CIBC Tech & Innovation Market Update – October 2023

The number of advertisements we see on our devices has been rising steadily over the last decade. With more and more apps competing for our attention, companies are now looking to monetize each subconscious glance at a device. Last month, ride-sharing app Lyft announced it would start displaying ads on a user’s ETA screen during their ride, similar to Uber’s in-ride advertising announced earlier this year. Everyone is now likely familiar with Netflix, Disney+ and HBO Max’s ad-supported tiers. Even recently listed Instacart owes some of its success to advertising, with ad revenue representing approximately one-third of the company’s total revenue. After a large slowdown last year, the digital ad market appears to be making a recovery.

After Arm successfully made its debut on the Nasdaq last week, Instacart was quick to follow and Klavyio not far behind. There listing appears to support the notion that the market is heating up, although initial rallies for both Arm and Instacart have already started to fizzle. Arm’s shares lost some of the day-one gains with shares closing mid-September at ~$53, 4% above its IPO price, while Instacart is now trading close to its IPO price. Whether these recent IPOs inspire other companies to come to market remains to be seen, but in the U.S., 2023 has now outpaced 2022 in terms of total number of IPOs and total proceeds raised.

Prospective tech candidates generally thought to be next include Stripe, Klarna, Chime, and Databricks.

Over the years, the phrase “Google it” has become a common colloquialism for looking up information online. So common in fact, that the Department of Justice (DOJ) is now taking action against the company whose name has become synonymous with online search engines. This week, a federal judge began hearing claims from the DOJ in a case against Google, which alleges that the company abused its power as a monopoly over online search services. The trial is expected to last 10 weeks, and will hear testimony from CEO Sundar Pichai as well as other top executives, including some from Apple. The court case is another thorn in Google’s side at a time when the company’s dominance in search is being threatened by the entrance of new AI-powered search tools, such as ChatGPT.

The 2023-2024 school year marks the first full school year where generative AI technologies such as ChatGPT are widely accessible, making it a pivotal year for determining what role AI will play in education. Although many school districts throughout the US banned ChatGPT shortly after its public launch, most later lifted the bans, with NYC encouraging teachers and students to explore the technology. Viewpoints among educators remain divided on whether AI will have an adverse impact on students’ critical thinking/creativity skills or whether it can be used to enhance learning. Within this context, Canadian educators now face the decision either to ban the technology, or embrace it.

While venture capital has been lagging, technological advancements surround us in software development, artificial intelligence, computer chips, and countless other areas. The output of non-traditional investment opportunities is making investors play catch up to new trends. When the new lexicon of industries becomes better established, updated with for example “automated code modernization” or “tailored language models”, venture capital will thrive once again – and soon.

The ex-CEO of the bankrupt crypto exchange FTX, Sam Bankman-Fried’s first of two criminal trials began this week. In his first trial, Bankman-Fried faces seven criminal counts related to the exchange’s collapse including wired fraud, securities fraud, and money laundering. A superseding indictment alleges he misused billions on personal items such as $200 million in real estate properties in the Bahamas, and there is over $8 billion of customers’ money unaccounted for. A conviction on all counts could sentence him to more than 100 years in prison.

China is looking to invest in smart vehicle supply chains by supporting firms to form national “innovation consortia”, in hopes that through collaboration it will accelerate technological breakthroughs within the autonomous driving industry. Currently, China has four cities where self-driving cars are licensed. As the Chinese autonomous driving market ramps up, it will likely face export challenges from the US. Be that as it may, China is home to the world’s largest auto market.