Tech Thoughts Newsletter – 28 March 2024.

This week’s update highlights new AI features unveiled at the Adobe Summit, BYD surpassing Tesla in electric vehicle sales in Q4, and Apple facing challenges in the Chinese market.

Market: The week was marked by a shortened trading period and low volatility. However, we did observe some repositioning ahead of the quarter’s end.

Portfolio: We increased our position in Broadcom during the week. The company is ranked second worldwide in terms of GPU supplies.

Adobe (not owned) held its Summit Designer conference. The key focus was on the release of new AI features across the portfolio. There were a number of improvements to Firefly Services and the introduction of Custom Models, enabling brands to train their own models for brand-building purposes. GenStudio is assisting clients in quickly creating visual assets with GenAI and automating the creative-to-marketing workflow. The company also announced a new partnership with Microsoft, integrating marketing insights and workflows from Adobe Experience Cloud with Microsoft 365 and Copilot.

Our view is that AI development in the entire industry is proceeding at warp speed, and a very large number of new tools are being released. One thing we did miss from the new tools released by Adobe was a competitor to OpenAI’s tool Sora, a text-to-video tool.

Apple (small position): According to data from the China Academy of Information and Communications Technology, Apple’s iPhone sales fell by approximately 33% year-over-year in China in February. The data indicated that 2.4 million foreign phones were shipped in February, with Apple constituting the vast majority. In January, Apple’s sales fell by 39% year-over-year, according to the same source.

Our view is that China, being the second-largest market for Apple iPhones, presents a challenging environment for the company at the moment.

BYD (not owned) surpassed Tesla as the number one supplier of EV cars in the world. However, their sales growth slowed down in Q4 to 15%, while shipped car volumes were up 38% year-over-year. This clearly indicates that the average selling price (ASP) of the cars is trending downward due to price pressure and the production of more affordable EVs. The company sold 526,000 fully electric vehicles in Q4. The profit increased by 18.6% year-over-year, marking the slowest growth rate since Q1 2022.

TD Synnex (not owned), a large distributor of PCs, reported results that were slightly better across all levels. More importantly for us, the company sees an improving IT spending environment with PC demand stabilizing. The company even expects that the AI PCs to be released during the summer will boost demand and ASP in the second half of the year. AI PCs are expected to constitute a single-digit percentage of the market in the second half of this year but will grow rapidly in 2025. The company further states that it sees strong demand from its partnership with Nvidia and that its push of Microsoft Copilot out to partners has met with a strong response.

For enquiries, please contact: Inge Heydorn, Partner, at inge.heydorn@gpbullhound.com and Nejla-Selma Salkovic, Associate, at nejla-selma.salkovic@gpbullhound.com

About GP Bullhound: GP Bullhound is a leading technology advisory and investment firm, providing transaction advice and capital to the world’s best entrepreneurs and founders. Founded in 1999 in London and Menlo Park, the firm today has 13 offices spanning Europe, the US and Asia. For more information, visit www.gpbullhound.com