Where to Invest in Technology Right Now

Ladies and gentlemen, good morning once again, Christian. I'm delighted to welcome you for the first time to the Qatar Economic Forum. Thank you. It's been great to be here. We're going to cover a lot of ground. I'd like to begin, Christian, by talking about investing in technology. It's one of the things that we're here to do. Everybody wants to know about artificial intelligence, don't they? Yes, they do. Mistral, a French company involved in AI, recently raised money at a $6 billion valuation. Open AI has tripled to $80 billion in 10 months. NVIDIA has a market cap of $2.3 trillion. And Microsoft, which is spreading its bets everywhere in AI. Is it 3.1 trillion Christian? Is there any value left in AI? This is a great question. I think the big speculation these days is you know for the companies that are doing a like Open AI, how do you value those companies? You know there's so much future potential and but but we don't yet know what the future will look like. So that is extremely complicated actually. But I feel that this is a history repeating itself a bit. If you think back to when Google was a tiny company and it went public at a wild valuation, everybody thought it felt like the same. Who would have known that was a multi trillion dollar company today? So, So if I look away from from the valuation question, I think there's no doubt that AI is changing the world, the world of business, the society in many ways and that there are lots of other angles into investing into the AI space without having to deal with that particular question. So let's talk about that. How do you play AI without playing AI? Yeah. So across EQT, we have venture capital and private equity infrastructure etcetera and and we do on the ventures and growth side, we're investing in called the tools and the shovels, you know software that's serving AI, hardware that's serving AI, companies that are using apps that are using AI and all kinds of different features around that network. And in the infrastructure we're going a totally different path. Of course there were part of digitizing society. So there it's fiber broadband, it's data centers, towers, etcetera, because the need for data is massively increasing. So there are a lot of other areas of investment that support this whole AI wave that's out there. What people want to know though is, is there potential in those areas for genuinely handsome returns? Because when people think about AI and whether to commit capital to AI, they worry not without reason that all the value is going to accrue to the LLM developers, right. The open a eyes, for example, or the real arms merchants, the Nvidias. Yeah, you can, you can argue that. And I and I think Google itself is concerned, right? Because if you use ChatGPT, you probably do. We do, I do all the time. That means I'm not using the search mechanism any longer. And that that powers a huge part of their income, right? The whole advertising model, the interactivity, the cookies, all these kinds of things. So their business models are changing. So I think there's certainly shifts in business that are going to be impacted by this across many different types of companies and value chains. But if you look in the long term, you think now the next generation now is introducing voice, video interactivity at a scale which we've never seen before. Maybe the change that's coming is about the same as when we got the iPhone 1st and of course all the applications that are needed to handle that. And even we also invested another angle into this, which is tech services. So primarily Indian companies that are that are helping companies move into the cloud or move into AI because almost every industry is impacted by AI, very few people have the competence. So if we own the companies that have that competence to help them, there you go. The reality of course is that EQT is a $250 billion firm and you invest not just in AI, but in technology and other areas. Let's let's talk about technology as distinct from LIAI. How do you think about it and where are you looking for opportunities? Yes, so if you look away from AI, where we're investing in, it's in a number of different areas across the firm. We're trying to find long term secular themes in society. One of them is the digitalization of society. The other one is let's call it sustainability, you know moving new end to new energies for example as fossil fuels over time run out and the aging society. So the number of themes that we demographics so and that goes into the healthcare space, that's a big part of our business. The other big part of our business is technology and there we have, we invest in software companies across across all value chains really we invest in technology companies that are serving some of those sectors that I just mentioned serving these the the green you know space Agritech is a big area and and then we we have industrial technology companies. So robotics, automation, humanoid robotics is a very exciting space. We own a company called 1X, which is one of the possible winners in the humanoid robots race. Time will tell, it's very early. So if you think about technology, it's an enormous space actually And and and what we try to do is try to find the mega trends, break that down into, you know, trends that we can invest behind and invest from different angles into those trends. Could you be a futurist for a moment and share with us what you think a humanoid robot is going to be doing for us 10 years from now? I think you'll come into the Bloomberg office and and the humanoid robot will receive you in the reception, help you find your meeting rooms, serve you coffee, clean the clean the offices when everybody's leaving, security, handling security, that kind of stuff. But also if you break it down into another part of the world, like, you know, warehouses for example, you know, the robots can of course work 24/7. They don't get back pain or neck pain. They're strong, stable and these are actually use cases that are already happening. All the things I just mentioned, they are you can watch some videos of our company for example, or some other ones where all those things are happening. Not yet perfectly though. For EQT, which as you've explained operates as AVC investor or growth equity investor or private equity investor, where's the optimal place to participate in technology? Because in VC 9 out of 10 companies fail in growth, you have to find the right time to enter. And of course in private equity it beats. These days it's less about financial engineering and more about creating value and optimizing business models. What's the optimal spot? That's the ultimate question, isn't it? Sometimes I'm asked slightly differently, what's your, you know, what's my favorite asset class amongst all of our asset classes. And and I end up actually saying even though I grew up in private equity, I end up saying infrastructure. Because if you think about the transformation that society is going through now on the digital side and moving electrifying the world, basically not just the transportation sector, not just the energy sector, but over time also the manufacturing sector and the investments that are needed. And that's in both of those spaces or all those spaces is massive and you're providing essential services to society. And then we add the venture capital private equity mindset to it, so we can expand those companies, create better services etcetera and better companies. So that's a that's a probably my what I'm most intrigued about right now Europe is EQ TS backyard you live in Zurich. In fact tell us is what is what's going on in European technology, excuse me, competitive with what's going on in American tech. No, it's not competitive with American tech and and that is something which is which is a challenge, a big challenge. You know if you look at the, you know there are there are no trillion dollar companies in Europe particularly not in tech. We're quite good at life sciences, pharma, Nova Nordisk for example. You know, it's a fantastic company in Denmark, right around the corner from us. But in technology, it's the issue and I think that there are multiple levels of problems. It's access to capital, it's different regulatory regimes across countries. It's a possibility for exits. And it's like, you know, the Silicon Valley of course is the ultimate example. The like there's a value chain there from the early, early startup Angel investors all the way to the public markets and you, you know and the universities and everybody's working to get that company up. And since Europe so fragmented, you don't have anywhere where that's really successful. Sweden's pretty good at it actually where our company is from, but it's a fraction of of Silicon Valley. Does Europe recognize that it has this problem? Yes. We're part of a a big delegation in the EU that was led to as a kick started by President Macron in France to to help attack some of these areas. So mobility of Labor, mobility of capital unified, you know, creating rather than every country having a Stock Exchange, Shouldn't we have a European Stock Exchange Federated stock, Yeah, like a Federated, a big one. I mean we're traded on the NASDAQ, but that's NASDAQ Stockholm. Why isn't that connected to the rest of Europe? You know, so, so all these elements and actually when we were doing that study, which was a two years ago or something, the majority of capital into growth companies was coming from America and the majority of exits above a certain level, we're in America. So. So if you don't have the capital, you don't have the exits, of course you're losing a lot of the value creation. That's not good. What about regulation? The European Union, as many of you probably know, has GDPR, it has the Digital Markets Act, it has the AI Act, It has many other pieces of legislation. Is Europe over regulating tech? Is that partly to explain for this lack of competitiveness? It may be, although there's a lot of regulation in America as well as you know and there are tariffs being implemented and all kinds of trade barriers and stuff. So I I think this is a global trend unfortunately. But the fact that Europe is so fragment that I just talked about and you put regulation on top of it, of course that that makes it harder. I think if you compare the Green Deal versus the Inflation Reduction Act, really interesting. So we did that actually a few months ago and they're not that dissimilar in size, but the IRA is much more effective because it actually provides cash. It deregulates and it's quick. And the year has the problem that they have the same ideas, but you get credits instead of cash, takes longer and regulation is harder to, let's say harder to to weave through. So there is an issue there. Yes, Christian, I suspect there may be some of your LP's in this room right now and they recognize the private equity has a bit of a problem. It is difficult to exit investments and return capital to your limited partners. How are you solving for that problem? Thank you. We have actually more than more than 10 years ago we started shifting our mindset in private equity and how we manage our funds to make sure that what happens is a typical private equity fund as they end up at the end of the life with a relatively few companies that are underperforming and are hard to exit and then you got out of all your good ones early. So it's the opposite of financial theory. You sell the the winners and you and you keep the dogs. So we switched that around which our industry has been slow to do and we did it. So we run with the winners and and try to you know sell the dogs rather if I may use that expression and and that means that we we were lucky coming into the cycle that we've we've sold a lot of companies but what we're doing now is is trying to innovate. So first of all we're we're we we built a A-Team around exit so we can be the best at providing the markets with healthy and good IPOs. We just took Galderma public in Switzerland that went very well. So we can actually really really make sure we understand which companies should go to the Stock Exchange. How do we do that in the best possible way. How do we create long term success and of course all the different private avenues to families, to industrial groups, to to financial groups, etcetera. And then we're also trying to innovate with something we call private IPOs, which is kind of, if you think about it, pretty simple. If a company here is going public, you make a market in the shares, it starts to trade, we could just keep it in our ecosystem, create a market in the shares and continue to run with it. And so this is something we're trying to do this year together with some of our, our big clients and hopefully that'll create yet another alternative to create liquidity because there's a lot of capital, there's $10 trillion in in private markets. We have more than 1200 institutional clients at EQT and a typical IPO, there's only 150 or 200. So why couldn't we do that? When I read about that for the first time, I thought what a clever alternative to the continuation fund. I agree. One of your company's Waystar, which simplifies healthcare payments is trying to raise a billion dollars in a USIPO. How important a test for the IPO market in America will that be? I think it is going to be important. There haven't been that many IPOs yet, maybe 10 or 20 or something like that. Luckily I think that performed reasonably well with the exception of a couple and and this is a sizable company, you know pardon me five, six, $7 billion whatever it's the valuation ends up being. So it's sizable, it's in a really interesting sector and it's in a billion dollar IPO in the US is, is pretty big actually. So I think it will be important and you know ref my other comment that we're trying to be really, really good at this and think very long term because when we take a company public, we're typically owners of that company three more years. And so we're doing our best to make sure that that goes well. Sovereign wealth funds in this part of the world, the QIA included of course have become very important partners for firms like yours. I had the opportunity to speak to Muhammad Al Sawaidi who is Qi as CIO for the Americas yesterday and he was talking with some sense of satisfaction about how much leverage investors like QIA have over their GPS these days. Is that something you feel acutely That's a good way to ask the question. I'd rather say that it's it's pretty impressive what this what's what this region has been able to create in terms of capital base you know growing populations growing economies and a real willingness to invest in innovation in the future whether it's infrastructure locally or whether it's global companies etcetera. So, so we have we're lucky to have partners all over the region and we try to work with them in funds and direct investments and and and create a partnership spirit. I think as the way I would say EQT has taken some pains to distinguish itself from the rest of the private equity industry. How will you distinguish yourself further in the future? It's a good question. Again the the way I would answer it is that is that we are we like to go our own way. So if you look at EKT today, all of our strategies connect with active ownership. We own shares in the company or we own the building we own or we own typically Co controlling or Co controlling stakes. So when you have EKT as a shareholder there's something happening, we're helping Dr. transformation driving that company to the future driving change. Sometimes things are tough. We need to fix those problems together. We don't have any passive financial products. So we don't have any insurance products. We don't have any credit products, those kinds of things. And because it's a totally different mindset, that's an allocation mindset. It's an AUM game and some of our peers are playing that game. That's not for us. You know, we're here to create the most value that we can in a responsible way and we're in the performance game, you know, rather than the AUM game. One of the ways in which you've distinguished yourself is by being a willing buyer of businesses that help you enter new markets or perhaps new products. In 2022, EQT made the then largest ever purchase of a private equity firm, if I'm not mistaken BPEA in Hong Kong for north of $7 billion. Since then of course BlackRock has bought GIP and infrastructure Company for 15 billion, so that's bigger. But I'm curious to know and I think people here might want to know do acquisitions remain an important part of your strategy and how healthy is your appetite? Yeah, it will. I mean you look at the whole industry, there are something like 7500 PE firms in the world and there is a consolidation ongoing driven by some of the forces we've talked about and also driven by the need for. You need a lot of competence around AI, digitalization, sustainability, reporting, compliance, regulation, you name it, you get that big scale, you get it from scale and if you're small that's going to take way too much time rather to join a big platform. We already took care of it and then you can just continue investing. So the consolidation is going to continue big time and some will be out competed. I think this next cycle is going to be pretty tough. The tide was rising all boats from 2010 to to 21. Now it's back to fundamental value creation. So we think we'll we'll we will be one of the consolidate tours, yes, I don't see that many deals of the size that the BPA and GIP, there aren't that many firms of that scale. But I think you know regional or niche players in certain areas, specialists certainly will will you know will join forces with us and we'll continue to grow. Ladies and gentlemen, Christian sending.

OTHER NEWS

13 minutes ago

Dr Malinga's good deed overshadowed by curios netizens

13 minutes ago

Dangerous weather warning for entire state

13 minutes ago

Christ the Redeemer decorated with a colorful carpet to celebrate the Catholic holiday of Corpus Christi

13 minutes ago

Do the dividends from Westpac shares still come fully franked?

13 minutes ago

Latest news bulletin | May 30th – Morning

13 minutes ago

‘Long standing congestion issues’ to be removed with extra Belfast, Galway, Waterford train routes

13 minutes ago

North Korea's Missile Launches Escalate Regional Tensions

13 minutes ago

Real Madrid star rules himself out of Champions League final

13 minutes ago

Skydance Sweetens Merger Offer for Paramount

13 minutes ago

Akani Simbine victorious in men's 100m, remains undefeated in Diamond League this year

13 minutes ago

Stocks making the biggest moves after hours: Dell Technologies, MongoDB, Zscaler, Gap and more

13 minutes ago

Jewish firefighter group accuses FDNY of not treating them like other ethnic organizations

13 minutes ago

Trump blasts out fundraising appeal after ‘hush money’ verdict, says he’s a ‘political prisoner’

13 minutes ago

Blake Lively dazzles in a sheer pearl-embellished dress and satin bodysuit while on the set of the anticipated sequel A Simple Favor 2 in Rome

13 minutes ago

'An outrageous day in America': Caitlyn Jenner leads fury as Trump is found guilty on all counts in hush money trial

13 minutes ago

Stunned Trump fans burst into tears outside courthouse as he's found guilty on all counts

13 minutes ago

Wonder Woman star Lynda Carter, 72, teases 'hot new single' for summer called Pink Slip Lollipop: 'This one's for the ladies'

13 minutes ago

Secret Service under scrutiny due to Kamala Harris' agent 'physically attacking' supervisor and other incidents of 'inadequate training'

13 minutes ago

Lindsie Chrisley speaks out about 'chosen family' amid ongoing estrangement from sister Savannah and jailed parents Todd and Julie

13 minutes ago

Video: Ruth Langsford is still wearing her wedding ring as she brushes off Eamonn Holmes divorce for cheerful appearance on QVC after it was revealed work commitments 'took their marriage in different directions'

13 minutes ago

Video: Trump ridicules Robert De Niro with a deepfake video of his court rant saying he is a 'scared little man' who needs Biden in power for his 'perversions'

13 minutes ago

Video: Trump fan tries to smother Biden supporter with her chest outside courthouse as nervous fans on both sides await hush money trial verdict

16 minutes ago

Pirates' Paul Skenes is already worthy of All-Star selection

16 minutes ago

BHP's takeover bid of Anglo American got 'too expensive'

16 minutes ago

Biden partially lifts ban on Ukraine using US arms in strikes on Russian territory, US officials say

16 minutes ago

Brisbane girl hopes to be first female Formula One champion after being hand-picked for global driving program

16 minutes ago

True Religion Develops a Blue Jean Meant to Shape Your Butt

16 minutes ago

Josef Newgarden on running Indy 500 and NASCAR Charlotte race double: 'I want to, so bad'

17 minutes ago

Lenny Kravitz reveals he hasn’t been in a relationship for nine years

18 minutes ago

'Wheel of Fortune' contestant unaware he gave wrong answer, celebrates win until Pat Sajak steps in

18 minutes ago

Trump Hush Money Trial Verdict: Guilty On All The 34 Counts – See Each Of The Charges

18 minutes ago

Citizen survey says quality of life has worsened in Kelowna

18 minutes ago

Pimicikamak Cree Nation, Man. teenager shot, RCMP looking for answers

19 minutes ago

Robinson: Saquon set to see 'space like he's never seen before' with Eagles 'Schedule Release '24'

19 minutes ago

Coalition possibilities for political parties now under way as counting reaches 50%

19 minutes ago

Judge Aileen Cannon Seeks Briefs From Donald Trump Lawyers On Supreme Court Case

19 minutes ago

Latest news bulletin | May 30th – Evening

19 minutes ago

Under the Bridge Finale Recap: Life After Death

19 minutes ago

Why the Dow’s Topsy-Turvy May Isn’t a Sign of a Broader Market Panic

19 minutes ago

Mets Morning News for May 30, 2024