Starling Bank CEO Anne Boden.
The co-founder of Starling, one of the U.K.’s largest digital banks, is set to step down as CEO next month, the company said Thursday.
Starling, which is backed by U.S. investment banking giant Goldman Sachs, is one of the most prominent fintechs in the country with a user base of 3.6 million customers.
Anne Boden is to step down on June 30, according to a press release. She will hand the reins to Starling’s chief operating officer, John Mountain, who has been with the bank since 2015.
“I have spent nearly a decade here as both the founder and CEO, a dual role which is unique in U.K. banking,” Boden said in a statement Thursday. “It’s been all-consuming and I’ve loved every minute of it.”
“Now that we have grown from being an aspiring challenger to an established bank, it is clear the roles and priorities of a CEO and a large shareholder ultimately differ and require distinct approaches. As Starling continues to evolve and grow, separating my two roles is in the bank’s best interests.”
Starling reported annual revenue of £453 million ($600 million) for the year to March 31, 2023, more than doubling from 2022, with pre-tax profits of £195 million, a sixfold increase year over year.
Total lending stood at £4.9 billion, up from £3.3 billion. Customer deposits increased 17% to £10.6 billion.
Boden, who co-founded Starling in 2014, took the startup from a tiny challenger in banking to a major player in the U.K.’s financial scene.
The often outspoken CEO has been a key voice behind the U.K. government’s attempt to make it an established fintech hub.
She is also a staunch critic of social media’s role in online fraud as well as a prominent crypto skeptic.
On a call with reporters Thursday, Boden said the main thing that triggered her decision was concerns that her significant shareholding in the firm could create a conflict of interest.
Boden owns a 4% stake in Starling.
She added that it was herself, not the company’s board, that initiated conversations about her departure.
Starling has raised a total of £946.5 billion to date from investors including Goldman Sachs, Fidelity and the Qatar Investment Authority. The bank was last valued at £2.5 billion.
In response to a CNBC question Thursday, Boden said that, were the firm to raise capital today, its shares would not decrease in value from their last price.
Asked how her plans to step down may impact Starling’s path toward an initial public offering, Boden said the IPO market is currently closed and the firm is in no immediate hurry.
The U.K. has received plenty of criticism from top tech bosses over its tech listings environment — earlier this year, the CEO of Revolut said he would never list in London.
Boden said that Starling has not yet taken a decision on a listing venue for its eventual public offering, however the U.K. was likely to be the place in which it debuts.
“We need to keep our options open. This is not the right time to make a decision on listing venue, however we’re a U.K. bank and a very successful U.K. bank,” Boden said.
“Customers love us and the default situation would be a U.K. listing because of the consumer enthusiasm for a brand that is as powerful as Starling.”
‘It’s not a bubble yet’: Wharton’s Jeremy Siegel predicts Big Tech boom fueled by A.I.
Wharton professor and renowned economist Jeremy Siegel is bullish on a Big Tech boom fueled by artificial intelligence despite concerns of a bubble.
An AI chip craze, driven by demand for AI-powered chatbots and high-powered graphics processing units — used to train such chatbots on supercomputers — has seen investors piling into certain stocks with some raising concerns of a bubble.
“It’s not a bubble yet,” said Siegel, Russell E. Palmer professor of finance at the Wharton School at The University of Pennsylvania, on CNBC’s “Street Signs Asia” Monday. He noted that he has been getting questions around whether it would lead to a repeat of the dot-com bubble in the late 1990s.
Economist David Rosenberg, known for his contrarian views, had predicted that the current AI boom could collapse like late 1990s dot-com stocks. The dotcom bubble burst when capital dried up after a massive adoption of the internet and a proliferation of available venture capital into internet-based companies, especially startups that had no track record of success.
“First, there was excitement about AI and Nvidia ratified that excitement with blowout earnings. That’s a double push,” said Siegel.
Shares of Nvidia rallied 24% on Thursday after the firm posted better-than-expected top and bottom lines in the recent quarter, reaching an all-time high on the back of exploding demand for Nvidia chips used in AI. The rally brought the chip maker’s market capitalization to nearly $1 trillion.
Nvidia CEO Jensen Huang said during the earnings call that the company was seeing “surging demand” for its data center products. Nvidia shares are up 166% year-to-date.
“[In the] long term I would say that [Nvidia shares] were probably slightly overvalued. But for the short term, we know momentum can carry stocks far higher than their fundamental value, and no one can predict how high they might go,” said Siegel.
On Sunday, Nvidia announced a new class of large-memory AI supercomputer created to enable the development of giant, next-generation models for generative AI language applications. The supercomputer powered by Nvidia GH200 Grace Hopper Superchip is expected to provide nearly 500 times more memory than the previous generation Nvidia DGX A100 — which was introduced in 2020.
“Generative AI, large language models and recommender systems are the digital engines of the modern economy,” said Huang, in the press release. “DGX GH200 AI supercomputers integrate Nvidia’s most advanced accelerated computing and networking technologies to expand the frontier of AI.”
Wharton’s Siegel said that AI stocks have helped lift the S&P 500 and that it could become “a winner from the banking crisis.”
“As we all know that the top eight or nine companies have accounted for all the gains of the S&P 500. This year, the other 490 have been flat or down. Yes, [the] Nasdaq was oversold in 2022 and it did bounce back but I think AI has pushed those big cap tech stocks even higher,” said Siegel.
“Remember big cap stocks of any sort, whether they’re tech or not, don’t have to worry about the credit conditions. Yes, they have to worry about interest rates to be sure. The credit conditions are going to affect the small and mid size [companies],” said Siegel.
“The S&P could actually become a winner from the banking crisis.”
Chinese apps remain hugely popular in the U.S. despite efforts to ban TikTok
TikTok Chief Executive Shou Zi Chew is pictured on the day he will testify before a House Energy and Commerce Committee hearing entitled “TikTok: How Congress can Safeguard American Data Privacy and Protect Children from Online Harms,” as lawmakers scrutinize the Chinese-owned video-sharing app, on Capitol Hill in Washington, U.S., March 23, 2023.
Evelyn Hockstein | Reuters
For several years now, ByteDance’s TikTok has been the focus of lawmakers and intelligence officials who fear it could be used to spy on Americans. Those concerns took center stage during a five-hour grilling of TikTok’s CEO back in March.
But while TikTok has been the one in the spotlight, other Chinese apps that present similar issues are also experiencing massive popularity in the U.S.
Concerns about ByteDance stem in large part from a national security law that gives the Chinese government power to access broad swaths of business information if it claims to be for a national security purpose. U.S. intelligence officials and lawmakers fear that the Chinese government could effectively access any information that China-based app companies have collected from American users, from email addresses to user interests to driver’s licenses.
But that doesn’t seem to have swayed many consumers, as several China-based apps are still booming in the U.S.
For example, the shopping app Temu, owned by China-based PDD Holdings, has the number two spot on the Apple App Store among free apps as of late May. It also held the number 12 spot among digital retailers in the 2022 holiday season for unique visitors to its site, topping stores like Kohl’s, Wayfair and Nordstrom, according to Insider Intelligence, which also credits visibility on TikTok for its rise.
Meanwhile, ByteDance-owned apps CapCut and TikTok hold the fourth and fifth spots on the App Store rankings. Chinese fast fashion brand Shein holds fourteenth.
And between late March and early April, after the TikTok CEO hearing before Congress, ByteDance’s Lemon8, saw nearly 1 million downloads in the U.S., Insider Intelligence reported based on data from Apptopia. It’s an app with similarities to Pinterest and Meta’s Instagram.
These apps share some of the features that have worried the U.S. government about TikTok, including about whether some of these firms adequately protect U.S. user data when operating out of China (TikTok has stressed that U.S. user information is only stored on servers outside of China). Like TikTok, these apps collect user information, can analyze trends in their interests and use algorithms to target consumers with products or information that is likely to keep them engaged with the service.
But experts on China and social media say there are important differences between these apps and TikTok which might explain the relative lack of attention on them. Among the most important of those features is the scale of their presence in the U.S.
TikTok vs. other Chinese apps
In just 17 days after launch, Temu surpassed Instagram, WhatsApp, Snapchat and Shein on the Apple App Store in the U.S., according to Apptopia data shared with CNBC.
Stefani Reynolds | Afp | Getty Images
Even as they grow, the U.S. userbase of many popular Chinese apps is still dwarfed by TikTok’s massive U.S. audience of 150 million monthly active users.
TikTok sister app Lemon8, for instance, has an estimated 1.8 million monthly active users in the U.S., according to Apptopia.
While TikTok has had 415 million downloads in the U.S. since its launch here, CapCut has had 99 million, Temu 67 million and Lemon8 1.2 million, according to Apptopia.
Only Shein surpasses TikTok in downloads among this group of apps, though it launched far earlier in the U.S. in 2014. Shein’s app has 855 million downloads in the U.S. since its debut, though Apptopia estimates it has about 22 million monthly active users.
“An app with a thousand, or even a million users in the U.S. does not present the same widespread cybersecurity threat that an app with 100 million users has,” said Lindsay Gorman, senior fellow for emerging technologies at the German Marshall Fund’s Alliance for Securing Democracy.
Gorman said as the U.S. considers the threat posed by TikTok, it will also need to develop a framework for how to evaluate the relative risk of Chinese apps. The scale should be one factor, she said, and the type of app, including its ability to spread propaganda, should be another.
“The ability for a Chinese technology platform to represent critical information infrastructure in a democracy has to be part of that calculus when assessing risk,” Gorman said. “That’s where I think the analogies with power grids or energy infrastructure are applicable. We we would not allow the authoritarian regime to build significant components of our energy infrastructure and rely on an authoritarian regime for that.”
That means that an app like ByteDance’s CapCut may present a lower risk, both because of its smaller user base and because it’s meant to edit videos, rather than distribute them.
“We’re really at the beginning stages of even recognizing that a broader characterization and categorization is actually needed,” Gorman said, adding that rather than playing whack-a-mole with Chinese technology that poses a threat to U.S. national security, the country should develop a more systematic framework.
But in the meantime, U.S. consumers continue to turn to Chinese apps.
“Among the most downloaded apps consistently are Chinese-based ones like Temu and CapCut,” said Jasmine Enberg, principal analyst covering social media at Insider Intelligence. “And then of course, there’s the early growth of Lemon8, which suggests that the appetite for Chinese apps in the U.S. is still growing.”
For e-commerce apps, the risk of spreading harmful misinformation may not be as high as on a social media service. An e-commerce platform like Temu or Shein is likely a less viable platform to spread propaganda than a video app like TikTok.
“People just aren’t really spending the same amount of time on commerce apps and they’re not exposed necessarily to the same kind of content that could potentially have a negative impact on young people,” Enberg said. “I also don’t necessarily think that the connection to China for some of these apps is as clear to the average consumer and I also don’t think that consumers are really going around thinking about where the apps that they’re using originate from.”
Still, the U.S. could find a reason for concern. A recent CNN report that found Temu sister company Pinduoduo, a shopping app popular in China, contained malware. The parent company of both apps, PDD Holdings, did not respond to a request for comment. Research staff at the U.S.-China Economic and Security Review Commission pointed to that report in assessing Temu’s data risks, though an analyst recently told CNBC that Temu has not been as “aggressive” in requesting access to consumers’ data as Pinduoduo.
At least one group has viewed the pressure on TikTok as an optimal time to raise concerns with another Chinese company popular in the U.S.: Shein. The group Shut Down Shein, which is a “coalition of individuals, American brands and human rights organizations,” according to executive director Chapin Fay, launched the day that TikTok’s CEO was hauled before Congress.
Customers hold shopping bags outside the Shein Tokyo showroom in Tokyo on Nov. 13, 2022. Reuters reports the fast fashion retailer is targeting a U.S. IPO in the second half of 2023.
Noriko Hayashi | Bloomberg | Getty Images
“We were sort of agnostic on the timing, but we wanted to make sure that while people are talking about TikTok, there’s this other nefarious actor, Shein, who’s also collecting data and doing it all under the radar and also doing these other even worse things like slave labor,” said Fay, managing director of Actum consulting firm.
The group specifically takes issue with Shein’s alleged use of forced labor, as Bloomberg reported last year that tests revealed that cotton in clothes shipped to the U.S. were linked to a region in China where the U.S. government has said forced labor is deployed. China has denied the use of forced labor.
Shut Down Shein also rails against the company’s alleged use of an import loophole to avoid tariffs. Through the de minimis trade tax exemption, the group says, individual customers become the importer of their fast fashion goods, a practice that came up at a recent hearing by the House Select Committee on Strategic Competition between the United States and the Chinese Communist Party.
A Shein spokesperson said in a statement that it “complies with the domestic tax legislations of the countries in which it operates.” The spokesperson also said that Shein has “zero tolerance for forced labor,” takes seriously visibility across its supply chain and requires suppliers to follow a “strict code of conduct.”
Fay said it’s important to recognize that the way Shein has been able to grow its brand and gain new customers, in large part via so-called influencer hauls, is through TikTok.
Fear of a ‘slippery slope’ ban
Faced with national security worries over TikTok, lawmakers have considered several proposals that could lead to a ban. But critics fear some proposed solutions could create a slippery slope of unintended consequences. And some say the most effective long-term solution for curbing the use of Chinese apps may be fostering an environment for robust alternatives to grow.
Perhaps the most prominent of the bills that could lead to TikTok’s ban in the U.S., the RESTRICT Act, would give the Commerce Secretary the power to recommend barring technology that comes from a select group of foreign adversary countries if they determine the risks cannot be sufficiently mitigated otherwise.
Though the proposal quickly garnered serious attention for its heavy-hitting group of sponsors, including Senate Intelligence Committee Chair Mark Warner, D-Va., and Commerce subcommittee on communications ranking member John Thune, R-S.D., it’s since appeared to lose the early momentum. That’s due in part to concerns raised by the tech industry and others that the bill could give the executive branch broad power to seek a ban on certain technology.
Sen. Mark Warner (D-VA)
Drew Angerer | Getty Images
“While I understand that Americans enjoy the convenience of Chinese e-commerce and the creative tools of many Chinese communications apps, we have to reckon with the fact that these companies ultimately are beholden to the demands of the Chinese government,” Warner said in a statement. “We’ve had an important and overdue conversation about the predatory and invasive practices of U.S. tech firms in recent years; those same concerns are valid with the growing sway of these foreign apps – and then exacerbated by the manner in which these PRC-based companies serve as instruments of PRC power.”
One of those critics of the bill’s current scope is Andy Yen, CEO of Proton, which makes an encrypted email service and VPN. While Yen believes that TikTok should be banned in the U.S., he fears the RESTRICT Act is currently too broad to effectively do so without additional consequences.
In a recent blog post, Yen argued that the bill would give the Commerce Secretary overly-broad power to designate additional governments as foreign adversaries and feared that ambiguous language in the bill could be used to penalize individuals who use VPNs to access apps that are banned in the U.S.
In the post, Yen suggested these issues could be resolved with changes to the bill’s language to make it more targeted and limited in scope.
Speaking on the “Pivot” podcast recently, Warner stressed the need for a rules-based approach that could be legally upheld to deal with tech from foreign adversaries. He said he believes criticism of the bill, including that it would target individual VPN users or that U.S. companies that do business in China could be swept up in enforcement action, is not valid, though he said he is open to amending the bill to make that more clear.
“There is a very legitimate national security concern here,” Yen said. “So I think it is something that regulators do need to tackle and this is why Congress is trying do something. But I think we need to do it in a way that doesn’t undermine the values of freedom and democracy that make America different from China.”
Still, a TikTok ban would have other effects in the U.S., like yielding more market share to existing tech giants in the U.S. like Meta’s Facebook and Instagram. Proton has been an active proponent of antitrust reform to create what some companies see as a more level playing field for tech developers in the U.S.
Yen said the solution to creating more competitive digital markets in the U.S. is not to allow risky Chinese companies to run rampant, but rather “to have a level playing field that can allow other American companies or European companies to compete in the U.S. fairly.”
That’s a goal shared by Jonathan Ward, an expert on China who founded the Atlas Organization consulting firm.
“The best way that we can do this is to create alternatives,” Ward said. “Because even if these companies don’t take root in our own market, even if we’re able to successfully deny them access here, as we did with Huawei, they can flourish in other parts of the world,” he added, referring to the Chinese telecom company that’s been placed on a U.S. entity list over national security concerns.
“We’re also going to have to stand up American and free world alternatives to these companies because you can’t let them take over industries that matter or create apps that become integral to the fabric of our societies,” Ward said. “And that’s going to require an effort that goes beyond the Congress and into the sort of entire system of democracies worldwide.”
WATCH: Montana’s TikTok ban is a ‘clear violation’ of the First Amendment, says NetChoice VP Carl Szabo
The tech trade is back, driven by A.I. craze and prospect of a less aggressive Fed
Jen-Hsun Huang, president and chief executive officer of Nvidia Corp., speaks during the company’s event at Mobile World Congress Americas in Los Angeles, California, U.S., on Monday, Oct. 21, 2019.
Patrick T. Fallon | Bloomberg | Getty Images
Forget about the debt ceiling. Tech investors are in buy mode.
The Nasdaq Composite closed out its fifth-straight weekly gain on Friday, jumping 2.5% in the past five days, and is now up 24% this year, far outpacing the other major U.S. indexes. The S&P 500 is up 9.5% for the year and the Dow Jones Industrial Average is down slightly.
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Excitement surrounding chipmaker Nvidia’s blowout earnings report and its leadership position in artificial intelligence technology drove this week’s rally, but investors also snapped up shares of Microsoft, Meta and Alphabet, each of which have their own AI story to tell.
And with optimism brewing that lawmakers are close to a deal to raise the debt ceiling, and that the Federal Reserve may be slowing its pace of interest rate hikes, this year’s stock market is starting to look less like 2022 and more like the tech-happy decade that preceded it.
“Being concentrated in these mega-cap tech stocks has been where to be in this market,” said Victoria Greene, chief investment officer of G Squared Private Wealth, in an interview on CNBC’s “Worldwide Exchange” Friday morning. “You cannot deny the potential in AI, you cannot deny the earnings prowess that these companies have.”
To start the year, the main theme in tech was layoffs and cost cuts. Many of the biggest companies in the industry, including Meta, Alphabet, Amazon and Microsoft, were eliminating thousands of jobs following a dismal 2022 for revenue growth and stock prices. In earnings reports, they emphasized efficiency and their ability to “do more with less,” a theme that resonates with the Wall Street crowd.
But investors have shifted their focus to AI now that companies are showcasing real-world applications of the long-hyped technology. OpenAI has exploded after releasing the chatbot ChatGPT last year, and its biggest investor, Microsoft, is embedding the core technology in as many products as it can.
Google, meanwhile, is touting its rival AI model at every opportunity, and Meta CEO Mark Zuckerberg would much rather tell shareholders about his company’s AI advancements than the company’s money-bleeding metaverse efforts.
The chipmaker, known best for its graphics processing units (GPUs) that power advanced video games, is riding the AI wave. The stock soared 25% this week to a record and lifted the company’s market cap to nearly $1 trillion after first-quarter earnings topped estimates.
Nvidia shares are now up 167% this year, topping all companies in the S&P 500. The next three top gainers in the index are also tech companies: Meta, Advanced Micro Devices and Salesforce.
The story for Nvidia is based on what’s coming, as its revenue in the latest quarter fell 13% from a year earlier because of a 38% drop in the gaming division. But the company’s sales forecast for the current quarter was roughly 50% higher than Wall Street estimates, and CEO Jensen Huang said Nvidia is seeing “surging demand” for its data center products.
Nvidia said cloud vendors and internet companies are buying up GPU chips and using the processors to train and deploy generative AI applications like ChatGPT.
“At this point in the cycle, I think it’s really important to not fight consensus,” said Brent Bracelin, an analyst at Piper Sandler who covers cloud and software companies, in a Friday interview on CNBC’s “Squawk on the Street.”
“The consensus is, on AI, the big get bigger,” Bracelin said. “And I think that’s going to continue to be the best way to play the AI trends.”
Microsoft, which Bracelin recommends buying, rose 4.6% this week and is now up 39% for the year. Meta gained 6.7% for the week and has more than doubled in 2023 after losing almost two-thirds of its value last year. Alphabet rose 1.5% this week, bringing its increase for the year to 41%.
One of the biggest drags on tech stocks last year was the central bank’s consistent interest rate hikes. The increases have continued into 2023, with the fed funds target range climbing to 5%-5.25% in early May. But at the last Fed meeting, some members indicated that they expected a slowdown in economic growth to remove the need for further tightening, according to minutes released on Wednesday.
Less aggressive monetary policy is seen as a bullish sign for tech and other riskier assets, which typically outperform in a more stable rate environment.
Still, some investors are concerned that the tech rally has gone too far given the vulnerabilities that remain in the economy and in government. The divided Congress is making a debt ceiling deal difficult as the Treasury Department’s June 1 deadline approaches. Republican negotiator Rep. Garret Graves of Louisiana told reporters Friday afternoon in the Capitol that, “We continue to have major issues that we have not bridged the gap on.”
Treasury Secretary Janet Yellen said later on Friday that the U.S. will likely have enough reserves to push off a potential debt default until June 5.
Alli McCartney, managing director at UBS Private Wealth Management, told CNBC’s “Squawk on the Street” on Friday that following the recent rebound in tech stocks, “it’s probably time to take some of that off the table.” She said her group has spent a lot of time looking at the venture market and where deals are happening, and they’ve noticed some clear froth.
“You’re either AI or you’re not right now,” McCartney said. “We really have to be ready to see if we don’t get a perfect debt ceiling, if we don’t get a perfect landing, what does that mean, because at these kinds of levels we are definitely pricing in the U.S. hitting the high note on everything and that seems like a terribly precarious place to be given the risks out there.”
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