Last month, the highly anticipated annual Apple Special Event took place at Apple’s California Campus, where the tech giant announced the release of their very own entertainment subscription platforms and new lines of Apple Watch, and of course, the iPhone.  As always, improved camera and battery life are the forefront characteristics of the new iPhones, but with expectations of 5G connectivity, screen-fingerprinting, reverse wireless charging, and AI capabilities, is a better camera enough to encourage upgrades? 

Per the Wall Street Journal, the US is falling behind on AI innovation as China is taking the lead in this sector and adopting AI faster than the US and Europe, directing business leaders to push for more US investment in AI.  Despite the newly announced $1 billion federal commitment for AI research, executives are demanding more capital for the industry, so how active (or inactive) is this sector?

Artificial Intelligence is by no means a new industry, with SPS recording AI deals since 2011, but it has gained significant attention in the past few years and growing rapidly.  The chart below shows the number of AI-related deals from 2015 to 2019 YTD:

From just year-to-date alone, SPS data shows that AI-related deals have increased 80% from 2018 levels.  Investors in the service industry have significant opportunities in AI, as it was the top industry with 24% of AI deals touching upon the service industry, followed by media with 5% and healthcare with 4%. The AI sector is undoubtedly experiencing an upwards trend, and with the desire for the US to maintain its competitive edge in AI, it seems likely to grow further. 

Per SPS data, approximately 79% of AI transactions traded in the sub $50MM range, and 14% between the $50-250MM range.  There were 4 deals in the $1 billion+ range, most notably Hewlett-Packard’s $1.3 billion acquisition of Cray Inc., a developer of supercomputers, high-performance storage, data analytics and artificial intelligence solutions, completed last month.  Most of the deals in this sector were done by corporate participants; however, 40% were done by PE firms, with Vista Equity Partners being the most active sponsor in this space, and the top 3rd overall investor in AI, preceded by Apple Inc. and Microsoft Corp.

The future is AI

Undoubtedly, AI technology is only developing further, but just how far can and should it go?  Ethics and data privacy are the main concerns– from autonomous vehicles to virtual assistants, such as Alexa and Siri, and intelligent robots – these technologies provide a luxurious outlet for convenience and improvement, making every day processes more efficient and removing variables from human error.  However, the technology depends on mass inputs of data to learn and truly be intelligent, as restricting data allowances confines AI capabilities with a blind spot, and with any data, concerns of a breach or abuse are imminent risks. 

So, should there be restrictions for AI?  Would restricting AI innovations limit advancements for the future?  Do the potential capabilities of AI outweigh the costs, if any?  Can further development of AI technologies even be controlled?  What are your thoughts? Is that even you thinking?

Last week’s deals today

September 22 – 28, 2019
~97 deals traded

Deal of the week

Hewlett-Packard Co. completed its acquisition of Cray Inc. for $1.3 billion. Based in Seattle, WA, Cray develops supercomputers, high-performance storage, data analytics and artificial intelligence platform and tools. Morgan Stanley provided financial advice and Fenwick & West and Wilson Sonsini Goodrich & Rosati served as legal advisors to Cray. Deutsche Bank was the financial advisor to Hewlett-Packard and Covington & Burling; Skadden, Arps, Slate, Meagher & Flom; Wachtell, Lipton, Rosen & Katz provided legal counsel.

Most active subsectors
  • IT: Software & services
  • Financial: Services
  • Media: Marketing and sales
  • Healthcare: Specialty clinics and centers
  • Services: Marketing and related
Most active cities
  • New York
  • Chicago
  • Cambridge
  • Orlando
  • San Diego
  • Houston

Photo by Tyler Lastovich on Unsplash

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