‘Utterly irresponsible’: SVB failure was caused by a banking — not tech — crisis, top VC says
Dado Ruvic | Reuters
LONDON — The collapse of Silicon Valley Bank was the result of a crisis in banking rather than technology, according to a top venture capitalist.
Anne Glover, CEO and co-founder of Amadeus Capital, said Friday that the SVB crisis was caused by “utterly irresponsible” practices by Silicon Valley Bank and its management — namely, taking short-term deposits from VCs and investing them in long-maturity debt.
“It is a banking one-on-one failure, unbelievably irresponsible frankly by the senior management of SVB in California,” said Glover, speaking at a tech investor showcase in east London. A spokesperson for SVB wasn’t immediately available for comment when contacted by CNBC.
SVB was shut down and taken over by the U.S. government after a slew of startups and venture capitalists withdrew their money en masse amid fears over its financial health.
The firm had earlier tried to raise $2.25 billion of capital to plug a $1.8 billion hole in its balance sheet caused by the sale of $21 billion worth of bonds at a loss. The bank was a crucial pillar of the tech industry, offering financing for firms often turned away by the traditional banks.
“They took cash deposits from VCs and hedge funds and put them into first-year mortgage bonds that fell in value when the interest rates went up,” Glover added.
“They didn’t hedge the interest rate. This is really basic banking, it’s nothing to do with the tech community. The tech community was impacted.”
Across the Atlantic, SVB’s U.K. arm was sold to British bank HSBC for £1, in a government and Bank of England-facilitated deal that protected £6.7 billion ($8.3 billion) in deposits.
Glover, who serves on the Bank of England’s board as a non-executive director, said the central bank “did a phenomenal job in delivering a resolution that was satisfactory to the U.K., much better than the U.S. did.”
Banks more broadly have been under immense strain due to a rise in interest rates, which has made debt more expensive. While on the one hand it is now more profitable for banks to lend, they are also holding government bonds on their balance sheet. When interest rates rise, those assets become less valuable.
Credit Suisse is the most notable failure in the sector to date. The Swiss banking giant was rescued by rival lender UBS in a cut-price deal coordinated by the Swiss government.
Glover, a prolific tech investor, joined Amadeus after previously running Apax Ventures. She co-founded Amadeus in 1997 with Hermann Hauser, who was instrumental in the development of the first Arm processor.
Cheng Xin | Getty Images
Applied Digital shares jumped 16% on Friday after the company posted strong first-quarter revenue that was boosted by artificial intelligence data center demand, putting the stock up more than 350% for the year.
Here’s how the company did compared to LSEG estimates:
- Loss per share: Loss of 7 cents vs. a loss of 13 cents expected
- Revenue: $64.2 million vs. $50 million expected
First quarter revenue of $64.2 million was up 84% from a year ago, when it reported $34.85 million in revenue.
The data center company reported earnings after the bell on Thursday.
During the quarter, Applied Digital built on its $7 billion lease agreement with CoreWeave that was announced in June for another 150 megawatts at the firm’s Polaris Forge 1 campus in North Dakota. The additional capacity brings the anticipated contracted lease revenue for the project up to $11 billion.
“With hyperscalers expected to invest approximately $350 billion into AI deployment this year, we believe we are in a prime position to serve as the modern-day picks and shovels of the intelligence era,” CEO Wes Cummins said in a release.
The new 150 MW building will join two other data cell blocks, each hosting 100 MW and 150 MW. The company noted that one building is nearly complete and construction will begin on the other.
Applied Digital also secured funding from Macquarie Equipment Capital for a second campus in North Dakota, dubbed Polaris Forge 2. The estimated $3 billion factory will hold two 150 MW buildings, bringing the total leased capacity to 600 MW across both campuses.
An initial 200 MW of power is expected to come online in 2026 and reach full capacity in 2027, the company said.
The company had a net loss of $18.5 million in the first quarter, a loss of 7 cents per share. A year ago, the company posted a net loss of $4.29 million, a loss of 3 cents per share.
Analysts polled by LSEG expect a loss of 15 cents per share for the second quarter on revenue of $76 million.
Applied Digital 5-year stock chart.
Cheng Xin | Getty Images
Rocket Lab shares have added more than a quarter in value this week as the aerospace company inked new launch deals in the burgeoning space tech industry.
The stock was flat on Friday, but has surged over 20% this week. Shares were up nearly 50% over the last two weeks and traded near fresh highs on Friday.
The stock has nearly tripled since the start of the year.
On Friday, the company said it secured two launches with the Japan Aerospace Exploration Agency, scheduled for December and in 2026.
Earlier in the week, Rocket Lab announced a multi-launch agreement with Japanese space start Q-shu Pioneers of Space. That’s on top of four contracted missions.
Late last month, the company also secured 10 additional launch missions for Synspective, bringing its total with the Japanese satellite company to 21. The first is scheduled for later this month.
Rocket Lab’s extreme stock movement could also be a result of some short covering, which occurs when short sellers buy a security to close a position and mitigate losses. Short interest accounted for nearly 14% of Rocket Lab’s float at the end of September.
Investors have poured more money into the space sector this year as the government greenlights more contracts and funding.
The space sector, currently dominated by billionaire-backed ventures like Elon Musk‘s SpaceX, has also seen a wave of initial public offerings this year from the likes of Firefly Aerospace, Voyager Technologies and Karman Holdings.
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