Page 58 - Bloomberg Businessweek - November 19, 2018

Bloomberg Businessweek The Year Ahead 2019 Technology

detection startup that raised about $550 mil- the five largest deals, led by hardware giant
lion in venture funding in less than six years. This Xiaomi, controversial Apple supplier Foxconn,
slice of the biotech industry has no trouble rais- and service- booking empire Meituan Dianping.
ing private cash—rival Grail Inc. has raised even America’s Year of the IPO is far from
more than Guardant—yet Guardant went public guaranteed. ( Just ask those Y2K investors.)
in October. “We believe that becoming a public Broader market shifts away from risk can dampen
company gives us the awareness that’s necessary demand for company stocks with no history.
for this important story,” Chief Executive Officer Trade disputes and other political unknowns can
Helmy Eltoukhy said on Guardant’s first day of complicate pricing. And the 10-year bull market
trading. The stock is up 88 percent since then, giv- can’t last forever. But 2018’s surfeit of volatility
ing the company a $3 billion valuation. has made investors even more eager for the rel-
Elsewhere in the world, jumbo startups have atively safe bets they see in big consumer inter-
already been headed this way. Global tech and net companies, says Gary Kirkham, head of global
communications IPOs accounted for $42 billion in technology banking at Bank of America Corp.
stock sales in 2018, the most in four years. Of the “That’s the most capitalized space,” he says, “and
top 20 biggest such deals, 14 were companies from what public investors are willing to assign good
outside the U.S. Nine hailed from Asia, including multiples to.” <BW> �Alex Barinka

Chips downgrade of a broad swath of companies,
including Intel Corp.
Chipmakers are also enmeshed in some of
the world’s most complex supply chains, mak-
ing them especially vulnerable to trade disputes.
▷ Off quarters for a hot company Micron named tariffs as a concern after its latest

30 highlight wider concerns earnings and said it’s working to address them.
Mehrotra dismisses concerns that the industry
might flood the market with chips and crash its
During Micron Technology Inc.’s latest quar- own prices, as it often has. He says his handful ▼ Micron’s hardware,
such as this solid-state
terly earnings call in September, Chief Executive of rivals, such as Samsung Electronics Co., are drive, is considered an
Officer Sanjay Mehrotra told those listening squarely focused on profit, not market share. industry bellwether
to think of the memory-chip maker’s disap- Given the numbers, investors remain skep-
pointing sales forecast as a temporary detour. tical. The Philadelphia Stock Exchange
Investors want to believe this sort of thing. For Semiconductor Index, which has out-
four of the past five years, Micron has been a run the broader indexes in
market favorite, proof of the industry’s endur- four of the last five
ing growth potential. years, has lagged
But inventory buildups and steady price drops the S&P 500 in
undermine the industry line that an expanding 2018. And the indus-
range of new data-hungry artificial intelligence try itself seems to
technologies, including driverless cars, will think the boom is
steadily fuel demand. With the chips business over, according to
an unprecedented five years into a boom, the veteran chips inves-
consensus is building that winter is here. tor Daniel Morgan,

Analysts say the $400 billion industry ought a portfolio manager
to worry about its reliance on data center at Synovus Financial
construction. The Big Five tech companies— Corp. He estimates
Apple, Amazon.com, Google parent Alphabet, chip makers will
Microsoft, and Facebook—spent $80 billion on spend a combined
big-ticket physical assets in the last year, dou- $27.3 billion on new

ble what they spent in 2015. Such massive invest- plants and equip-
ments can’t continue, analysts argue, nor can the ment next year,
knock-on effects for chipmakers. “We’ve seen down 3.3 percent
this movie before,” Raymond James Financial from 2018. <BW>
Inc. analyst Chris Caso wrote in his recent �Ian King