SVB’s failure will have a ripple effect across technology ‘for years to come’
Silicon Valley Bank’s collapse could have ramifications for the technology landscape over the coming years, analysts and investors said.
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Silicon Valley Bank was the backbone of many startups and venture capital funds around the world. The effects of its collapse, the biggest banking failure since the 2008 financial crisis, is likely to be felt across the technology landscape globally over the coming years.
“With SVB in essence the Godfather of the Silicon Valley banking ecosystem for the past few decades in the tech world, we believe the negative ripple impact of this historical collapse will have a myriad of implications for the tech world going forward,” Dan Ives, analyst at Wedbush Securities, said in a note on Tuesday.
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SVB’s collapse began last week when it said it needed to raise $2.25 billion to shore up its balance sheet. Venture capital firms told their portfolio companies to withdraw money from the bank and other clients looked to get their cash before it became unobtainable. This effectively led to a bank run.
The bank had to sell assets, mainly bonds, at a massive loss.
U.S. regulators shut down SVB on Friday and took control of its deposits. Regulators then said Sunday that depositors at SVB would have access to their money, in a move aimed at stopping further contagion.
But the episode has the potential to impact the technology world in several ways, from making it harder for startups to raise funds to forcing firms to change their business model, according to investors and analysts who spoke to CNBC.
‘Last thing we needed’
SVB was critical to the growth of the technology industry, not just in the U.S. but in places like Europe and even China.
The 40-year old institution had an intimate link to the technology world offering traditional banking services as well as funding companies that were deemed too risky for traditional lenders. SVB also provided other services like credit lines and lines to startups.
When times were good, SVB thrived. But over the past year, the U.S. Federal Reserve has hiked interest rates, hurting the once high-flying technology sector. The funding environment has got harder for startups in the U.S., Europe and elsewhere.
SVB’s collapse has come at an already difficult time for startup investors.
“This whole Silicon Valley Bank thing is the last thing we needed and was completely unexpected,” Ben Harburg, managing partner of Beijing, China-based venture capital fund MSA Capital, told CNBC.
Startups have had to tighten their belt while technology giants have axed tens of thousands of workers in a bid to cut costs.
In such an environment, SVB played a key role in providing credit lines or other instruments that allowed startups to pay their employees or ride out hard times.
“Silicon Valley Bank was very paternalistic to this sector, they not only provided payroll services, loans to founders against their illiquid credit, but lines of credit as well. And a lot of these companies were having trouble already raising equity and they were counting on those lines to extend their runway, to push out the cash burn beyond the recession we all expect.” Matt Higgins, CEO of RSE Ventures, told CNBC’s “Street Signs Asia” on Tuesday.
“That evaporated overnight and there’s not another lender that’s going to be stepping in to fill those shoes.”
Paul Brody, global blockchain leader at EY, told CNBC on Monday that a crypto firm called POAP, which is run by his friend, has half of the company’s money tied up in SVB and can’t get it out. The amount at SVB is “more than payroll can cover.” Patricio Worthalter, founder of POAP, told CNBC that the company had a “substantially high amount” of its treasury in SVB and has managed to retrieve 50%. However, payroll was “never at risk” and the company has “solid credit lines to tap into” if required, the founder added.
‘Reboot’
The SVB collapse will also likely put the focus on startups to pivot to profitability and be more disciplined with their spending.
“Companies will have to reboot the way they think about their business,” Adam Singolda, CEO of Taboola, told CNBC’s “Last Call” on Monday.
Hussein Kanji, co-founder of London-based Hoxton Ventures, said that over the next three years there will be more restructurings at companies, though some are holding off.
“I’m seeing a lot of ‘kick the can down the road’ behavior which isn’t that helpful. Do the hard things and don’t delay or procrastinate unless there is very good reason to. Things don’t often get easier in the future simply because you wish for them to,” Kanji told CNBC via email.
Wedbush’s Ives said that there could also be more collapses, adding that early stage tech startups with weaker hands could be forced to sell or shut down.
“The impact from this past week will have major ripple impacts across the tech landscape and Silicon Valley for years to come in our opinion,” Ives said in a note Sunday.
—CNBC’s Rohan Goswami and Ari Levy contributed to this report.
The X logo appears on a phone, and the xAI logo is displayed on a laptop in Krakow, Poland, on April 1, 2025. (Photo by Klaudia Radecka/NurPhoto via Getty Images)
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Elon Musk‘s xAI Holdings is in discussions with investors to raise about $20 billion, Bloomberg News reported Friday, citing people familiar with the matter.
The funding would value the company at over $120 billion, according to the report.
Musk was looking to assign “proper value” to xAI, sources told CNBC’s David Faber earlier this month. The remarks were made during a call with xAI investors, sources familiar with the matter told Faber. The Tesla CEO at that time didn’t explicitly mention any upcoming funding round, but the sources suggested xAI was preparing for a substantial capital raise in the near future.
The funding amount could be more than $20 billion as the exact figure had not been decided, the Bloomberg report added.
Artificial intelligence startup xAI didn’t immediately respond to a CNBC request for comment outside of U.S. business hours.
The AI firm last month acquired X in an all-stock deal that valued xAI at $80 billion and the social media platform at $33 billion.
“xAI and X’s futures are intertwined. Today, we officially take the step to combine the data, models, compute, distribution and talent,” Musk said on X, announcing the deal. “This combination will unlock immense potential by blending xAI’s advanced AI capability and expertise with X’s massive reach.”
Read the full Bloomberg story here.
— CNBC’s Samantha Subin contributed to this report.
Alphabet CEO Sundar Pichai during the Google I/O developers conference in Mountain View, California, on May 10, 2023.
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Alphabet‘s stock gained 3% Friday after signaling strong growth in its search and advertising businesses amid a competitive artificial intelligence environment and uncertain macro backdrop.
“GOOGL‘s pace of GenAI product roll-out is accelerating with multiple encouraging signals,” wrote Morgan Stanley‘s Brian Nowak. “Macro uncertainty still exists but we remain [overweight] given GOOGL’s still strong relative position and improving pace of GenAI enabled product roll-out.”
The search giant posted earnings of $2.81 per share on $90.23 billion in revenues. That topped the $89.12 billion in sales and $2.01 in EPS expected by LSEG analysts. Revenues grew 12% year-over-year and ahead of the 10% anticipated by Wall Street.
Net income rose 46% to $34.54 billion, or $2.81 per share. That’s up from $23.66 billion, or $1.89 per share, in the year-ago period. Alphabet said the figure included $8 billion in unrealized gains on its nonmarketable equity securities connected to its investment in a private company.
Adjusted earnings, excluding that gain, were $2.27 per share, according to LSEG, and topped analyst expectations.
Alphabet shares have pulled back about 16% this year as it battles volatility spurred by mounting trade war fears and worries that President Donald Trump‘s tariffs could crush the global economy. That would make it more difficult for Alphabet to potentially acquire infrastructure for data centers powering AI models as it faces off against competitors such as OpenAI and Anthropic to develop largely language models.
During Thursday’s call with investors, Alphabet suggested that it’s too soon to tally the total impact of tariffs. However, Google’s business chief Philipp Schindler said that ending the de minimis trade exemption in May, which created a loophole benefitting many Chinese e-commerce retailers, could create a “slight headwind” for the company’s ads business, specifically in the Asia-Pacific region. The loophole allows shipments under $800 to come into the U.S. duty-free.
Despite this backdrop, Alphabet showed steady growth in its advertising and search business, reporting $66.89 billion in revenues for its advertising unit. That reflected 8.5% growth from the year-ago period. The company reported $8.93 billion in advertising revenue for its YouTube business, shy of an $8.97 billion estimate from StreetAccount.
Alphabet’s “Search and other” unit rose 9.8% to $50.7 billion, up from $46.16 billion last year. The company said that its AI Overviews tool used in its Google search results page has accumulated 1.5 billion monthly users from a billion in October.
Bank of America analyst Justin Post said that Wall Street is underestimating the upside potential and “monetization ramp” from this tool and cloud demand fueled by AI.
“The strong 1Q search performance, along with constructive comments on Gemini [large language model] performance and [AI Overviews] adoption could help alleviate some investor concerns on AI competition,” Post wrote in a note.
WATCH: Gemini delivering well for Google, says Check Capital’s Chris Ballard
CNBC’s Jennifer Elias contributed to this report.
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