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The Middle Eastern country is creating a gigantic fund to invest in A.I. technology, potentially becoming the largest player in the hot market.

The government of Saudi Arabia plans to create a fund of about $40 billion to invest in artificial intelligence, according to three people briefed on the plans — the latest sign of the gold rush toward a technology that has already begun reshaping how people live and work.

In recent weeks, representatives of Saudi Arabia’s Public Investment Fund have discussed a potential partnership with Andreessen Horowitz, one of Silicon Valley’s top venture capital firms, and other financiers, said the people, who were not authorized to speak publicly. They cautioned that the plans could still change.

The planned tech fund would make Saudi Arabia the world’s largest investor in artificial intelligence. It would also showcase the oil-rich nation’s global business ambitions as well as its efforts to diversify its economy and establish itself as a more influential player in geopolitics. The Middle Eastern nation is pursuing those goals through its sovereign wealth fund, which has assets of more than $900 billion.

Officials from the Saudi fund have discussed the role Andreessen Horowitz — already an active investor in A.I. and whose co-founder Ben Horowitz is friends with the fund’s governor — could play and how such a fund would work, the people said. The $40 billion target would dwarf the typical amounts raised by U.S. venture capital firms and would be eclipsed only by SoftBank, the Japanese conglomerate that has long been the world’s largest investor in startups.

The Saudi tech fund, which is being put together with the help of Wall Street banks, will be the latest potential entrant into a field already awash in cash. The global frenzy around artificial intelligence has pushed up the valuations of private and public companies as bullish investors race to find or build the next Nvidia or OpenAI. The start-up Anthropic, for instance, raised more than $7 billion in one year alone — a flood of money virtually unheard-of in the venture capital world.

The cost of funding A.I. projects is steep. Sam Altman, the chief executive of OpenAI, has reportedly sought a huge sum from the United Arab Emirates government to boost manufacturing of chips needed to power A.I. technology.

Saudi representatives have mentioned to potential partners that the country is looking to back an array of tech startups tied to artificial intelligence, including chip makers and the expensive, expansive data centers that are increasingly necessary to power the next generation of computing, according to four people with knowledge of those efforts, who were not authorized to speak publicly. It has even considered starting its own A.I. companies.

Two of the people said that Saudi’s new investment push is likely to take off in the second half of 2024. A $40 billion fund could make both the Saudi Arabian government and Andreessen Horowitz key players in races to corner various businesses related to the field.

Mr. Horowitz and Yasir al-Rumayyan, the governor of the Public Investment Fund, have discussed the possibility of the Silicon Valley firm setting up an office in the country’s capital, Riyadh, one person with knowledge of the conversations said.

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Other venture capitalists may participate in the kingdom’s tech fund, two people briefed on the plans said.

Partly because of its enormous financial clout and growing ambitions, those in international business circles closely monitor moves made by the Public Investment Fund, which was created in 1971.

In 2018, just as Saudi Arabia was becoming a major destination for investment firms and entrepreneurs seeking financial backing, the country’s agents killed the dissident Saudi journalist Jamal Khashoggi in the kingdom’s Istanbul consulate, which for a spell seemed to damage the nation’s reputation among international financiers.

In 2022, the Saudi government invested billions into a firm run by former President Donald J. Trump’s son-in-law Jared Kushner, among others, which was seen by many as a political move. One of its recent deals to merge its LIV Golf upstart with the PGA Tour raised the ire of golfers, but the pact is also controversial in part because of Saudi Arabia’s human rights record.

Saudi Arabia, which poured $3.5 billion into Uber in 2016, has largely struggled with technology investing. It handed $45 billion to SoftBank for the Japanese firm’s $100 billion Vision fund, which was channeled into dozens of startups including the now-bankrupt real estate firm WeWork and other failed startups, such as the robotic pizza-making company Zume.

Many in Silicon Valley and on Wall Street have welcomed the nation back into the fold. During this year’s Super Bowl, Mr. Horowitz hosted Mr. al-Rumayyan, according to two people briefed on their activities.

The two men also spent time together before and after the game, the people said, with Mr. Horowitz giving Mr. al-Rumayyan tours of Las Vegas, his adopted city, and introducing the investor to his friends in music and sports.

Airbus ends talks with Atos on deal for big data and security unit

Decision adds pressure on indebted French IT services company

Airbus has walked away from talks with Atos over a potential deal to buy its prized data and security business, imperilling efforts by the French IT services company to avoid going into debt restructuring.

The end of the discussions on a deal potentially worth up to €1.8bn sent Atos shares falling by as much as 25 per cent on Tuesday morning before trading was briefly suspended.

Atos’s shares have lost over 90 per cent of their value in the past three years, taking the company’s market value to €188mn.

Its big data and security division houses the company’s cyber security and supercomputing capabilities. As well as managing sensitive contracts with the French military, it is also contracted to run cyber security for the Paris Olympics this summer.

Airbus said on Tuesday that “after careful consideration of all aspects of a potential acquisition”, it had decided to end discussions. Atos was “analysing the resulting situation and actively evaluating strategic alternatives”, it said in a statement, as it delayed reporting its annual results for the second time in recent weeks.

This is the second time talks on a prospective deal between Atos and Airbus have fallen apart in just over a year. Airbus decided it would have been too complex and risky to carve out and then integrate the unit, according to people familiar with the situation, as the Atos business is made up of numerous entities across different countries. The French company’s wider state of financial distress also played a role in the decision, the people said. 

“Airbus will never come back — their image is dead with Atos,” said one person with knowledge of the situation.

Airbus and Atos confirmed in January that talks over the unit were under way as Atos chair Jean-Pierre Mustier sought options to deal with the company’s big debt burden, while trying to assuage political concerns that Atos divisions with sensitive national security functions would not fall into foreign hands.

Mustier’s options have now narrowed considerably, after a separate deal with Czech billionaire Daniel Křetínský to buy Atos’s lossmaking legacy business fell apart in February.

Atos faces repayments on €3.65bn in debt before the end of 2025 — which it has been trying to push out to 2028 in talks with its bank lenders — and is rapidly burning through cash. The company reported negative free cash flow of €1bn for last year — over five times higher than in 2022 — while net debt totalled €2.23bn.

Credit rating agencies have downgraded the group’s debt to junk status and warned of its poor liquidity amid high cash burn.

The company will now try to increase the pace of negotiations with its creditors, overseen by a recently appointed mediator in what is still a voluntary process, according to several people with knowledge of the process. But if this process fails, Atos may need to go into a court-supervised bankruptcy proceeding.

Křetínský would consider coming back to the table with an offer for more of the company, according to people with knowledge of his thinking. They estimate Atos will need a capital injection of at least €600mn-700mn in new money, but his side is waiting to be courted, the people said.

Atos’s lead shareholder David Layani, the founder of digital consultancy Onepoint who has built an 11 per cent position in the company and joined the board in recent months, has also expressed ambitions to take control of Atos and anchor a capital raise, according to people familiar with his thinking.

“Atos will continue with the mediator. They don’t have immediate liquidity issues. They will open negotiations with creditors and shareholders . . . as well as Layani and Křetínský,” said the person with knowledge of the situation.

Investor appetite might be whetted for bolder action on the group’s bloated portfolio

Spin offs work particularly well when the original corporate hodge podge obscures the value of one (or more) true gems. That isn’t the case with Unilever’s proposed demerger of its ice-cream business.

Instead of an uplift in valuation, the scoop-out may simply increase investor appetite for bolder action on the group’s bloated portfolio.

Unilever’s plan is best understood as the unwinding of a corporate footprint which made little sense in the first place. Ice-cream — which accounted for 13 per cent of Unilever’s total sales last year — has few synergies with the rest of the group’s home, food and personal care business. It is more capital intensive and volatile, with lower operating margins of 10.8 per cent in 2023, compared with 16.7 per cent for Unilever as a whole.

Yet scooping out the division will not — of itself — unlock value for Unilever’s shareholders. Imagine that the new ice-cream company traded in line with the valuation at which Nestlé sold Häagen-Dazs in 2019, and lop the resulting €17bn (£14.5bn) off Unilever’s current £118bn of enterprise value. That would leave the rump trading at 12.8 times forward ebit. That’s cheaper, but not miles away, from its current multiple of 13.4 times. 

Such back-of-the envelope maths implies that financial engineering alone won’t cut the mustard. Unilever will need to improve its core business — comprising condiments such as Hellmann’s and Knorr, and cleaning products Cif and Domestos — if it is to narrow its valuation gap with peers.

New boss Hein Schumacher basically plans to run a tighter ship. He has nudged up growth targets, from the current 3-5 per cent to “mid single digits”, and announced £800mn of cost cuts. A smidgen comes from shedding lower growth ice-cream. The rest, one hopes, will come from new investment. Brand and marketing spend is on the up: from 13 per cent of sales in 2022 to 14.3 per cent last year. The cost cuts will create space for more. 

The snag is that investors have been here before. Actually making the announced cost cuts and reinvesting the money profitably requires better execution than Unilever has managed in the past. Schumacher reckons the demerger will help by reducing complexity, improving focus and speeding up decision making.

If that really is the case, shareholders may soon be clamouring for Unilever’s management to hive off its food business and give the potentially higher-growth home and personal care segment their undivided attention.

The tie-in with Interstellar Labs comes as brands and consumers are on a growing quest for more sustainable perfumes.

PARIS – Nutrition, health and beauty supplier DSM-Firmenich has partnered with Interstellar Lab, a biotech startup that develops biofarming solutions, to conceive exclusive natural ingredients for sustainable scents.

“Together, the two companies aim to spearhead advancements in botanical ingredient production, marking a significant leap forward in DSM-Firmenich’s quest to expand and explore the boundaries of natural innovation in agrotech, and to unlock new dimensions in olfactive richness and sustainable innovation,” DSM-Firmenich said in a statement Tuesday.

“This collaboration aims to pioneer an ingredient research program focusing on the impact of environmental conditions on plant yield and phenotype evaluation,” the company continued.

Fragrance suppliers have been expanding their biotech know-how as their clients and consumers are on a rising quest for more natural and sustainably made perfumes.

The compound annual growth rate of the natural fragrance market globally is expected to be 7.5 percent between 2022 and 2030, when it should reach $48.3 billion, according to Market Research Future.

Interstellar Lab develops and operates advanced biofarming platforms in order to speed up plant growth and trigger specific molecules in plants. It has artificial intelligence-controlled biofarms to optimize energy and resources consumption, capture carbon dioxide and improve ingredients’ lifecycle assessments with a data-driven approach, according to DSM-Firmenich.

“Our biofarming platform represents a revolution in the perfumery landscape, understanding and addressing the current industry needs to provide renewable ingredients, responsibly sourced and produced, that inspire creators and respect the environment,” said Barbara Belvisi, chief executive officer and founder of Interstellar Lab.

“At DSM-Firmenich, we valorize natural ingredients and continuously push the boundaries of innovation and sustainability for perfumery,” said Michal Benmayor, vice president perfumery innovation and sustainability at DSM-Firmenich. “Our partnership with Interstellar Lab represents another avenue of exploration in agrotech, expanding our ability to harness the synergy of nature and science, breaking the conventions to uncover unparalleled excellence in both olfactive quality and sustainability for our creations.”

Together, Interstellar Lab and DSM-Firmenich will also try to reduce the climate impact of farming and to preserve biodiversity in critical ecosystems.

“Our commitment to innovation drives us to continually expand the horizons of natural ingredients,” said Xavier Brochet, global head of natural innovation at DSM-Firmenich.

“By exploring cutting-edge agrotech advancements, we’re reshaping the landscape of species selection, anticipating challenges of production and sourcing, and prioritizing the highest quality of ingredients,” he continued. “This dedication ensures we deliver the purest and most authentic natural extracts for perfumery.”

DSM-Firmenich, a Swiss-Dutch company listed on Euronext Amsterdam, is increasingly focusing fully on its core nutrition, health and beauty business. In mid-February, the group said it will spin off its animal nutrition and health activity with that aim in mind.

Firmenich and DSM merged in May 2023 to become the world’s largest fragrance, beauty, wellbeing and nutrition supplier.

In 2023, DSM-Firmenich’s net profit rose 26 percent to 2.15 billion euros on sales that grew 27 percent to 10.63 billion euros.