Fed Faces Pressure Amid Economic Slowdown, Climate Startups Face Hurdles, and Pershing Square Looks to go Public in this Week's Edition....
Take a Lap Around the Industry
The Solar Breakthrough That Could Help the U.S. Compete With China (WSJ)
The U.S. Gave Chip Makers Billions. Now Comes the Hard Part (WSJ)
Nvidia and AMD Square Off in Fight to Take Control of AI (Bloomberg)
New Texas Stock Exchange Takes Aim at New York’s Dominance (WSJ)
Investors Brace for CrowdStrike's Earnings Amid High Valuation Concerns
CrowdStrike investors find themselves in a precarious position as the cybersecurity firm approaches its next earnings report. Despite the company's shares more than doubling over the past year, making it one of the top performers on the Nasdaq 100 Index, the recent downturn in software stocks has cast a shadow over its sky-high valuation. This high valuation, coupled with heightened scrutiny from investors, has set the stage for a potentially volatile reaction to the upcoming earnings release. Ivana Delevska, founder and chief investment officer of Spear, highlighted the risk by trimming her position in CrowdStrike, opting instead for beaten-down rivals like Zscaler Inc. and Palo Alto Networks Inc. Investors are also keenly watching CrowdStrike's partnership with Amazon Web Services, a significant endorsement that could bolster its growth prospects. Analysts at Morgan Stanley remain optimistic, projecting about $500 million in annual recurring revenue from CrowdStrike’s AI initiatives by 2028 and envisioning the company hitting a $100 billion market cap over the next 12 months. Meanwhile, skeptics caution about the sustainability of its core business growth.
"What we talked about in the earnings call is the ability to create more adversaries with lower skill levels, but operating at a much higher skill level, leveraging generative AI. Of course, on the security side, we leverage generative AI to help protect our customers, so it’s going to be the battle of AI in the future.”
George Kurtz (CrowdStrike CEO)
Private Funding Pulse Check
Saudi Arabia-based agritech startup, iyris, secures $16M in Series A funding from Bahrain-based Kanoo Family Office
Rhea, a Singapore- and New York-based reproductive health service provider, has secured $10M in funding from Thiel Capital to bolster its global expansion efforts and further enhance its fertility care services
Caju AI, a pioneer in Generative AI-powered solutions for customer engagement, has successfully concluded a $3M Seed financing round with backing from Jaffray Woodriff's family office, Felton Group
CoreWeave, a company headquartered in Roseland, NJ, specializing in tailored solutions for cloud infrastructure to support AI workloads, has secured $1.1B in Series C funding from Eric Schmidt's family office, Hillspire LLC
Corient Private Wealth, the US wealth management arm of CI Financial, has made its first RIA acquisition of 2024 by acquiring Socius Family Office in Ft. Lauderdale, FL
Led by former NFL player, Mark Baniewicz, Socius Family Office disclosed approximately $915M in assets under management by the end of 2023 and was previously owned by Alterna Financial
Former Miami Dolphins fullback, Rob Konrad, who served as chairman of Socius and is the chief executive officer of Alterna Financial, disclosed the end of his 20-year affiliation with Socius in May
With assets totaling around $164 billion as of March 2024, Corient's acquisition of Socius strengthens its position in the RIA industry and demonstrates its ongoing efforts to bolster its market presence (Citywire)
Fed Faces Mounting Pressure as Economic Slowdown Looms
The Federal Reserve, having raised its benchmark rate to the highest level since 2001, is now confronting signs of an economic slowdown that could prompt pressure to lower rates. While the focus on the personal consumption expenditures (PCE) price index--the Fed’s preferred inflation measure--remains crucial, recent data on personal income and spending highlight more profound concerns. April's figures showed income growth slowing to 0.3%, down from 0.5% in March, and personal spending rising just 0.2%, a sharp decline from the previous month's 0.7%. Both consumption and disposable incomes fell in real, inflation-adjusted terms. Coupled with the Chicago Business Barometer falling to its lowest level since May 2020 and a downward revision in first-quarter GDP growth to 1.3%, these indicators suggest a weakening consumer base. The savings rate also remains low, well below the 12-month average, indicating that consumers are feeling the prolonged effects of inflation. As the labor market typically lags behind other economic shifts, the Fed might soon need to pivot from its inflation-centric stance to address broader economic deceleration.
"I do think that monetary policy is restrictive and is bringing the economy a better balance. So I think at some point, interest rates within the US will, based on data analysis, eventually need to come down. But the timing will be driven by how well you achieve your goals."
John Williams (New York Federal Reserve Bank President)
Climate Startups Face the 'Valley of Death' as they Race to Innovate
Hundreds of emerging climate startups, including companies like Material Evolution, are diligently working to convert innovative technologies into successful businesses while facing financial challenges and time constraints. As part of the broader wave of climate startups, these companies navigate the 'valley of death,' a critical phase where many early-stage ventures encounter issues such as budget overruns, engineering setbacks, and regulatory hurdles. Material Evolution, for example, is currently facing challenges in constructing a green cement plant in the U.K., dealing with issues like unstable ground and infrastructure limitations. Despite these difficulties, the success of companies like Material Evolution is crucial to global climate change mitigation efforts. CEO Liz Gilligan, humorously remarks on the absence of a definitive playbook for industrial technology startups, highlighting the unpredictable nature of such ventures. With significant investor capital and potential economic reshaping technologies at stake, these startups are critical yet risky investments. Material Evolution’s progress amidst these hurdles exemplifies the arduous journey faced by climate tech innovators striving to achieve commercial viability and environmental impact.
"Morally, I couldn’t look the other way while the world was on fire, so I decided that taking action was the right step forward to create real change. Material Evolution was born in my parent’s garage with the hope that normal people, like me, can make a difference in the fight against climate change."
Liz Gilligan
Pershing Square Targets IPO as it Reinvents its Business Model
Bill Ackman is preparing to take his investment firm, Pershing Square, public by late 2025 or early 2026, leveraging his significant social media presence to attract investor interest. Ahead of the IPO, Ackman has sold a 10% stake in Pershing Square in a funding round that values the firm at just over $10 billion. With $16.3 billion in net assets as of April, Pershing Square's valuation is backed by plans to attract billions more in stable assets. The firm has transformed from a traditional hedge fund to an asset manager focused on a concentrated portfolio of undervalued large companies, such as Chipotle Mexican Grill and Universal Music Group. This strategic pivot includes a shift away from aggressive proxy battles and activist short selling, opting instead for more durable capital via a closed-end fund traded on European stock exchanges. Ackman’s public profile and a string of successful IPOs in recent years suggest a favorable market reception for Pershing Square’s ambitious plans.
"As always, Pershing Square will remain intensely focused on generating high, long-term returns for our investors."
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