit of more than $10 billion in revenue in 2022 as a direct result. The company’s stock swooned 26%.

For the AI-giveaway strategy to work, Meta must get its billions of users to look to those free AI services in the same way they flocked to Facebook, Instagram and WhatsApp. It wagers that advertising can come later, as it did in the past. Meta’s ability to turn eyeballs into ad dollars is well established, although early user responses to its AI services have been mixed.

The effort to draw users to a free AI product grew more competitive last week after OpenAI launched GPT-4o, a conversational-assistant version of its blockbuster AI model that it intends to give away free. Google launched new versions of free AI models it calls Gemma. But neither is releasing the underlying code of their most powerful tools, to which they sell access to make money. OpenAI has raised at least $13 billion, largely from Microsoft. Google said it is boosting capital expenditures by 50% or more this year.

Meta said last quarter that AI could lead it to spend an additional $10 billion in 2024. So far there isn’t an obvious way to recoup its spending in the near term. Meta makes its money selling ads on its social-media services. Meta doesn’t sell cloud access to its servers—one of the main ways its AI competitors plan to monetize the tools called large language models, or LLMs. Generative AI tools are able to help write code and provide humanlike answers to queries, among other things.

Its shares plunged 10% last month after Meta detailed its new spending on AI. But Meta is seeing early support from some investors and analysts for its argument that it will benefit eventually by releasing its generative AI as “open source.” Open-source software is publicly available, meaning Meta is releasing the source code and doesn’t intend to charge most businesses to use it.

Meta last month released its most recent generative AI tool—dubbed Llama 3—free for any company to use and repurpose so long as they have fewer than 700 million users. And it integrated chatbots based on Llama 3 into Instagram, WhatsApp, Facebook, Messenger and on the web.

“All of our properties are free, we help people connect with each other, and we want to help connect people with AIs that can help them get things done,” Ahmad Al-Dahle, Meta’s vice president of generative AI, told The Wall Street Journal. “That’s always been our playbook. That’s what the company ethos is about.”

In March, Zuckerberg decided to double down on offering free AI products to users, giving the teams working on the company’s chatbot, Meta AI, just one month to turn his vision into reality, according to people familiar with the matter.

Zuckerberg contributed directly to the effort to integrate Meta AI into the search functions of Facebook, Instagram and WhatsApp, making a number of key design decisions. It was a familiar pattern for the chief executive, who has been known to take a hands-on approach on certain projects. When he does, some employees refer to his attention as “the Eye of Sauron,” a reference to an all-seeing eye in the J.R.R. Tolkien classic “The Lord of the Rings.”

If OpenAI is building ChatGPT for the early adopters of the world, Meta is building its Meta AI for the average Joe.

“We definitely think we have the scale and reach to allow people the ability to access these AIs, and this will be their first interaction with what an AI can do,” Meta’s Al-Dahle said.

Some competitors and government officials are concerned that by making some of the most advanced AI tools freely available, Meta could help adversaries and hackers. At a summit last fall in the U.K., some officials raised the idea of putting limits on open-source AI models.

Meta says it has been engaged in discussions with officials in the U.S. and elsewhere on AI safety, as well as on national security. The company includes limits on how its Llama models can be used with its open-source license and has added technical guardrails that limit how the model will respond to certain queries.

The company launched Meta AI last fall, but the chatbot was tucked away within its apps. To access it, users had to start a new conversation with the chatbot. By putting Meta AI into the apps’ search functions, Meta is creating more opportunities for its users to interact with its chatbot. And as with past launches of new features, some users hated it.

“Dear @Meta no one asked for the Ask Meta AI feature on FB,” one user posted on X, formerly known as Twitter. “I genuinely just want to search Facebook. I don’t need your help.”

Internally, this user vitriol was expected, the people said, but the bet is that Meta’s search features could stand to be improved and that eventually users will get over it, especially as Meta AI gets better.

Meta has to convince users to see it as a destination for search. In the past, Meta’s search functions have been used to search for specific content inside those apps rather than broad, text-based results that users would typically type into a search engine.

“Building a really amazing product experience, it is always really hard to do, and it requires lots of iteration, creativity and a lot of learning from users and feedback on how to make it better and better,” Al-Dahle said. “But that’s what Meta is about.”

One advantage of releasing its Llama models free is that Meta can watch a whole community of open-source developers refining the tool—and then integrate those improvements. Another is that it is a recruitment tool for top AI researchers, many of whom come from academia and prize the ability to keep publishing their work.

Within days of the launch of Llama 3 in April, the open-source community improved the model so that it could take in 20 times as many tokens at a time than when it launched. A token is a unit of text, like a word or a punctuation mark.

If Meta succeeds, it would be able to define its own destiny in a way it was never able to do in the mobile-phone revolution. On mobile, Meta is beholden to two companies—Apple and Alphabet’s Google—that control the mobile-phone operating systems.

“It seems to be driven by a desire to commoditize the market,” said Bryan Offutt, a partner at Index Ventures, who invests in enterprise tech. “They don’t want a world where the entire tech community is building the foundations of the next 20 years of applications on OpenAI and Microsoft.”

Curtis Priem is donating more than $75 million to help Rensselaer Polytechnic Institute become a hub for a cutting-edge technology

TROY, N.Y.—The co-founder of the AI chip maker Nvidia said he chose to study at Rensselaer Polytechnic Institute in the late 1970s because it had a state-of-the-art mainframe computer. Now, he is betting that a quantum computer at his alma mater could reinvigorate the region.

Curtis Priem, 64 years old, is donating more than $75 million so RPI can have a quantum-computing system made by International Business Machines IBM 0.04%increase; green up pointing triangle—making it the first such device on a university campus anywhere in the world.

Priem spent a decade as Nvidia’s chief technology officer. While he cashed out well before the company’s valuation topped $2 trillion, he amassed a large enough fortune to fund multimillion-dollar gifts to educational and other causes.

The goal of his latest bet is to establish New York’s Hudson Valley as an epicenter of quantum-computing research in the country, he said. His vision is to create a critical mass of talent that will lead to spinoff businesses. While school and regional officials share his optimism, the task might be tricky in an upstate New York city whose former industrial primacy faded with the detachable shirt collar.

“We’ve renamed Hudson Valley as Quantum Valley,” Priem said in an interview. “It’s up to New York whether they want to become Silicon State—not just a valley.”

Priem was working at Sun Microsystems in 1993 when he met two friends, Jensen Huang and Chris Malachowsky, at a Denny’s restaurant in Silicon Valley. They came up with the idea for a graphics processor that would become Nvidia’s core product. Priem is credited with developing the chip’s architecture.

He left Nvidia in 2003 and sold most of his shares over the next few years, with the money going to a family foundation. Priem now lives on a secluded ranch in California where he said his cattle sometimes break through the fence and drink from the swimming pool. The current gift to RPI will effectively use up his foundation’s resources, he said.

Today’s classical computers use binary digits, or bits, which can either be zero or one. Quantum computers use quantum bits, or qubits, which represent and store information in a quantum state that is a complex mix of zero and one.

While quantum computers today are far from ready for large-scale commercial operation, they could be useful in tackling questions in natural materials and chemistry and even breaking the public-key cryptography used to secure the internet.

RPI has now installed an IBM Quantum System One device with 127 qubits. The school will spend $15 million a year to rent the computer, covered by Priem, and it will be upgraded to a more advanced system in several years.

Qubits need to be extremely cold to stay in a quantum state, so the physical machine includes a cryostat that keeps them about 0.015 degree Kelvin—about 1/200th of the temperature of outer space. The shiny cylinder is surrounded by museum-quality glass and sits in the transept of a former chapel, watched over by a quartet of stained-glass saints.

“Everybody will have access to it,” said RPI President Martin Schmidt. “We’ll start integrating how one uses a quantum computer into the curriculum.”

While IBM offers access to similar quantum computers through the cloud, having a system on campus will let students and researchers test their code without having to wait hours—or even days—to see the results. A fast turnaround is a precursor to innovating, Schmidt said.

Quantum computers are still relatively rare because the technology is young. IBM has set up around 70 quantum-computing systems around the world in the past eight years, according to a spokeswoman. Schmidt said he hoped the system would attract students and faculty.

Priem said Silicon Valley has become “social app valley” dominated by such companies as Meta Platforms and Google and said he saw more innovative work taking place in New York. He pointed to the Albany NanoTech Complex, where semiconductor companies develop new chip technologies.

State officials last year announced funding to buy chip-making equipment from ASML Holding, a Dutch company whose machines can cost hundreds of millions of dollars and are essential to making the most advanced chips possible.

New York is home to a number of large chip factories, including ones operated by GlobalFoundries, ON Semiconductor and Wolfspeed. Micron Technology is planning to invest up to $100 billion in a large factory near Syracuse, and was recently awarded $6.1 billion in funding from the 2022 Chips Act. That legislation included $11 billion for a National Semiconductor Technology Center to foster domestic chip research and development.

U.S. Rep. Paul Tonko, who represents the Capital Region, said he hoped the presence of the quantum computer would add “another layering of justification” to the region’s push to become the NSTC headquarters. The Commerce Department designated areas in Colorado and Illinois as tech hubs for quantum, and boosters in both places are vying for federal funding for quantum research.

Situated on the east bank of the Hudson River about 160 miles north of New York City, Troy was a major manufacturing center in the 19th century. Henry Burden automated the process for making horseshoes, powered by water from a creek that plunges downhill into the river.

P. Thomas Carroll, a technology historian, called it “the Silicon Valley of the 19th century,” where industrial innovations, such as some of the nation’s first steel production, brought wealth. Victorian homes and institutions from this era give the city a unique charm, and downtown streets have recently served as the backdrop to HBO’s “The Gilded Age” series.

The city’s population has declined from its peak in the early 20th century, and the region’s largest employers are hospitals and state government. Scott Lincicome, vice president of general economics at the Cato Institute, a libertarian think tank, said it is rare that a single investment would transform a region. Clustering effects depend upon other factors including natural resources and the existing labor force.

“If this quantum computer turns out to be amazing, maybe you have that gravitational pull. But the likelihood of spillovers is less,” he said, referring to new businesses that officials are hoping for.

RPI students are just beginning to play with the quantum computer. On a recent Wednesday, a dozen students in the Quantum Computing Club gathered in a windowless classroom for a demonstration on how to run programs on the machine.

“A really important skill is learning how to create little toy problems to actually test bigger concepts,” explained Michael Papadopoulos, a co-founder of the club. He hopes to get a Ph.D., studying the limits of quantum computing. Having the machine on campus makes staying at RPI a real possibility.

Queenie Sun, 20, came to RPI from Worcester, Mass. She said she has caught the quantum bug and wants to work on reducing errors with the machines.

“I’ll go wherever quantum goes, and if that ends up being this area, totally,” Sun said.