In a year marked by the fervor surrounding generative artificial intelligence, U.S. tech giants increased their market capitalizations by an amount totaling $2.4 trillion, according to a report from venture capital firm Accel. The tech-laden Nasdaq Composite was able to return to 80% of its recoded maximum within a period of only 18 months, according to Accel's report.
U.S. tech giants grew their market capitalizations by a whopping $2.4 trillion in 2020, a year marked by enthusiasm around generative artificial intelligence, according to Accel's annual Euroscape report. The share prices of Apple, Microsoft, Alphabet, Amazon and Nvidia, among others, increased by an average of 36% compared to the previous year. Notably, Nvidia crossed the trillion-dollar mark for the first time, with its worth now surpassing the coveted trillion-dollar threshold. The company's high-performance processors are essential to many advanced generative AI models, which when fed large amounts of data generate novel results.
Accel's Euroscape index, showcasing giants from the cloud and software-as-a-service (SaaS) sectors - including Salesforce, Palantir and Unity - has posted a 29% increase in its year-to-date performance.
A year ago, the outlook for cloud and SaaS was dismal. Accel reported that investors had withdrawn $1.6 trillion of value from high-growth tech stocks. However, there are now indicators that the strain is abating.
The Nasdaq Composite, loaded with tech names, regained 80% of its record peak within 18 months according to Accel, a faster recovery than after the dotcom bust of the 1990s.
It took the Nasdaq a period of fourteen years to accomplish that goal, stated Accel.
Public multiples for Euroscape companies have returned to the 10-year pre-Covid average of 6.1-times for their next-twelve-months revenue. Funding for cloud and SaaS companies in Europe, Israel and America has reverted to the pre-Covid levels.
Botteri opined to CNBC that the present day is unlike the year 2000 in many ways. He noted that it took the Nasdaq a significant amount of time to return to 80% of its peak at that time, a process which took 18 months following the 2021 reset.
According to Accel, AI was the primary technology powering cloud and SaaS in 2023. With OpenAI's ChatGPT, Google's Bard and Anthropic's Claude being some of the popularly-discussed generative AI tools, Philippe Botteri, partner at Accel, commented on a call Friday that software companies are making use of these tools for their own purposes. "Any software company is leveraging generative AI, whether they're just a startup or a new company or an existing company ... You should really think about this as something that is pervasive," he said. The U.S. dominated the generative AI market with OpenAI raising the largest amount — $10 billion — and Inflection coming in second with $1.3 billion.
In Europe, the three biggest venture rounds for generative AI companies were from France – Hugging Face at $235 million, Poolside at $126 million, and Mistral AI at $113 million. Pre-pandemic numbers of unicorns were restored, with AI making up a larger portion of these newly established billion-dollar enterprises. Worldwide, 40% of new unicorns originated in generative AI (Europe and Israel), and 80% came from the US.
This year has been difficult for tech firms, as investors have become more cautious and pulled back from making high-growth investments, resulting in lowered valuations and fundraisings.Tech firms usually prioritize expansion and growth and these objectives take precedence over short-term profits; unfortunately, this has been made more challenging due to rising interest rates, making the cost of capital more expensive.Consequently, the average growth rate of Euroscape businesses dipped from 68% in Q1 of 2021 to 23% in Q2 of 2023.At the same time, the average free cash flow progressed from -9% to +5%.
This year, acquisitions made by tech giants were stymied as regulatory bodies took action due to worries that these firms had become overly sizeable. Accel detailed only 10 exchanges associated with an important tech enterprise. This figure is a large contrast to those of prior years. In 2021, FAANG (Facebook, Amazon, Apple, Netflix and Google) made a total of 27 acquisitions, and 26 deals were conducted by Big Techs in 2022.
Microsoft's heavily scrutinized purchase of gaming powerhouse Activision Blizzard, developers of revered titles such as "Call of Duty," "Candy Crush" and "Crash Bandicoot," was consummated last week after British regulators gave their approval. Despite the protracted battle between Microsoft and the game studio, the deal was eventually sealed.
Comments