- Ericsson (ERCB TH) +2.4%
- Nel (D7G TH) +1.9%
- Rio Tinto (RIO1 TH) +1.8%
- Iron Ore Drops for Second Day With Demand Outlook Worsening
- Imperial Brands (ITB TH) +1.6%
- OMV (OMV TH) +1.6%
- Yara (IU2 TH) +1.4%
- Novo Nordisk (NOVC TH) +1%
- Nibe (NJB TH) +0.8%
- BP (BPE5 TH) +0.7%
- Encavis (ECV TH) +0.7%
- Orsted (D2G TH) -0.9%
- Ubisoft (UEN TH) -0.9%
- Street Insider: UBS Downgrades Ubisoft Entertainment SA (UBI:FP) (UBSFY) to Sell
- Enagas (EG4 TH) -0.9%
- Telefonica Deutschland (O2D TH) -2.1%
- Telefonica Deutschland Cut to Hold at Deutsche Bank
DAX:
- RWE (RWE TH) +0.7%
MDAX:
- Encavis (ECV TH) +1.4%
- Puma (PUM TH) +1.1%
- United Internet (UTDI TH) +1%
- Telefonica Deutschland (O2D TH) -1.9%
- Telefonica Deutschland Cut to Hold at Deutsche Bank
SDAX:
- 1&1 (DRI TH) +4.3%
- 1&1 Raised to Buy at Deutsche Bank; PT 17 euros
- SGL (SGL TH) +1.8%
- SGL Carbon Rated Buy at Jefferies on Better Mix and Outlook
- SAF-Holland SE (SFQ TH) -1%
Weakness in Chinese assets marred an otherwise positive day for markets as US equity futures and stocks across much of Asia pushed higher on encouraging signs from debt-ceiling talks in Washington. Hong Kong shares slid Friday in a decline led by internet giants. The Hang Seng Tech Index slumped as much as 2.4% as Alibaba Group Holding Ltd dropped in the wake of disappointing sales that add to signs of a faltering post-Covid rebound in China. Data this week showed activity in the world’s second-biggest economy is losing momentum, with private firms barely increasing investment and households cutting back on goods. The offshore yuan depreciated to levels not seen since late last year. An official fixing above 7 per dollar reflected a willingness among officials to keep the currency weak, potentially to spur domestic activity. shares in Australia, South Korea and Japan advanced. The gain for the Topix placed the index on course for its best week since November and a fresh 33-year high. Contracts for the S&P 500 climbed after the index ended Thursday at the highest level in nine months. Nasdaq 100 futures also rose after the tech-heavy gauge added nearly 2%. Market pricing places around a 40% chance the Fed will raise rates at its June meeting followed mixed commentary from central bank officials this week. Fed Bank of Dallas President Lorie Logan said on Thursday the case for a pause next month is not clear, contrasting with dovish remarks from central bank Governor Philip Jefferson. The yen rose slightly after Japan’s inflation re-accelerated in April following months of cooling. That may keep alive speculation that the central bank will have to revise its price outlook after waning expectations for policy normalization in the previous session. The currency on Thursday touched its weakest level this year against the dollar. Oil rallied, tracking some of the risk-on sentiment, and headed for its first weekly advance in more than a month. Gold edged higher. US After Hours FTCH +16.8%, PLXS +0.7% higher on earnings/guidance; DXC -5.7%, FLO -4.9%, AMAT -1.5% lower on earnings.
Nikkei +0.83% Hang Seng -1.23% CSI -0.33% Shanghai -0.45% Shenzen +0.09%
Eur$ 1.0765 CNH 7.0599 CNY 7.0428 JPY 138.42 GBP 1.2400 CHF 0.9049 RUB 80.3903 TRY 19.8102 WTI$ 72.37 +0.67% Gold 1,964 +0.32% BTC 26,833 +0.40% ETH 1,800 +0.17%
S&P +0.07% Nasdaq +0.13% EuroStoxx +0.32% FTSE +0.25% Dax +0.31% SMI +0.64%
Macro :
- Strategist Forecasts for European Stock Indexes in 2023 (Table)
- Strategist Forecasts for Germany’s DAX in 2023 (Table)
Keep an eye on :
- BABA US : Alibaba Falls on Weak Chinese E-Commerce Sales
- ENT LN : Entain Nears Deal For Angstrom Sports for About $200m: Insider
- EOAN GY : EON Is Said to Weigh Sale of UK Business Energy Supplier Npower
- FTCH US : Farfetch Shares Soar 21% After Results Beat Expectations
- FCT IM : Fincantieri Unit in $526m Contract to Build Frigate for US Navy
- IDR SM : Indra Sistemas Confirms It Named José de Los Mozos as CEO
- EMG LN : Man Group’s Trailblazing CEO Aims to Keep Hedge Fund’s Momentum
- WPP LN : WPP-Backed Ad Agency No Longer Sees Twitter as ‘High Risk’: FT
>>> Up
* Asos Raised to Buy at Citi; PT 600 pence
* Aston Martin Raised to Outperform at Mediobanca SpA
* Boohoo Raised to Buy at Panmure Gordon; PT 70 pence
* Catena Media Raised to Buy at ABG; PT 31 kronor
* St James's Place Raised to Outperform at RBC; PT 1,400 pence
>>> Down
* Boliden Cut to Hold at Berenberg; PT 360 kronor
* Canada Goose Cut to Hold at CFRA; PT $23
* Duell Cut to Reduce at Inderes; PT 1.60 euros
* Sonova Cut to Hold at Bank Vontobel; PT 270 Swiss francs
* Telefonica Deutschland Cut to Hold at Deutsche Bank
>>> Initiation
* BlackRock Rated New Buy at Citi; PT $750
* Blackstone Rated New Buy at Citi; PT $98
* Blue Owl Capital Rated New Buy at Citi; PT $14
* Carlyle Group Rated New Buy at Citi; PT $40
* KKR & Co. Rated New Buy at Citi; PT $69
* Nike Rated New Outperform at CICC; PT $151.87
* SGL Rated New Buy at Jefferies; PT 10.50 euros
* TPG Rated New Buy at Citi; PT $32
* T. Rowe Rated New Sell at Citi; PT $98
>>> Call
* Asos Raised at Citi, Seeing Measures Ahead to Improve Position
* Boliden Downgraded by Berenberg on Subdued Base Metals Outlook
* KKR, Apollo and Blue Owl Rated New Buys, Top Picks at Citi
* M&S Raised to Buy at Peel Hunt as Won’t Remain Cheap for Long
* St James’s Place Upgraded at RBC as Shares Now Offer Value
BoF Insights | How to Tap Into the Enduring Appeal of Branded Luxury Hotels
As global travel continues its post-pandemic recovery, BoF Insights explains how hotels and resorts are helping luxury brands from Bulgari to Gucci stay close to their customers, even when they’re on the road.
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Boucheron’s luxury apartment at Place Vendôme in Paris for the jeweller’s VIP clients. (Boucheron)
If recent announcements from airlines are anything to go by, the global travel and tourism sector is set for a bumper 2023. That’s good news for the luxury brands whose brand marketers are zeroing in the $4.3 trillion lifestyle industry.
While most fashion companies’ brand extensions into the lifestyle industry generally pivot around connecting with customers at home — something that was particularly important during the pandemic — there are now renewed opportunities to be part of customers’ travel experiences at hotels and resorts.
The authors of BoF Insights’ latest report, The Lifestyle Era: Luxury’s Opportunity in Home and Hospitality, unpack how hotels are becoming a key part of many luxury brand playbooks.
Why are hotels set to play a greater role than they have previously for many luxury lifestyle extensions?
In tandem with the travel industry gaining momentum, sales generated through branded hotels this year are forecast to reach $600 billion globally, up from $494 billion in 2022, according to Euromonitor International.
But for many brands, revenue generation isn’t the prime motivator for their hotel ventures. Consumer research from BoF Insights underscores the boost to brand equity extensions can provide alongside cross-selling opportunities. For affluent shoppers surveyed by BoF Insights, a branded-hotel visit can have an enduring impact, often influencing future purchase decisions. Nearly 80 percent of respondents say that after staying at a hotel or residence associated with a brand, they are likely to purchase the brand’s core fashion or home products.
For some brands, there’s another benefit: providing an additional touchpoint for their top-tier clients beyond shop floors that aims to be highly personalised and memorable. At Boucheron’s private apartment at Place Vendôme in Paris, exclusive hospitality is provided to only a select few guests every year. The guests receive a white-glove experience that goes beyond what is experienced at the luxury jeweller’s shop floor, with concierge and butler services to organise parties and events at the exclusive location.
As Hélène Poutin-Duquesme, Boucheron’s chief executive, sees it: The apartment “is about arousing emotion and experiencing something that will live forever. … [It] is spectacular but not intimidating. You understand that you are in a private French apartment, not in any brand showroom — you are at home.”
What are some of the other ways luxury brands are pursuing hotel extensions?
While few brands have access to the real estate to offer ultra-exclusive, VIP extensions like Boucheron’s, there are other ways hotels can provide brands with an exclusive client touchpoint. And the vast majority of these brand extensions are built upon licensing agreements and joint ventures with hospitality or property partners.
In some cases, this enables brands to apply house codes and aesthetics when decorating suites and other interiors with hotel partners, placing branded homeware products in rooms to create an association with their furniture, linen and other textiles, or even room fragrances and visitors’ travel experiences. Gucci, for example, entered into an agreement with Fairmont Hotel and Resorts’ Savoy Hotel in London to provide guests visiting London with an exclusive experience of the city. This included designing a suite that showcases items from its furnishing and decorative homeware that underscores urban luxury with views of the River Thames and skyline, alongside concierge and other special services for guests.
Other brands go a step further, opening fully branded hotels under their own names. One brand that has been an early adopter of this approach is Bulgari. Having entered into a joint venture with Ritz-Carlton Hotel Company in the early 2000s, the luxury jeweller opened its first hotel in 2004 in Milan, followed by another near London’s Hyde Park in 2012. Today, it has eight hotels, with a string of openings planned over the next few years in Rome, Miami Beach and Los Angeles, as well as a resort in the Maldives.
Some brands are now evolving the physical experiences of hotels and spearheading entire residential developments, generally in exclusive mixed-used spaces with shops, restaurants and other opportunities to showcase a brand, such as spas. Last year, Dolce & Gabbana announced a real estate project with two residential developments in Miami and one in Marbella, Spain, through respective local partners and Sierra Blanca Estates, while also teaming up with Saudi property developer Dar Global to create a branded hotel in the Maldives. The announcement followed the creation in 2022 of a new beauty division and the launch of its “Casa” homeware collection.
What are the critical success factors for hotel extensions?
A common theme cutting across successful hotel ventures is quality — starting with the partnerships and agreements brands enter. Like with any tie-up in the industry, luxury players face reputational and other risks in entering into deals that place their brands front and centre. Well-chosen partners help ensure the hotel experiences associated with the brand are synonymous with the essence of the brand’s core offering.
Along with industry expertise, execution becomes more complex as the size of investment increases. Clear alignment around which areas of expertise are best kept in-house also enable brands to maintain control of a venture. For instance, the Ritz Carlton, Bulgari’s operating partner for its hotels and resorts, facilitates staff training while Bulgari oversees other operations, including sales, marketing and public relations.
Ultimately, successful hotel extensions capture the brand in a way that makes sense to customers. “It’s really about making sure you’re relevant to guests of that hotel, and then, how does that fashion brand translate into a hotel experience?” said Jenni Benzaquen, managing director of Design Hotels and senior vice president of EMEA brand portfolio at Marriott International, which is the parent of Ritz-Carlton. The overarching aim, she added, is for brands to “become part of the memory of that trip, so that when that guest goes home, you are top of mind in terms of a purchasing decision.”
Lululemon Makes Minority Investment in Samsara Eco
New nylon? Lululemon looks to Samsara Eco for textile rebirth.
For the first time, Lululemon is investing in textile-to-textile recycling.
Announced Thursday, the athleticwear brand made a minority investment in Australian start-up Samsara Eco, a company that has a patented enzymatic process which breaks down high-performance nylon and polyester polymer blends for use as new fibers. Details were not disclosed but Lululemon is the first equity apparel partner in Samsara Eco. Last year, Samsara, which boasts the tagline of “infinite plastic recycling,” raised series A funding worth $56 million Australian dollars (roughly $37 million), with investors including Woolworths Group.
The move falls in line with Lululemon’s “Be Planet” roadmap to create a circular ecosystem by 2030. Essentially, the brand pledged to make 100 percent of its products with “sustainable materials” or “end-of-life solutions” by 2030. In demonstration of that, the leggings maker launched its first products, T-shirts made from plant-based nylon, in collaboration with materials maker Geno in April. Last year, Lululemon, along with H&M Group and The Schmidt Family Foundation, were among the first funding partners for Apparel Impact Institute’s $250 million climate fund.
“We’re focusing on creating and testing a successful fabric for both nylon and polyester beginning this year to inform future scaling and product plans,” Yogendra Dandapure, vice president of raw materials innovation at Lululemon, told WWD. “We are working towards previewing our first prototypes later this year and will start to unveil small collections in the next one to two years. We’re excited to pilot and scale textile-to-textile recycling technology and broader recycling infrastructure solutions as we move toward a circular economy.”
Today, nylon makes up 37 percent of Lululemon’s materials mix, followed by polyester (25 percent) and cotton (15 percent). Investments as in Samsara Eco are attempts to weather new unknowns. In Lululemon’s 2022 annual report, the brand noted the rising costs of raw materials including petroleum-based products, cotton and silver while also acknowledging the reality that climate change can exacerbate existing sourcing strains.
“Samsara” aptly means rebirth or flowing around in Sanskrit, representing the infinite aims for circular fashion, per Samsara Eco’s chief executive officer and founder Paul Riley. Paying homage to that principle, Samsara Eco’s patented enzyme technology breaks down plastic to its core molecules in a matter of minutes, over and over, according to the company.
Woolworths Group has already committed to turning the first batch of recycled Samsara plastic into branded packaging. In its path to scaling up, Samsara Eco’s Australian recycling facility looks to recycle 20,000 metric tons of plastic each year starting in 2024, once uptake and capacity allow.
Riley said partnering with Lululemon has been a “significant milestone that will accelerate the journey to closing the loop on textile recycling.”
Farfetch Shares Spike as Company Returns to GMV Growth
The platform, which is looking to lead in AI, is starting to put the closure of its Russian business and the slowdown in China behind it.
Farfetch is starting to get back into growth mode — and the good graces of Wall Street.
Shares of Farfetch shot up 16.8 percent to $5.07 in after-hours trading on Thursday after the company reported first-quarter results that showed gross merchandise volume had inched up 0.1 percent to $931.7 million. Revenues for the quarter increased 8 percent to $556.4 million.
The stock is still well off of Farfetch’s 52-week high of $12.89, but the jump back gives the company some welcome momentum.
The first-quarter performance marked a significant turn for Farfetch, which saw GMV drop 12 percent in the fourth quarter, when China was hindered by COVID-19 lockdowns and the comparisons were hurt by the closure of the company’s Russia business.
Now José Neves, founder, chairman and chief executive officer, is looking to press forward to profitability — with cost cuts and a flurry of new partnerships — while positioning the company to lead in the buzzy world of AI.
Farfetch, the rare fashion company that is also a real player in tech, has a long-standing partnership with Microsoft that has allowed it to access the most advanced version of ChatGPT to develop luxury applications.
In an interview with WWD, Neves, a technologist at heart, acknowledged the broader societal concerns around artificial intelligence.
“Any technology is a double-edged sword,” the CEO said. “And technologies can always be used for good or not.”
But in fashion, he said the application of AI would be more straightforward compared with the ethical questions faced by the broader search platforms.
“In terms of our industry in particular, fortunately it’s all about celebrating individuality, celebrating style, celebrating creativity,” he said. “And one of the things that is important in fine-tuning and training these models is really making sure that we’re focused on what we’re all about, which is discovering this amazing world of fashion globally. And bring that in an elevated and personalized way to customers and not really get into areas that in other businesses will be very problematic.
“The key is to have the customer in mind, to have the brand’s image in mind and always make sure that we elevate the customer experience,” Neves said.
That is not a new idea at Farfetch.
“We always take a very customer-centric view,” Neves said. “We don’t like technology for the sake of technology. We don’t think that that works in any industry, but particularly in our industry. This is an industry of inspiration, of discovery of a very, very demanding customer and a very, very demanding seller on the platform.”
And he said Farfetch already uses AI to help it connect consumers, for instance by giving personalized recommendations that have helped convert shoppers into buyers.
“Three years ago, we’ve really recognized that personalization was a key strategic initiative for us and we increased the size of our machine-learning data science teams and really invested in the talent to build on this type of technology,” Neves said. “And it has really paid off. So we’ve seen our recommendation engine, which is built entirely in-house, our rank algorithm, which ranks the products on a one-to-one basis and personalizes it to the personalized communications.”
Now the company is going to be exploring the potential of AI’s conversational skills.
“We’re developing three proofs of concepts, three prototypes, which I’ve seen already and made me very excited personally as a technologist,” Neves said. “It can’t be just a mechanical robotical conversation. It has to be an inspirational, engaging conversation. And even in the early different elements, we’re already seeing that and the way the models learn and get better very quickly, [it’s] quite impressive.”
Count AI as one of the many things on the agenda for Neves.
The CEO told analysts on a conference call that 2023 would be “our year of execution,” that the deal to start operating Yoox Net-a-porter was on track and that “cost-reduction and working capital initiatives toward achieving our 2023 profitability and free cash flow objectives are well on track.”
In the first quarter, Farfetch posted adjusted losses before interest, taxes, depreciation and amortization of $35 million. The target is to get adjusted earnings before interest, taxes, depreciation and amortization margins to 1 to 3 percent for the full year.
Net losses tallied $174 million for the first quarter.
As Farfetch waited out tough comparisons following the exit of Russia in the wake of its invasion of Ukraine, it has been busy building new businesses.
“Our 2023 launches, including Reebok and Ferragamo, have either been delivered or remained on schedule for launch later this year, as in the case of Neiman Marcus Group,” Neves said.
And China is waking back up, too.
“I have just spent a week in mainland China and Hong Kong and I am very excited by what I witnessed,” Neves said. “Not only does the country seem to be back to normal with a lot of positive energy, it is also clear that the appetite for luxury is very strong.”
Meta bets big on AI with custom chips — and a supercomputer
At a virtual event this morning, Meta lifted the curtains on its efforts to develop in-house infrastructure for AI workloads, including generative AI like the type that underpins its recently launched ad design and creation tools.
It was an attempt at a projection of strength from Meta, which historically has been slow to adopt AI-friendly hardware systems — hobbling its ability to keep pace with rivals such as Google and Microsoft.
“Building our own [hardware] capabilities gives us control at every layer of the stack, from datacenter design to training frameworks,” Alexis Bjorlin, VP of Infrastructure at Meta, told TechCrunch. “This level of vertical integration is needed to push the boundaries of AI research at scale.”
Over the past decade or so, Meta has spent billions of dollars recruiting top data scientists and building new kinds of AI, including AI that now powers the discovery engines, moderation filters and ad recommenders found throughout its apps and services. But the company has struggled to turn many of its more ambitious AI research innovations into products, particularly on the generative AI front.
Until 2022, Meta largely ran its AI workloads using a combination of CPUs — which tend to be less efficient for those sorts of tasks than GPUs — and a custom chip designed for accelerating AI algorithms. Meta pulled the plug on a large-scale rollout of the custom chip, which was planned for 2022, and instead placed orders for billions of dollars’ worth of Nvidia GPUs that required major redesigns of several of its data centers.
In an effort to turn things around, Meta made plans to start developing a more ambitious in-house chip, due out in 2025, capable of both training AI models and running them. And that was the main topic of today’s presentation.
Meta calls the new chip the Meta Training and Inference Accelerator, or MTIA for short, and describes it as a part of a “family” of chips for accelerating AI training and inferencing workloads. (“Inferencing” refers to running a trained model.) The MTIA is an ASIC, a kind of chip that combines different circuits on one board, allowing it to be programmed to carry out one or many tasks in parallel.
“To gain better levels of efficiency and performance across our important workloads, we needed a tailored solution that’s co-designed with the model, software stack and the system hardware,” Bjorlin continued. “This provides a better experience for our users across a variety of services.”
Custom AI chips are increasingly the name of the game among the Big Tech players. Google created a processor, the TPU (short for “tensor processing unit”), to train large generative AI systems like PaLM-2 and Imagen. Amazon offers proprietary chips to AWS customers both for training (Trainium) and inferencing (Inferentia). And Microsoft, reportedly, is working with AMD to develop an in-house AI chip called Athena.
Meta says that it created the first generation of the MTIA — MTIA v1 — in 2020, built on a 7-nanometer process. It can scale beyond its internal 128 MB of memory to up to 128 GB, and in a Meta-designed benchmark test — which, of course, has to be taken with a grain of salt — Meta claims that the MTIA handled “low-complexity” and “medium-complexity” AI models more efficiently than a GPU.
Work remains to be done in the memory and networking areas of the chip, Meta says, which present bottlenecks as the size of AI models grow, requiring workloads to be split up across several chips. (Not coincidentally, Meta recently acquired an Oslo-based team building AI networking tech at British chip unicorn Graphcore.) And for now, the MTIA’s focus is strictly on inference — not training — for “recommendation workloads” across Meta’s app family.
But Meta stressed that the MTIA, which it continues to refine, “greatly” increases the company’s efficiency in terms of performance per watt when running recommendation workloads — in turn allowing Meta to run “more enhanced” and “cutting-edge” (ostensibly) AI workloads.
A supercomputer for AI
Perhaps one day, Meta will relegate the bulk of its AI workloads to banks of MTIAs. But for now, the social network’s relying on the GPUs in its research-focused supercomputer, the Research SuperCluster (RSC).
First unveiled in January 2022, the RSC — assembled in partnership with Penguin Computing, Nvidia and Pure Storage — has completed its second-phase buildout. Meta says that it now contains a total of 2,000 Nvidia DGX A100 systems sporting 16,000 Nvidia A100 GPUs.
So why build an in-house supercomputer? Well, for one, there’s peer pressure. Several years ago, Microsoft made a big to-do about its AI supercomputer built in partnership with OpenAI, and more recently said that it would team up with Nvidia to build a new AI supercomputer in the Azure cloud. Elsewhere, Google’s been touting its own AI-focused supercomputer, which has 26,000 Nvidia H100 GPUs — putting it ahead of Meta’s.
But beyond keeping up with the Joneses, Meta says that the RSC confers the benefit of allowing its researchers to train models using real-world examples from Meta’s production systems. That’s unlike the company’s previous AI infrastructure, which leveraged only open source and publicly available datasets.
“The RSC AI supercomputer is used for pushing the boundaries of AI research in several domains, including generative AI,” a Meta spokesperson said. “It’s really about AI research productivity. We wanted to provide AI researchers with a state-of-the-art infrastructure for them to be able to develop models and empower them with a training platform to advance AI.”
At its peak, the RSC can reach nearly 5 exaflops of computing power, which the company claims makes it among the world’s fastest. (Lest that impress, it’s worth noting some experts view the exaflops performance metric with a pinch of salt and that the RSC is far outgunned by many of the world’s fastest supercomputers.)
Meta says that it used the RSC to train LLaMA, a tortured acronym for “Large Language Model Meta AI” — a large language model that the company shared as a “gated release” to researchers earlier in the year (and which subsequently leaked in various internet communities). The largest LLaMA model was trained on 2,048 A100 GPUs, Meta says, which took 21 days.
“Building our own supercomputing capabilities gives us control at every layer of the stack; from datacenter design to training frameworks,” the spokesperson added. “RSC will help Meta’s AI researchers build new and better AI models that can learn from trillions of examples; work across hundreds of different languages; seamlessly analyze text, images, and video together; develop new augmented reality tools; and much more.”
Video transcoder
In addition to MTIA, Meta is developing another chip to handle particular types of computing workloads, the company revealed at today’s event. Called the Meta Scalable Video Processor, or MSVP, the chip is Meta’s first in-house-developed ASIC solution designed for the processing needs of video on demand and live streaming.
Meta began ideating custom server-side video chips years ago, readers might recall, announcing an ASIC for video transcoding and inferencing work in 2019. This is the fruit of some of those efforts, as well as a renewed push for a competitive advantage in the area of live video specifically.
“On Facebook alone, people spend 50% of their time on the app watching video,” Meta technical lead managers Harikrishna Reddy and Yunqing Chen wrote in a co-authored blog post published this morning. “To serve the wide variety of devices all over the world (mobile devices, laptops, TVs, etc.), videos uploaded to Facebook or Instagram, for example, are transcoded into multiple bitstreams, with different encoding formats, resolutions and quality … MSVP is programmable and scalable, and can be configured to efficiently support both the high-quality transcoding needed for VOD as well as the low latency and faster processing times that live streaming requires.”
Meta says that its plan is to eventually offload the majority of its “stable and mature” video processing workloads to the MSVP and use software video encoding only for workloads that require specific customization and “significantly” higher quality. Work continues on improving video quality with MSVP using preprocessing methods like smart denoising and image enhancement, Meta says, as well as post-processing methods such as artifact removal and super-resolution.
“In the future, MSVP will allow us to support even more of Meta’s most important use cases and needs, including short-form videos — enabling efficient delivery of generative AI, AR/VR and other metaverse content,” Reddy and Chen said.
AI focus
If there’s a common thread in today’s hardware announcements, it’s that Meta’s attempting desperately to pick up the pace where it concerns AI, specifically generative AI.
As much had been telegraphed prior. In February, CEO Mark Zuckerberg — which has reportedly made upping Meta’s compute capacity for AI a top priority — announced a new top-level generative AI team to, in his words, “turbocharge” the company’s R&D. CTO Andrew Bosworth likewise said recently that generative AI was the area where he and Zuckerberg were spending the most time. And chief scientist Yann LeCun has said that Meta plans to deploy generative AI tools to create items in virtual reality.
“We’re exploring chat experiences in WhatsApp and Messenger, visual creation tools for posts in Facebook and Instagram and ads, and over time video and multi-modal experiences as well,” Zuckerberg said during Meta’s Q1 earnings call in April. “I expect that these tools will be valuable for everyone from regular people to creators to businesses. For example, I expect that a lot of interest in AI agents for business messaging and customer support will come once we nail that experience. Over time, this will extend to our work on the metaverse, too, where people will much more easily be able to create avatars, objects, worlds, and code to tie all of them together.”
In part, Meta’s feeling increasing pressure from investors concerned that the company’s not moving fast enough to capture the (potentially large) market for generative AI. It has no answer — yet — to chatbots like Bard, Bing Chat or ChatGPT. Nor has it made much progress on image generation, another key segment that’s seen explosive growth.
If the predictions are right, the total addressable market for generative AI software could be $150 billion. Goldman Sachs predicts that it’ll raise GDP by 7%.
Even a small slice of that could erase the billions Meta’s lost in investments in “metaverse” technologies like augmented reality headsets, meetings software and VR playgrounds like Horizon Worlds. Reality Labs, Meta’s division responsible for augmented reality tech, reported a net loss of $4 billion last quarter, and the company said during its Q1 call that it expects “operating losses to increase year over year in 2023.”
Antitrust Gone Wild Against Amgen
No theory is too strange for Lina Khan’s FTC to block a merger.
Try though she has, Lina Khan hasn’t been able to stop every corporate merger. The frustration must be getting to her because the Federal Trade Commission Chair is resorting to ever more bizarre theories of antitrust to block business tie-ups.
On Tuesday the FTC sued to block Amgen’s acquisition of Horizon Therapeutics, which the agency boasts is the first pharmaceutical deal in “recent memory” that it has challenged. This is not an achievement to celebrate. Historically, the agency has raised competition concerns only when a drug maker has sought to buy a company with rival products. Then it has required discrete product divestments and approved the deals.
In this case, Amgen and Horizon don’t make drugs that directly compete. The FTC’s strained argument is that Amgen will use its negotiating clout with pharmaceutical benefit managers (PBMs) to protect Horizon’s successful drugs Tepezza and Krystexxa from competition. The drugs treat thyroid eye disease and chronic refractory gout, respectively.
The two drugs currently don’t have competition, and they may never get any. The Food and Drug Administration designated both “orphan drugs” because they treat rare diseases. This status confers regulatory benefits that are intended to provide an incentive to develop drugs for rare diseases for which there may be little financial return.
The FTC lawsuit concedes all this. “The preclinical and clinical trials can cost hundreds of millions of dollars to complete, all without a guarantee of success,” the lawsuit says. “The Department of Health and Human Services estimates that it can take $300-500 million and 14 years on average to develop and bring a drug to market.”
Yet the FTC claims that if a smaller company were to someday gain approval for a competing drug, Amgen might then offer PBMs larger rebates for its other drugs in return for giving Horizon’s treatments preferred placement on insurer formularies. It says this potential scenario might discourage potential competition.
The Khan FTC has been seeking to revive the ancient antitrust theory of “potential competition,” which was long ago shown to be flawed by antitrust legal scholars and has been discounted in the courts. In the Amgen case, the agency is taking an even greater logical leap in extending what qualifies as a potential antitrust violation.
The FTC doesn’t even attempt to show consumer harm, which is the modern standard for blocking mergers. If the scenario the FTC describes did occur, patients would probably benefit because PBMs use drug maker rebates to reduce insurance premiums.
To boost its weak case, the agency offers misdirection about how consolidation between insurers and PBMs in recent years could make its speculative case more likely. The FTC is investigating drugmaker rebates but hasn’t shown them to be illegal. So Ms. Khan is using the Amgen-Horizon lawsuit to discourage both rebates and acquisitions.
The lawsuit “sends a clear signal to the market: The FTC won’t hesitate to challenge mergers that enable pharmaceutical conglomerates to entrench their monopolies at the expense of consumers and fair competition,” the agency’s Bureau of Competition Director Holly Vedova said.
The FTC also says Amgen has built its drug portfolio by acquisition, which mimics Ms. Khan’s criticism of Big Tech. But this is how drug development in the U.S. works: Start-ups develop drugs because they are more nimble and have expertise in niche areas. Large drug makers then buy them because they are better at commercializing products and navigating the drug-approval obstacle course.
Investors fund start-ups on the expectation they will be acquired. Ms. Khan’s lawsuit will disrupt their calculations and hamper investment and innovation, especially in treatments for rare diseases. The Amgen-Horizon lawsuit may be Ms. Khan’s biggest and most destructive legal overreach so far, and apparently she thinks this is a compliment.
Fund manager Amundi shifts assets from US to China
Paris-based firm attracted by valuations and says investors have priced in ‘too much risk’
Europe’s largest asset manager Amundi is moving out of US assets in favour of China, attracted by the country’s brighter economic prospects, better valuations and a more benign outlook for inflation.
Vincent Mortier, chief investment officer of the Paris-based fund firm, which has €2.1tn in assets, thinks “too much risk” is priced into Chinese credit and high-quality companies, while markets in the US are “too optimistic” as a recession looms.
“In our allocations we have made a clear shift from west to east,” Mortier said in an interview with the Financial Times, predicting that the US economy will not grow next year while China, India and Indonesia will each grow by 5 to 6 per cent.
Mortier’s bullish stance on the world’s second-largest economy comes as political tensions between Beijing and Washington worsen and recent consumer and industrial activity has fallen far short of expectations.
In late January, a top US air force general predicted that the US and China would probably go to war in 2025, and the following month Chinese spy balloons were discovered over the US.
While Mortier sees geopolitics as “a risk”, he thinks the balance of power is such that the US would try to avoid being too harsh on China. Amundi has been gradually increasing its allocation to China and India over the past 12 months, and has accelerated the move this year.
“The US should not underestimate the capacity of China to retaliate, to escalate and then to negotiate,” Mortier said. “I think China can make serious arguments to put pressure on the US as well.”
Mortier is particularly keen on opportunities in select Chinese corporate bonds, arguing that foreign investors have been blanket selling without differentiating between the quality of issuers.
“If you dig you can find really good companies that you can buy for 50 cents to the dollar,” he said. “If you are brave or if you have some time it’s very good.”
Amundi’s optimism on China comes despite a tough period for its equity markets. The CSI 300 Index has shed 5.7 per cent from its January peak.
Markets have been pushed lower by disappointing economic data. Although China’s economy grew by a better-than-expected 4.5 per cent year-on-year in the first quarter, industrial production rose 5.6 per cent last month from a year earlier, but well below forecasts of a 10.6 per cent rise. Retail sales figures also missed forecasts. But Mortier said he believed investors’ reaction may have been overblown.
“The data may seem disappointing but when you dig more into the details in fact they are not that bad,” he said. “I think the markets may have not caught the reality of what is happening because there have been changes in how the data is produced.”
US markets are pricing in a “goldilocks” scenario of low inflation, rate cuts, stronger earnings and a soft landing, but the likelihood of this happening is becoming increasingly remote as financial conditions tighten, he said.
The US Federal Reserve’s quarterly Senior Loan Officer Opinion Survey last week showed that 46 per cent of US banks plan to raise their lending standards owing to worries about loan losses and deposit flight.
Meanwhile, hourly wage growth was 4.4 per cent year on year in April, which is likely to put upward pressure on inflation.
Mortier thinks inflation in both the US and Europe will stabilise at around 3 to 4 per cent in the years ahead, but with some volatility that will make the Fed’s job particularly difficult owing to the time it takes for monetary policy to have an impact.
However, he is not worried about the possibility of a US debt default, which has sent the cost of insuring against US Treasury default soaring this year to its highest level since the financial crisis.
“We think Treasuries are safe,” he said. “We are continuing to manage this exposure like business as usual and even taking some opportunity” to buy some.
Nevertheless, he favours emerging markets over western markets as a whole and is upping allocation to both India and Indonesia where, like China, economic growth is becoming less dependent on exports.
“This is good news for these countries and less good news for the West,” he said.