Grocery king 🔥
AI hardware, old IT moves, and lodging getting disrupted.
Hi 👋, Tanvi here.
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Market summary: 📊
Indian markets finished on a high note for the week. US markets, after a choppy mid week run, finally ended higher as well. Investors everywhere rest easy this weekend.
US:
S&P 500 - up 0.88%
Nasdaq 100 - up 1.51%
India:
Nifty 50 - up 0.67%
Sensex - up 0.81%
AI Hardware heats up 🔥
COVID altered the trajectory of cloud computing, and the effects are more visible on hardware vendors than ever before!
After Nvidia scooped up ARM processor design giant Arm Holdings just last month in a blockbuster $40 billion deal, rival AMD led by Dr. Lisa Su is apparently looking to buy FPGA vendor Xilinx—in a $30 billion deal.
To say this is a ballsy move by AMD would be an understatement—who until 12 months ago, itself wasn’t worth $30 billion. However, led by a strong gaming market which helped GPU demand, solid demand from datacenters, and problems from the Intel camp, the company made a surprise 3x stock move in no time.
Back to the deal—with XLNX in their pockets, AMD is looking to seal its position in the AI accelerator market, adding more value to its datacenter customers.
Some handholding—like how GPUs are good with parallel computing, and as a result, found their way into data centers to help with AI processing, FPGAs are a popular alternative for this application as well. Albeit the cost-performance tradeoff is debatable, FPGAs have unique use cases for AI Inference acceleration.
Anyway, while AMD is excited about this deal, Wall Street let’s just say isn’t exactly all gaga. Reason being, XLNX serves a ton of other markets which have little synergies for AMD—its chips go into base stations for cellphone towers, industrial applications, as well as in smart cars—what does AMD plan on doing about these business units?
Bottomline—the semiconductor industry is changing faster than one can keep up with. Disruptors like AMD and Nvidia are punching well above their weight, audaciously looking to disrupt the hegemony of Intel. Expect a lot more shots here.
Capital talks 💰
First up, PharmEasy, which is looking to raise a whopping $100 million from Naspers and TPG Global at a valuation of about $1.2 billion. Just last month had the company merged with its peer Medlife, in a bid to mount a consolidated attack on big competitors AMZN, Flipkart and Reliance in the online pharma arena.
What’s going on—there’s little surprise about continued deal activity here. Online pharmacy is expected to grow to top over $4B in spending in India by 2022. Less than 10 million people having used digital pharmacies so far, which makes the runway very long. Strong investor enthusiasm will hold steady for a long time.
Onto travel plays that are holding tight in COVID 😷—
Budget hotelier Treebo managed to get $6 million more from existing investors Matrix Partners India, SAIF Partners, and others in a fresh raise. The company operates 600-plus hotels across 100 cities, most of which particularly in smaller cities remain battered by the pandemic.
More than a celebratory raise, this appears like a lifeline thrown to ensure survival, considering trying times the travel industry is facing. Treebo is putting capital to further ramp up its technology product suite, with a focus on its property management SaaS business, Hotel Superhero. Smart bet.
An observation—as demand slowly starts to crawl back, the digitally armed players, with better standards of hygiene and digital skills, are destined to pick a larger share of the lodging industry. Fragmented neighborhood hotels are uniquely challenged coming out of this mess for sure, and we can’t say if this is a good or a bad thing.
Finally, wrapping up with an IT acquisition —
Continuing its spree of acquiring specialized smaller cloud focused IT vendors, Infosys will purchase Blue Acorn iCi, a digital customer experience and analytics services provider, for a massive $125 million! 🔥
The purchase will add increasingly important bespoke customer experience and digital commerce services skills to INFY’s stables, widening its service delivery abilities in tools like Magento, Salesforce Commerce and Shopify ecosystems. Within the last few months alone, this has to be like INFY’s 5th acquisition. Essentially, Old IT is transforming itself to remain relevant in the cloud era.
When tenacity pays, big time 🛒
Pre-pandemic, you’re just another Silicon Valley disruptor—then suddenly the winds turn, and a generational event forces millions of consumers to go under lockdown. Suddenly your services are what they count on to survive. You are no longer just another “app”—overnight you’ve been Knighted! Dreams of an entrepreneur.
That short story does little justice to outline the grueling rise to prominence of Instacart, and its tenacious founder Apoorva Mehta. They’ve finally arrived.
On the back of the pandemic driven boom, the grocery and other essentials delivery company raised some $200 million, at a valuation of $17.7 billion. To put things into perspective, Instacart now processes gross merchandise volume (GMV) of over $34 billion! That brings them in a respectable range (7-8%) of Amazon’s global GMV. 👏
What makes this special is the fact that Instacart over its small period of time saw everything, from labor conflicts, wage protests, battles with unions, to crushing pressure from competition like Amazon, despite which they thrived, to now serve over 85% of US households by 2020.
The folks at YC are rejoicing. BTW—if you didn’t know, Instacart was a YC reject, but the ever persistent Apoorva wouldn’t take no for an answer. 👌
Checking giants 🧐
US District Judge ruled that Cisco infringed upon 4 cybersecurity patents belonging to a smaller company Centripetal Networks, slamming the networking giant for unruly behavior.
The judge slapped a $1.9 billion fine, almost 12% of Cisco's cash flow over the last 12 months. Management and shareholders are coiling under the impact this could have on the company’s earnings, especially at a time when enterprise buyers have tightened their purse strings on networking spending.
Per the Judge, Cisco will pay $755 million in actual damages multiplied by 2.5 to reflect Cisco’s “willful and egregious” conduct. LOL! Cisco has promised it will appeal in higher courts to get the judgement overturned. The Judge however maintains that Cisco's wrongdoing is more than apparent and it's an open and shut case. Read more.
While we’re on the subject of old-tech ☝️ —
After TCS yesterday during its earnings announced a surprised share buy back program of ₹16,000 crore, Wipro announced that it may consider a similar buyback during its earnings call next week. Shareholders are excited.
To non-finance nerds here—share buybacks are essentially when a company goes out and buys its own shares from public investors, by paying them market prices. Companies mostly do buybacks when they believe they have no better “investments” to spend money on, can utilize the opportunity to gain more ownership of stock internally, or when they believe their stock is maybe undervalued. Easy peasy…
Tweet of the day 🐦
Last week, when Walmart offloaded Asda to a retail group owned by somebody called the “Issa brothers”, we got a little curious and did some digging. Turns out, these guys are freaking geniuses with an incredible story of gritty entrepreneurial hustle!
What else are we snackin’ 🍿
🕊️ Sorry Trump - The World Food Programme has won the Nobel Peace Prize this year for its efforts to fight hunger. The WFP is the largest humanitarian organization in the World that promotes food security in over 88 countries.
🏛️ Seoul takes on Google now - South Korea has launched an antitrust investigation into Google because of its regressive app-store policies—the same issue they have been struggling with in India. SK says that the practice clearly violates local fair trade and telecommunication laws.
💉Ek pe ek free - Russia is preparing to register its second coronavirus vaccine called EpivacCorona on 15 October. The experimental vaccine developed by a different institute this time, Vector State Research Center of Virology and Biotech has recently completed its early stage of human trials apparently. (I’m sure they said human)
🌳 Environmentalists get hope - India’s sulphur-dioxide emissions dropped 6% in 2019, reporting the first decline in 4 years. The baby steps we took to slowly move away from Coal for our electricity production is paying off.
Hit that 💚 if you liked today’s issue.
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Hi, ma'am. Would you be able to recommend some paid/unpaid resources for detailed analysis of M&A and PE deals in India?