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With Quiver Quantitatives recentinstitutional holdings data, we can see that hedge funds and asset managers have been increasing their holdings in MercadoLibre MELI . Firms such as Scottish investment managerBaillie Gifford, Fidelity Investments, andBlackrockhave all added to their MELI positions recently. Most notably, Baillie Gifford increased shares held by 4.28% (as filed on 6/30), bringing their total MELI holdings to 6,389,959 shares (nearly 13% of MercadoLibres float) worth around $8.28 billion dollars at current market prices. With this in mind, we took a closer look at some of the reasons why many investors may be bullish on MercadoLibre.

Last week, MercadoLibre posted impressive second quarter earnings results. The Latin American e-commerce giant, which has a presence in 18 countries across Latin America, posted impressive revenue and net income figures as sales volumes and user counts increased significantly. Net revenue and net income rose 57.3% to $3.4 billion dollars and 113% to $261.9 million dollars in the second quarter, respectively, showing the business increased operational efficiency. This came as MercadoLibre announced it added 8.1 million users to the platform over the quarter, bringing their active user base to 108.6 million customers. An important e-commerce and retail KPI, gross merchandise volume (GMV), rose 47.2% to $10.5 billion dollars, showing the platform's explosive growth in sales and transaction volume. After such a strong quarter, it is becoming increasingly evident that MercadoLibre is winning the e-commerce market in Latin America, one of the fastest growing markets in the world, leading to a compelling investment opportunity at a relatively low valuation.

MercadoLibreis the largest commerce ecosystem in Latin America and is present in 18 countries (Argentina, Brazil, Mexico, Chile, Colombia, Peru, Venezuela, Bolivia, Costa Rica, Dominican Republic, Ecuador, Guatemala, Honduras, Nicaragua, Panama, Paraguay, El Salvador, and Uruguay). MercadoLibre offers an ecosystem of six integrated e-commerce and digital finance services (Mercado Libre Marketplace, Mercado Pago Fintech platform, Mercado Envios logistics service, Mercado Ads solution, Mercado Libre Classifieds service, and Mercado Shops online storefronts solution). MercadoLibres e-commerce platform provides buyers and sellers with a robust and safe commerce ecosystem across Latin America, a region with a population of over 650 million people and one of the fastest growing internet penetration and e-commerce growth rates in the world. The Mercado Libre Marketplace is a topically arranged, fully automated, and user-friendly e-commerce platform that allows merchants and individuals to list merchandise and conduct sales and purchases digitally. The marketplace offers a wide range of products from consumer packaged goods to electronics and home goods, and management believes that their world-class technological and commerce solutions address distinctive cultural and geographic challenges that an e-commerce business faces operating within Latin America, giving them a strong competitive advantage within the Latin America market.

The e-commerce market is a highly competitive and rapidly evolving industry, with low barriers of entry and low costs of entry. Management mentions that they are a market leader in a number of markets that they operate within, however, competition has intensified over the years as local players grow out their e-commerce businesses and international players expand to the region, namely Brazil and Mexico. The financial services market, another market that MercadoLibre operates within Latin America, is also becoming increasingly competitive. MercadoLibres Mercado Pago payment business competes with banks and a number of players within the rapidly growing fintech space, both local and international players.

MercadoLibre plans to expand into additional transaction offerings. This includes maximizing the utilization of Mercado Pago, offering additional categories in the Mercado Libre marketplace, expanding their presence in vehicle, real estate, and services classifieds, maximizing the utilization of Mercado Envios, expanding their Mercado Credito service (MercadoLibres credit solution service available in Argentina, Brazil, Mexico, and Chile), and expanding their advertising offerings. Additionally, management plans to continue to improve the shopping experience for users, increase monetization of the business transactions, take advantage of natural synergies that exist among the business services, and continue to grow the business and maintain market leadership. These goals set out by management plan to make MercadoLibre the leading commerce ecosystem across Latin America. These goals will further strengthen their market share within the fast growing Latin America market, strengthening their moat and building a very resilient business model.

Management is solid and their capital allocation priorities are shareholder friendly. In 2022, management repurchased around 37,000 shares at an average share price of around $1,816.5 per share, worth around $67.2 million dollars. While share repurchases are a great capital allocation practice that returns value to shareholders, it seems that management repurchased shares at relatively high valuations, lessening the impact of the share repurchases. In February of this year, the Board of Directors terminated the prior share repurchase program, replacing it with a new program set to expire on March 31st, 2024 that allows management to repurchase up to $900 million dollars worth of shares. At current market prices, that represents around 670,000 shares that could be repurchased (although there can be other costs associated with such a large repurchase of shares). As for management incentives, management is incentivized to meet corporate performance measures to receive their bonus. In 2022, the corporate performance measures were measured via performance in net revenues, income from operations, total payment volumes, and competitive NPS (Net Promoter Score, a metric that measures the business commerce and fintech customer satisfaction). We believe these are all solid incentives that incentivize management to maintain solid growth, strong operational efficiency, and strong competitive advantages within their payments and commerce businesses across Latin America. Looking at 2022 executive compensation, we can see that President and CEO Marcos Galperin was the highest paid executive, making $8,766,100 in total compensation, compared to $17,671,854 and $22,996,123 in 2021 and 2020, respectively. Within his 2022 compensation, $448,824 was his base salary, with $218,958 in an annual bonus and the rest in an all-cash long term retention plan, a long-term cash based incentive paid over 6 years through annual fixed payments. Although we would like to see a stock-based incentive rather than a cash-based incentive, this 6-year long-term incentive plan does a great job of retaining talent over a long period of time. Skilled management is hard to come by, especially in such a niche and fast growing market, so it is important that MercadoLibre retains its skilled management team.

MercadoLibre is an efficient business. The business operates at LTM ROIC and LTM ROE figures of 19.7% and 39.5%, respectively. Looking further at efficiency metrics, we can see that MercadoLibres ROIC has had a rough patch over the past few years, but as the business matures, we can see that ROIC is on a pathway for growth. In 2016, ROIC stood at 25.1%, falling to as low as -6% in 2018. Since 2020, however, ROIC has increased from a measly 3.7% to nearly 20% today. With a relatively high ROIC, MercadoLibre is able to reinvest cash back into the business at favorable rates of return, rapidly compounding intrinsic value and handsomely rewarding shareholders. We believe that a high ROIC sustained for long periods of time can represent a business strong moat within their respective sector and / or industry. As MercadoLibre matures and grows, rapidly gaining market share throughout he rapidly growing LATAM e-commerce sector, we believe that these efficiency metrics will grow as the company solidifies itself as a LATAM e-commerce giant.

Analyzing MercadoLibres income statement, we can see stellar sustained growth in revenue, gross profit, and earnings. Since 2013, revenue has grown at a CAGR of around 38%, with gross profit growing at a CAGR of around 34% in that same time period. Gross profit grew less than revenue in that same time frame largely due to diminishing gross margins. In 2013, MercadoLibre operated with 72.5% gross margin, compared to today where the company operates at a LTM gross margin of 56.4%. While these diminishing margins may be a concern for some investors, it is important to compare them to their two largest competitors, Alibaba and Amazon, to get the full picture. Amazon currently operates with LTM gross margins of 45.5%, with Alibaba operating with LTM gross margins of 36.9%. While these diminishing margins are certainly not a positive for the business, MercadoLibre still operates with the highest margins amongst its principal e-commerce competitors.

In terms of earnings, MercadoLibre has grown its EBITDA at a CAGR of around 24% since 2013, with EPS growing at a CAGR of around 17%. EPS lagged EBITDA growth during that time period largely due to share dilution. Since 2013, shares outstanding have actually increased 13%, diluting shareholders. However, it is important to note that shares outstanding have actually fallen around 0.7% since 2021. While a 0.7% decrease in shares outstanding is very small, it shows that management is on the right track with share repurchases, no matter how small. While share dilution is another concern for investors to consider, we believe that the risks of dilution are relatively mitigated as MercadoLibre has a low float (around 50 million shares outstanding) and management has begun to buy back shares, although very lightly for the time-being.

Looking at MercadoLibres balance sheet, we can see that the business is in good financial health. MercadoLibre has around $1.86 billion dollars worth of cash and equivalents on hand, with an additional $1.44 billion dollars worth of short term investments. In tandem with this, the business also holds around $2.48 billion dollars worth of long-term debt, operating at a very healthy cash to long-term debt ratio. Additionally, with an EBIT / Interest Expense (interest coverage ratio) of 4.11x, MercadoLibres operating income is 4.11 times higher than the its interest expenses. While we would like to see a company with an interest coverage ratio of at least 5x to ensure maximum safety in an investment, this 4.11x ratio is not a point of concern. The business has plenty of cash on hand to pay down its debt if needed, and the business has been continually increasing its operating income over the last few years, meaning that this ratio is likely to expand over time, assuming that the business doesnt take on any additional debt.

Looking at MercadoLibres cash flow statement, we can see sustained growth in free cash flow and net income over the last decade. Since 2013, MercadoLibre has grown its net income at a CAGR of 20.5%, impressive given that the business operated with negative net income between 2018 – 2022. Since 2021, MercadoLibre has grown its net income at a CAGR of nearly 200%. Although the 200% CAGR in net income over the past 2 years is very unsustainable, it shows the business increased operational efficiency over the past few years. Within that same time frame, MercadoLibre has increased free cash flow at a whopping CAGR of 64%. This large increase in free cash flow over the past few years can largely be attributed to expanding free cash flow margins. In 2013, MercadoLibre operated with a free cash flow margin of 6.1% of revenue, compared to today where the business operates at a LTM free cash flow margin of 33.9%. As we can see, MercadoLibre is able to efficiently produce cash from its operations, which it can then use to reward shareholders via dividends, share repurchases, or reinvestments back into the business at favorable rates of return (which the business is capable of doing based on their ROIC).

After conducting a reverse discounted cash flow analysis, we can see that MercadoLibre is trading at share prices that imply a growth rate of a 6.2% in free cash flow over the next 10 years, using a perpetuity growth rate of 3% (largely in line with US GDP growth) and a discount rate of 10%. With free cash flow growing at a CAGR of 64% over the last few years (over 10x what current share prices are implying), we believe that this 6.2% growth rate implied by current share prices is very cheap. While past performance is not indicative of future results, and the 64% CAGR in free cash flow is largely unsustainable, it is very likely that the business will grow its free cash flow at a CAGR of at least 6.2% over the next few years. One catalyst for future increases in free cash flow is increased operational efficiency and expanding free cash flow margins. As stated above, MercadoLibre has expanded its free cash flow margins over the last decade, however, free cash flow margins seem to fluctuate by year. If the business is able to incrementally expand free cash flow margins over the next few years, we believe that the business should have no issue meeting a 6.2% growth rate in free cash flow. Additionally, the other catalyst for increased free cash flow generation is the fact that MercadoLibre operates within the fastly growing LATAM geographic region. With Deloitte stating that the LATAM market grew by 6.8% in 2021, and macroeconomic conditions improving around the world, we believe that explosive growth in the LATAM market will continue to fuel growth in revenue, and most importantly free cash flow, over the next few years.

Keep an eye out forMELI stocks latest news, data, and more withQuiver Quantitative.

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UK

Southport stabbing victim reveals how she survived attack – and fears ‘it could happen again’

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Southport stabbing victim reveals how she survived attack - and fears 'it could happen again'

A girl who was stabbed in the Southport attack has told Sky News how she thought she was going to die that day.

Warning: Some readers may find this content distressing

It is exactly a year since Axel Rudakubana killed three girls and attempted to murder eight others at a summer holiday Taylor Swift-themed dance event in the seaside town.

The girl, who cannot be named for legal reasons, was stabbed in the back and the arm after going to the class with her younger sister.

She is now campaigning for children to have mandatory first aid training at school in response to the growth of knife crime.

She said she clearly remembers what happened that day.

Flowers and tributes near the scene of the attack a year ago. Pic: PA
Image:
Flowers and tributes near the scene of the attack a year ago. Pic: PA

“Some of the girls were sat down in a circle making bracelets with the teachers, and a couple of them were getting up to get beads. I was standing between two tables and he came through the doors.

“He stabbed a little girl in front of me and then came for me and stabbed my arm. I turned and then he stabbed my back, even though I didn’t feel it at the time.

“There was a bunch of girls huddled around so I just started pushing them down the stairs, telling them to get out and run.

“I was thinking ‘Where’s my sister?’ and ‘We need to get out’.”

She and many of the other victims ran to the house of a neighbour for shelter. “I just thought that I was going to die,” she said.

Killer ‘looked possessed’

The girl said she can clearly picture Rudakubana that day.

“What I remember most about him is his eyes. They just didn’t look human, they looked possessed. It was kind of like a dream and you’re on a movie set and watching yourself go through it and make these decisions.

“It’s just kind of like adrenaline. People like to think they know what they’d do in that situation but, in reality, you don’t until you’re in it.”

Alice da Silva Aguiar, Elsie Dot Stancombe and Bebe King were murdered in an attack at a Taylor Swift-themed class.
Image:
Alice da Silva Aguiar, Elsie Dot Stancombe and Bebe King were murdered in the attack

Six-year-old Bebe King, Elsie Dot Stancombe, who was seven, and nine-year-old Alice da Silva Aguiar died in the attack. It is something she finds difficult to talk about.

“I don’t think I can express how I feel about it,” the girl said. “A lot of anger and sadness.”

In January, Rudakubana was jailed for life and must serve a minimum of 52 years before he can be considered for release.

The chairman of the public inquiry into the atrocity called the attack “one of the most egregious crimes in our country’s history”.

Carrying knives ‘disgusting’

The girl who survived has now launched a campaign, supported by a clothing range called “Go Anywhere, Be Anything” to raise funds, to improve the ability of schoolchildren to help in the event of knife attacks.

“Everyone that’s going out and carrying knives is getting younger and younger,” she said. “And to think that it’s people my age is like disgusting.

“I just want to try and do the best I can to let people know that it’s not okay to do that and that they need to think about what they’re doing and the risks and how they’re harming themselves and other people.”

Her sister, who was also there that day, helped design “Go Anywhere, Be Anything”.

Read more:
Missed chances to stop Rudakubana

‘Terrorism has changed’, says PM

A three-minute silence will be held in Southport at 3pm to mark one year on from the attack. In an open letter to the community, Sefton Council wrote: “This period is incredibly hard for the families of Alice, Bebe and Elsie and all of those children and adults injured or who suffered lifelong psychological impact of witnessing the attack, and we acknowledge the huge impact on their lives, too.

“We must not forget the local people who rushed to support and to our emergency responders. They all remain always in our thoughts.”

It is a sentiment shared by the survivor.

“You live in fear every day that it could happen again,” she said.

“Physically I’m getting better every day and healing. Obviously, my scars stay as a reminder but everyone from that day is going to have mental scars forever.”

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UK

Revealed: The scale of cheap Chinese imports flown into UK without paying any tariffs

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Revealed: The scale of cheap Chinese imports flown into UK without paying any tariffs

The scale of cheap Chinese e-commerce imports flown into Britain without paying any tariffs has become clearer following a Sky News investigation into this new multi-billion pound phenomenon.

We have uncovered the first official estimate of the value of so-called “de minimis” imports into Britain, ahead of an official inquiry into whether this legal clause – which excludes packages worth less than £135 from paying customs duties – should be allowed to continue.

Companies like Shein and Temu have become big players in British retail, not to mention elsewhere around the world, by manufacturing cheap products in China and then posting them directly to consumers, benefiting from the de minimis rules.

Inside the cargo plane

Clothing manufacturers in the UK claim that de minimis makes it nearly impossible to compete with these Chinese competitors, raising questions about the viability of domestic textile and apparel production.

However, economists argue that the main beneficiaries of the policy to exclude cheap imports from customs are lower-income households, since it allows them to spend less on their shopping. Removing it, they say, would disproportionately affect poorer families.

The government has committed to an inquiry into the rules, which are also being changed in the EU and the US, but up until now there has been no official estimate of its scale.

According to HM Revenue and Customs data released to Sky News following a Freedom of Information request, the total declared trade value of de minimis imports into the UK in the last fiscal year (2024-25) was £5.9bn.

That was a 53% increase on the previous year (£3.9bn), underlining the scale of growth of e-commerce imports into the UK.

While it is hard to gauge how much revenue this means the Treasury has forgone, an illustrative 20% tariff on flows of that order could raise more than £1bn.

De minimis trade is growing

While that sum alone would not fill the fiscal black hole faced by Chancellor Rachel Reeves in the coming budget, it would nonetheless be nearly enough to pay for the government’s recent U-turn on winter fuel allowances.

Sky has also obtained the first television access deep into the supply chain, helping bring those goods into the UK, as it boarded a flight that had just travelled from Chongqing to Bournemouth Airport.

We filmed inside the belly of a plane belonging to European Cargo, one of a number of air cargo firms booming as a result of these trade flows.

Read more:
The rarely examined trade clause about to become a very big deal
UK city’s clothing industry in crisis

The untold story about de minimis is that it hasn’t just had an impact on shopping habits in the UK, or for that matter, the textiles manufacturing sector – it has also changed patterns of distribution.

Struggling regional airports that never saw their passenger numbers recover after the pandemic are now re-establishing themselves as hubs for cargo.

European Cargo is now the single biggest airline at Bournemouth Airport, despite not carrying a single passenger.

Other regional airports like East Midlands Airport and Prestwick in Scotland are seeing rapid growth in flows of trade.

All of which raises the stakes for the government’s inquiry into the de minimis system.

At present, there is no timeline for its decision, but removing the clause would have far-reaching effects across the economy.

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Technology

Europe sets its sights on multi-billion-euro gigawatt factories as it plays catch-up on AI

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Europe sets its sights on multi-billion-euro gigawatt factories as it plays catch-up on AI

Data storage tapes are stored at the National Energy Research Scientific Computing Center (NERSC) facility at the Lawrence Berkeley National Laboratory, which will house the U.S. supercomputer to be powered by Nvidia’s forthcoming Vera Rubin chips, in Berkeley, California, U.S. May 29, 2025.

Manuel Orbegozo | Reuters

Europe is setting its sights on gigawatt factories in a bid to bolster its lagging artificial intelligence industry and meet the challenges of a rapidly-changing sector.

Buzz around the concept of factories that industrialize manufacturing AI has gained ground in recent months, particularly as Nvidia CEO Jensen Huang stressed the importance of the infrastructure at a June event. Huang hailed a new “industrial revolution” at the GTC conference in Paris, France, and said his firm was working to help countries build revenue-generating AI factories through partnerships in France, Italy and the U.K.

For its part, the European Union describes the factories as a “dynamic ecosystem” that brings together computing power, data and talent to create AI models and applications.

The bloc has long been a laggard behind the U.S. and China in the race to scale up artificial intelligence. With 27 members in the union, the region is slower to act when it comes to agreeing new legislation. Higher energy costs, permitting delays and a grid in dire need of modernization can also hamper developments.

Henna Virkkunen, the European Commission’s executive vice president for tech sovereignty, told CNBC that the bloc’s goal is to bring together high quality data sets, computing capacity and researchers, all in one place.

“We have, for example, 30% more researchers per capita than the U.S. has, focused on AI. Also we have around 7,000 startups [that] are developing AI, but the main obstacle for them is that they have very limited computing capacity. And that’s why we decided that, together with our member states, we are investing in this very crucial infrastructure,” she said.

These are very big investments because they are four times more powerful when it comes to computing capacities than the biggest AI factories.

Henna Virkkunen

European Commission’s executive vice president for tech sovereignty

“We have everything what is needed to be competitive in this sector, but at the same time we want to build up our technological sovereignty and our competitiveness.”

So far, the EU has put up 10 billion euros ($11.8 billion) in funding to set up 13 AI factories and 20 billion euros as a starting point for investment in the gigafactories, marking what it says is the “largest public investment in AI in the world.” The bloc has already received 76 expressions of interest in the gigafactories from 16 member states across 60 sites, Virkkunen said.

The call for interest in gigafactories was “overwhelming,” going far beyond the bloc’s expectations, Virkkunen noted. However, in order for the factories to make a noteworthy addition to Europe’s computing capacity, significantly more investment will be required from the private sector to fund the expensive infrastructure.

‘Intelligence revolution’

The EU describes the facilities as a “one-stop shop” for AI firms. They’re intended to mirror the process carried out in industrial factories, which transform raw materials into goods and services. With an AI factory, raw data goes into the input, and advanced AI products are the expected outcome.

It’s essentially a data center with additional infrastructure related to how the technology will be adopted, according to Andre Kukhnin, equity research analyst at UBS.

“The idea is to create GPU [graphics processing units] capacity, so to basically build data centers with GPUs that can train models and run inference… and then to create an infrastructure that allows you to make this accessible to SMEs and parties that would not be able to just go and build their own,” Kukhnin said.

How the facility will be used is key to its designation as an AI factory, adds Martin Wilkie, research analyst at Citi.

“You’re creating a platform by having these chips that have insane levels of compute capacity,” he said. “And if you’ve attached it to a grid that is able to get the power to actually use them to full capacity, then the world is at your feet. You have this enormous ability to do something, but what the success of it is, will be defined by what you use it for.”

Telecommunications firm Telenor is already exploring possible use cases for such facilities with the launch of its AI factory in Norway in November last year. The company currently has a small cluster of GPUs up and running, as it looks to test the market before scaling up.

Telenor’s Chief Innovation Officer and Head of the AI Factory Kaaren Hilsen and EVP Infrastructure Jannicke Hilland in front of a Nvidia rack at the firm’s AI factory

Telenor

“The journey started with a belief — Nvidia had a belief that every country needs to produce its own intelligence,” Telenor’s Chief Innovation Officer and Head of the AI Factory Kaaren Hilsen told CNBC.

Hilsen stressed that data sovereignty is key. “If you want to use AI to innovate and to make business more efficient, then you’re potentially putting business critical and business sensitive information into these AI models,” she said.

The company is working with BabelSpeak, which Hilsen described as a Norwegian version of ChatGPT. The technology translates sensitive dialogues, such as its pilot with the border police who can’t use public translation services because of security issues.

We’re experiencing an “intelligence revolution” whereby “sovereign AI factories can really help advance society,” Hilsen said.

Billion-euro investments

Virkkunen said the region’s first AI factory will be operational in coming weeks, with one of the biggest projects launching in Munich, Germany in the first days of September. It’s a different story for the gigafactories.

“These are very big investments because they are four times more powerful when it comes to computing capacities than the biggest AI factories, and it means billions in investments. Each of these need three to five billion [euros] in investment,” the commissioner said, adding that the bloc will look to set up a consortium of partners and then officially open a call for investment later this year.

Bertin Martens, senior research fellow at Bruegel, questioned why such investments needed to subsidized by government funds.

“We don’t know yet how much private investment has been proposed as a complement to the taxpayer subsidy, and what capacity and how big these factories are. This is still very much unclear at this stage, so it’s very hard to say how much this will add in terms of computing capacity,” he said.

Power consumption is also a key issue. Martens noted that building an AI gigafactory may take one to two years — but building a power generation of that size requires much more time.

“If you want to build a state-of-the-art gigafactory with hundreds of thousands of Nvidia chips, you have to count on the power consumption of at least one gigawatt for one of those factories. Whether there’s enough space in Europe’s electricity grid in all of these countries to create those factories remains to be seen… this will require major investment in power regeneration capacity,” he told CNBC.

UBS forecasts that the current installed global data center capacity of 85 GW will double due to soaring demand. Based on the EU’s 20-billion-euro investment and the plan for each factory to run 100,000 advanced processors, UBS estimates each factory could be around 100-150 MW with a total capacity for all of the facilities of around 1.5-2 GW.

That could add around 15% to Europe’s total capacity — a sizeable boost, even when compared to the U.S., which currently owns around a third of global capacity, according to the data.

Following the announcement of the EU-U.S. trade framework, EU chief Ursula von der Leyen said Sunday that U.S. AI chips will help power the bloc’s AI gigafactories in a bid to help the States “maintain their technological edge.”

“One could argue that it’s relatively easy, provided you have the money. It’s relatively easy to buy the chips from Nvidia and to create these hardware factories, but to make it run and to make it economically viable is a completely different question,” Martens told CNBC.

He said that the EU will likely have to start at a smaller scale, as the region is unable to immediately build its own frontier models in AI because of their expense.

“I think in time, Europe can gradually build up its infrastructure and its business models around AI to reach that stage, but that will not happen immediately,” Martens said.

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