[33] Alta Views: your latest scoop of Private Capital Markets

Hi Alta-natives! We are back with a new edition of Alta Views.?In this edition, we will talk about U.S. stocks hitting record highs while China is slumping, Singapore drafts GenAI governance framework and private equity secondaries.

U.S. Stocks are Hitting Record Highs, but China is Slumping

• US stocks edged higher on Monday, with the S&P 500 and Dow notching another record high close. On the other hand, Chinese stocks continued a sharp decline. The CSI 300 fell 1.6% to close at an almost five-year low. Hong Kong's Hang Seng Index fell 2.3% and is now approaching its lowest close since 2009.
• Excitement about artificial intelligence is continuing helping drive shares of tech darlings higher. Microsoft, an early investor in ChatGPT, had its shares up by more than 7% this year, adding roughly $200 billion in market value — roughly a quarter of S&P 500's market value gains this year.
• China’s economy, on the other hand, is plagued by a myriad of problems. They include a record downturn in real estate, deflation, debt, a falling birthrate and shrinking work force, as well as a shift towards ideology-driven policies that has rattled the private sector and scared away foreign firms.?
• Additionally, relations between the United States and China have become increasingly tense over the past few months. Washington has ramped up sanctions against key Chinese industries, including chipmaking. Beijing has displayed a growing distrust of foreign companies, cracking down on international consultancies and expanding the country’s counter-espionage law last month.
• However, Chinese stocks should not plainly be dismissed — with China having substantial global influence, there is potential in the market; It would not hurt to maintain cautious optimism and monitor China's evolving landscape for potential opportunities in the new year.

Singapore Drafts GenAI Governance Framework

• Singapore's AI Verify Foundation (AIVF) and Infocomm Media Development Authority (IMDA) have drafted a governance framework for generative AI (genAI).?
• The framework emphasizes that AI-driven decisions should be explainable, transparent, and fair. It also offers practical guidance for both developers and policymakers in their initial steps.?
• This development aligns with Singapore's proactive measures to advance its AI goals. In the previous month, the city-state revised its national AI strategy and allocated S$70 million (US$52 million) to create Southeast Asia's first large language model catering to the region's languages.
• These initiatives underscore the government's commitment to the responsible use of generative AI, bolstering investors’ confidence for artificial intelligence opportunities in Singapore.

Private Equity Secondaries — No Longer in Second(ary) Place?

• IPO markets have remained lukewarm and global deal making is at a slow — seeing only 72 IPOs by private equity-backed companies in 2023, the lowest total since 2019, and global M&A activity falling 17% to USD$2.9 trillion, a record low in over 10 years.
• This is fueling a rise in secondary deals that enable investors to get their cash back without having to wait for IPOs or company sales — the two traditionally preferred methods of exiting.
• More players have been capitalizing on the liquidity demand, with Blackstone closing private equity secondary funds at a record US$25B and Goldman Sachs raising over US$15B for private equity secondary deals just in the recent year.
• With the liquidity demand expected to persist in 2024, deal activity in this asset class will only continue to grow, providing investors an opportunity to participate early on in this asset class’s boom.

Semiconductors Poised for an Epic Comeback

• Global semiconductor revenue in 2023 totaled $520 billion, a decrease of 11.1% from 2022. This was largely due to the 37% (YoY) decrease of memory (chip) revenue, which posed to be one of the worst memory revenue declines in history. Smartphones, PCs and servers, three of the largest segments for DRAM and NAND, faced weaker than expected demand and excess channel inventory, which led to DRAM revenue declining 38.5% to total $48.4 billion and NAND flash revenue decreasing 37.5% to total $36.2 billion.
• However, this trend is not expected to hold for long — rapid developments in generative AI (GenAI) and large language models are driving demand for the deployment of high-performance GPU-based servers and accelerator cards in data centers to support the training of AI workloads.?
• Just recently, on January 18, an index of semiconductor stocks (.SOX), was up more than 2% and chip stocks were helping the broader market after Taiwan Semiconductor Manufacturing (“TSM”), the world's largest contract semiconductor maker, cited strong demand for high-end chips used in artificial intelligence. U.S-listed shares of TSM, which also forecasted more than 20% growth in 2024 revenue, were last up 7.2%, the biggest percentage gainer for the day on the semiconductor index. Furthermore, the semiconductor index rose 65% in 2023 and hit an all-time intraday high on December 28 of 4,233.73, boosting the overall market amid optimism over AI demand.?
• Moreover, OpenAI’s CEO, Sam Altman, who has been working to raise billions of dollars from global investors for a chip venture, is aiming to use the funds to set up a network of factories to manufacture semiconductors. Altman's initiative is driven by concerns over a potential shortage of AI-specific chips, as demand is expected to outpace production forecasts, according to multiple sources reporting on the discussions.
• With GenAI being only at the start of its revolution, the semiconductor industry is poised for a positive outlook, with potential upside that is due to be uncovered.

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OpenAI, Anthropic, Hugging Face, Epic Games, discover who’s trending with our investor network! Researched by experts, voted by insiders. View our Top Picks here!

?? Notable Fundraises

GX Bank | US$40.8M | Series C1 | HealthTech

Operator of a digital bank intended to provide digital banking services. The company offers financial and banking services digitally to meet the financial services needs of both consumers and small businesses.

Hashkey Group | US$100M | Series A | Fintech

Operator of a digital asset exchange in Hong Kong offering investment opportunities across the digital asset ecosystem. The exchange covers the entire digital asset ecosystem with its core businesses including an SFC-licensed digital asset exchange, a full-service brokerage platform, an institutional-grade custody service and a VC fund invested in blockchain companies and digital asset projects globally, providing investors a platform to settle digital asset transactions.

Sakana AI | US$30M | Seed | Artificial Intelligence

Operator of an AI-enabled information technology company headquartered in Tokyo, Japan. The company specializes in developing a generative AI model and software that can generate text, images, code, and multimedia, enabling clients to collaborate on research and development of generative AI.

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About Alta Views

A fortnightly collection of the latest news from Private Capital Markets. Put together by Alta’s team of analysts, we bring you the most critical and timely pieces from private markets, to help you navigate the broad horizon. Stay tuned as we bring you the most notable fundraises, analysis on industries and companies trending within investor networks, the latest headlines, and more!

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