On Monday, British tech lobby group Startup Coalition warned in a blog post that there was a risk Reeves’ tax plans could result in a tech “brain drain.”. (Photo by Oli Scarff/Getty Images)
Oli Scarff | Getty Images
Venture capital investment in European technology startups is projected to decline for a third straight year, according to VC firm Atomico — but there are signs that things are finally stabilizing as valuations improve and interest rates fall.
Europe’s venture-backed startups are expected to secure $45 billion of investment by the end of 2024 — slightly lower than the $47 billion they raised last year, Atomico said Tuesday in its “State of European Tech” report.
Still, Atomico said this shows that European tech funding levels have finally “stabilized” despite worsening global macroeconomic conditions leading to three consecutive years of declines.
The firm stressed that the continent’s tech ecosystem is in a much better place than it was a decade ago, with funding this year still set to eclipse the $43 billion startups raised between 2005 and 2014.
In the period spanning 2015 to 2024, European startups have bagged $426 billion, dwarfing the sum of investment deployed into tech firms the decade prior.
Tom Wehmeier, head of insights at Atomico, told CNBC that Europe still has a few key areas of improvement to address before it can produce companies of similar scale to the largest tech firms in the U.S. and China.
“There’s frustrations about the continued challenges faced when it comes to regulation, bureaucracy, access to capital and this idea of scaling across the fragmented European marketplace,” Wehmeier said in an interview.
For example, pension funds in Europe face barriers to investing in venture capital funds and therefore aren’t gaining much exposure to the continent’s fast-growing startup ecosystem, Wehmeier said.
European pension funds allocate just 0.01% of the $9 trillion worth of assets they manage into venture capital funds based in the continent, according to Atomico’s report.
The 2024 publication marks the 10th anniversary since Atomico began compiling its annual report, which is produced in partnership with data firm Dealroom.
Europe’s first $1 trillion tech firm?
According to Atomico there are signs that the sector is improving. In the U.K., for example, Finance Minister Rachel Reeves last week laid out plans to consolidate 86 separate local government pension pots into eight “megafunds” to boost investment in domestic assets.
British tech advocacy group techUK said the reforms “should address barriers to greater availability of pension fund capital and encourage a vision that sees more investment into UK tech science start-ups and scale-ups.”
Reforms to pension schemes are either underway or being discussed in several other countries across Europe.
“These changes could result in billions more being made available to European scale-ups — and that’s something that could be the difference between the best and brightest companies scaling from here in Europe, versus being forced to relocate,” Wehmeier told CNBC.
Atomico said it’s optimistic about the next decade in European tech. The VC firm, which was established by Skype co-founder Niklas Zennström, is predicting the entire European tech ecosystem combined could be valued at $8 trillion by 2034, up from around $3 trillion currently.
Atomico also predicts that Europe will mint its first-ever trillion-dollar tech company in a decade’s time.
While Europe is home to several so-called “decacorns” valued at $10 billion and above, including Arm, Adyen, Spotify and Revolut, it has so far failed to produce a company valued at $1 trillion.
That’s unlike the United States, where several of the so-called “Magnificent Seven” technology companies are now worth over $1 trillion. They include Google parent company Alphabet, Amazon, Apple, Facebook-owner Meta, Microsoft, Nvidia and Tesla.
“If we can unlock capital at scale, keep the brightest minds in Europe, maintain that focus on solving really hard problems for society and the economy, that’s how we go and unlock the first trillion-dollar company,” Wehmeier said.
Altimeter Capital CEO Brad Gerstner said Thursday that he’s moving out of the “bomb shelter” with Nvidia and into a position of safety, expecting that the chipmaker is positioned to withstand President Donald Trump’s widespread tariffs.
“The growth and the demand for GPUs is off the charts,” he told CNBC’s “Fast Money Halftime Report,” referring to Nvidia’s graphics processing units that are powering the artificial intelligence boom. He said investors just need to listen to commentary from OpenAI, Google and Elon Musk.
President Trump announced an expansive and aggressive “reciprocal tariff” policy in a ceremony at the White House on Wednesday. The plan established a 10% baseline tariff, though many countries like China, Vietnam and Taiwan are subject to steeper rates. The announcement sent stocks tumbling on Thursday, with the tech-heavy Nasdaq down more than 5%, headed for its worst day since 2022.
The big reason Nvidia may be better positioned to withstand Trump’s tariff hikes is because semiconductors are on the list of exceptions, which Gerstner called a “wise exception” due to the importance of AI.
Nvidia’s business has exploded since the release of OpenAI’s ChatGPT in 2022, and annual revenue has more than doubled in each of the past two fiscal years. After a massive rally, Nvidia’s stock price has dropped by more than 20% this year and was down almost 7% on Thursday.
Gerstner is concerned about the potential of a recession due to the tariffs, but is relatively bullish on Nvidia, and said the “negative impact from tariffs will be much less than in other areas.”
He said it’s key for the U.S. to stay competitive in AI. And while the company’s chips are designed domestically, they’re manufactured in Taiwan “because they can’t be fabricated in the U.S.” Higher tariffs would punish companies like Meta and Microsoft, he said.
“We’re in a global race in AI,” Gerstner said. “We can’t hamper our ability to win that race.”
YouTube on Thursday announced new video creation tools for Shorts, its short-form video feed that competes against TikTok.
The features come at a time when TikTok, which is owned by Chinese company ByteDance, is at risk of an effective ban in the U.S. if it’s not sold to an American owner by April 5.
Among the new tools is an updated video editor that allows creators to make precise adjustments and edits, a feature that automatically syncs video cuts to the beat of a song and AI stickers.
The creator tools will become available later this spring, said YouTube, which is owned by Google.
Along with the new features, YouTube last week said it was changing the way view counts are tabulated on Shorts. Under the new guidelines, Shorts views will count the number of times the video is played or replayed with no minimum watch time requirement.
Previously, views were only counted if a video was played for a certain number of seconds. This new tabulation method is similar to how views are counted on TikTok and Meta’s Reels, and will likely inflate view counts.
“We got this feedback from creators that this is what they wanted. It’s a way for them to better understand when their Shorts have been seen,” YouTube Chief Product Officer Johanna Voolich said in a YouTube video. “It’s useful for creators who post across multiple platforms.”
CEO of Meta and Facebook Mark Zuckerberg, Lauren Sanchez, Amazon founder Jeff Bezos, Google CEO Sundar Pichai, and Tesla and SpaceX CEO Elon Musk attend the inauguration ceremony before Donald Trump is sworn in as the 47th U.S. president in the U.S. Capitol Rotunda in Washington, Jan. 20, 2025.
Saul Loeb | Via Reuters
Technology stocks plummeted Thursday after President Donald Trump’s new tariff policies sparked widespread market panic.
Apple led the declines among the so-called “Magnificent Seven” group, dropping nearly 9%. The iPhone maker makes its devices in China and other Asian countries. The stock is on pace for its steepest drop since 2020.
Other megacaps also felt the pressure. Meta Platforms and Amazon fell more than 7% each, while Nvidia and Tesla slumped more than 5%. Nvidia builds its new chips in Taiwan and relies on Mexico for assembling its artificial intelligence systems. Microsoft and Alphabet both fell about 2%.
The drop in technology stocks came amid a broader market selloff spurred by fears of a global trade war after Trump unveiled a blanket 10% tariff on all imported goods and a range of higher duties targeting specific countries after the bell Wednesday. He said the new tariffs would be a “declaration of economic independence” for the U.S.
Companies and countries worldwide have already begun responding to the wide-sweeping policy, which included a 34% tariff on China stacked on a previous 20% tax, a 46% duty on Vietnam and a 20% levy on imports from the European Union.
China’s Ministry of Commerce urged the U.S. to “immediately cancel” the unilateral tariff measures and said it would take “resolute counter-measures.”
The tariffs come on the heels of a rough quarter for the tech-heavy Nasdaq and the worst period for the index since 2022. Stocks across the board have come under pressure over concerns of a weakening U.S. economy. The Nasdaq Composite dropped nearly 5% on Thursday, bringing its year-to-date loss to 13%.
Trump applauded some megacap technology companies for investing money into the U.S. during his speech, calling attention to Apple’s plan to spend $500 billion over the next four years.