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SaaS Sector Struggles: Underperformance Against Nasdaq Amid Slowing Growth

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The average public Software as a Service (SaaS) company is expecting sub-20% growth for the first time. Factors causing this downturn include customers reducing SaaS spend and increased budget allocation towards AI development. Additionally, price hikes and inflation are consuming budgets. SaaS and cloud companies, which once boasted a premium over Nasdaq, are now underperforming. Consequently, venture capital investments in SaaS appear less attractive than investments in Nasdaq.

đź’ˇ Insight: The SaaS sector, once a reliable outperformer, is facing headwinds with average growth rates falling below 20% for the first time. Factors include ongoing budget cuts, AI-driven budget reallocation, and absorption of prior tech investments. Investors now need to seek standout performers rather than relying on overall sector strength.

Mission-critical SaaS will undoubtedly maintain stellar performance, while the "nice-to-haves" are set to encounter a more challenging environment.

Venture capital firm Andreessen Horowitz (A16z) is accumulating thousands of GPUs, including Nvidia's H100 processors, to attract AI startup deals. The firm, managing $42B assets, has loaned these GPUs to its portfolio companies and plans to increase this inventory to over 20,000 GPUs. The usage of GPUs as collateral has been witnessed previously with Nvidia-backed CoreWeave’s $2.3B debt raised last year.

💡 Insight: Andreessen Horowitz’s strategic GPU deployment underlines the growing necessity of computational power in securing AI startup deals. This move could set a precedent for venture firms pivoting to hardware investments to bolster AI portfolio competitiveness. The move could also be risky if the current AI boom cools off and the venture firms end up with GPU inventory and no new investments.

Meta, formerly known as Facebook, is developing a new small language model (SLM) that's compatible with mobile devices, focusing on more efficient energy consumption and smaller computing infrastructure needs. The company's researchers argue that smaller models with less than a billion parameters can enable generative AI across many applications on mobile devices. Upon testing, they found that such models, such as the 125 and 350 million-parameter MobileLLM, are just as effective as their larger counterparts in handling tasks like chat and API calling.

Klarna has teamed up with Adobe Commerce to extend its buy now, pay later (BNPL) services to more customers. This agreement follows Klarna's launch of a subscription service enabling customers to dodge service fees while gaining rewards and promotions. Meanwhile, consumer adoption of BNPL services is booming with a reported 11% growth this year. Despite this surge, BNPL options have a premium price, putting pressure on struggling consumers who have embraced this form of payment.

Despite concerns that artificial intelligence (AI) chatbots like OpenAI's ChatGPT could undermine Google Search, the tech giant has seen a nearly 60% increase in profits due to rising ad revenue from search. Bank of America reports Google's global search market share rose to 91.1% in June as ChatGPT's web visits fell 12%. Google's integration of its own AI, Gemini, may be driving this growth. However, Google's increasing dominance in digital search may face pushback from antitrust regulators.

Microsoft Azure AI has successfully bypassed OpenAI's restriction on API access in China, affirming a significant victory for Microsoft's cloud and AI ambitions. Despite OpenAI blocking its API usage in unsupported countries, Chinese developers can still utilise these models via an Azure account, considering Microsoft and OpenAI's integral relationship. This workaround, confirmed by multiple customers, is substantially advantageous for Microsoft, OpenAI, and Chinese AI developers.


UiPath Shares Dip 8% Amid Major Restructuring and Workforce Reductions - Following a restructuring plan announcement, UiPath's shares fell 8%. Increased deal scrutiny, lengthening sales cycles, and doubts about growth strategy intensify investor concern, further pressuring share prices.

Unlikely AI Reveals Neuro-symbolic Strategy and New Senior Hires - Alexa co-creator's company, Unlikely AI, adopts a ""neuro-symbolic"" approach, blending neural and symbolic AI types. With two new senior hires, the firm aims for a trustworthy, energy-efficient AI platform.

Quora's Poe Launches Previews; Enables Streamlined Web App Creation - Quora's Poe has launched Previews, a feature for creating interactive apps within chatbot dialogues. Despite criticism over alleged breaching of paywalls, Previews supports HTML output from any chatbot.


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