UAE defies fintech slowdown with a 92% jump in funding — against a global plunge of 48%
Europe’s fintech sector is fiercely competitive, with privately-held start-ups worth tens of billions of dollars vying to steal market share from incumbent banks.
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The fintech industry saw more pain in 2023, with overall investment falling by half as higher interest rates and worsening macroeconomic conditions caused investors to tighten their belts, according to global investment figures shared exclusively with CNBC.
The data from Innovate Finance, a financial technology industry body, shows that investment in fintechs last year sank $51.2 billion, down 48% from 2022 when total investment in the sector totaled $99 billion. The total number of fintech fundraising deals also sank considerably, to 3,973 in 2023 from 6,397 in 2022 — a 61% drop.
Still, despite that drop, there was one standout performer on Innovate Finance’s list when it came to funding: the United Arab Emirates. According to Innovate Finance, the UAE saw total investment soar 92% in 2023, thanks in part to more fintech-friendly regulations, and as adoption of digital banking and other tools expanded in the region.
That marks the first time the UAE has made it to the top 10 list of most well-funded fintech hubs in 2023, according to Innovate Finance. There were more Asian and Middle East countries in the top 10 last year than there were European nations, the group noted, as some major European economies slipped down the table, such as France and Germany.
“Some of the markets now adopting this technology, we’re seeing that reflected in investment numbers,” Innovate Finance CEO Janine Hirt told CNBC earlier this week. Hirt noted that the momentum in Asia and the Middle East offered an opportunity for the U.K. to boost cooperation and partnerships with countries in those regions. “We are seeing appetite and real momentum coming from a lot of hubs in Asia,” she said.
On the slowdown, Hirt noted that growth-stage companies were the most likely to be affected by the downturn in funding in 2023, whereas seed-stage and early-stage firms were more immune to those pressures.
“If you’re a later-stage company, you might not be going out for a raise right now,” Innovate Finance’s CEO said, adding that early-stage fintechs had a better time in the market last year raising about $4 billion. “That’s a really positive sign,” she added.
“What is a testament to the strength of our sector is that deal sizes are very, very healthy,” Hirt said. “Globally, and in the U.K., investment in seed, Series A and B fintechs has normalized, which is a testament to the strength of investors,” she added.
Financial technology has had its share of gloom over the past 12 months, amid intensifying conflicts between Russia and Ukraine and Israel and Hamas, ongoing geopolitical tensions between the U.S. and China, and broader uncertainties affecting financial markets, such as higher interest rates.
According to the International Monetary Fund, global economic growth is expected to slow to 3% in 2023 from 3.5% in 2022.
UK comes second to U.S.
Innovate Finance also noted that the U.K. was the second-biggest hub for fintech investment in 2023, with total funding for the country’s financial technology industry totaling $5.1 billion in 2023, down 63% from $13.9 billion in 2022.
The U.K. received more investment in fintech than the next 28 European countries combined, according to Innovate Finance.
London fintechs pulled in $4.5 billion last year, with the city continuing to dominate when it comes to fintech funding in Europe more broadly.
However, the U.K.’s capital saw overall funding drop, too — down 56% from 2022.
Meanwhile, female-led fintechs in the U.K. bagged 59 deals year worth a combined $536 million, according to Innovate Finance, accounting for 10.5% of the U.K. total, which the organization called a “step forward” for women founders and leaders.
“I think, ultimately, the U.K. is still very much a global leader in fintech,” Hirt told CNBC. It’s the European leader.”
But, she added, “We can’t afford to rest on our laurels. It’s critical to build on the momentum we’ve had over the past few years. We need government support and regulation that is effective and efficient and proactive.”
“For us, a focus going forward is making sure we do have proper regulation in place that allows fintechs to thrive, and allows SMEs [small to medium-sized enterprises] across the country to benefit from these new innovations as well.”
“Cracking on with new regimes for stablecoins, regimes for crypto, open banking and finance — these are all areas we’re hopeful we’ll see progress in in 2024.”
The United States, unsurprisingly, was the biggest country for fintech investment, with total investment coming in at $24 billion, although funding levels remained down from 2022 as fintech firms raised 44% less in 2023 than they did a year ago.
India came in third after the U.K., with the country seeing fintech investment worth $2.5 billion last year, while Singapore was fourth with $2.2 billion of funding, and China was fifth on $1.8 billion.
The value of the top five biggest deals globally in 2023 was over $9 billion, or about 18% of total global investment in the space.
Stripe pulled in the most amount of cash raising $6.9 billion, according to the data, while Rapyd, Xpansiv, BharatPe, and Ledger won the second, third, fourth, and fifth-biggest investment deals, respectively.
Thomas Fuller | SOPA Images | Lightrocket | Getty Images
Ambarella stock roared 20% higher Friday as the chip designer reported better-than-expected second-quarter results and issued strong guidance.
Here’s how the company did compared to LSEG expectations:
- Earnings: 15 cents per share adj. vs 5 cents per share expected
- Revenue: $96 million vs $90 million expected
Ambarella, which is known for its system-on-chip semiconductors and software used for edge artificial intelligence, said it expects third-quarter revenue between $100 million and $108 million, beating the LSEG estimate of $91 million.
The company boosted its fiscal year revenue growth outlook to a range of 31-35%, to $379 million at the midpoint, which topped the $350 million expected by LSEG.
“After a multi-year period of significant edge AI R&D investment, our broad product portfolio enable us to address a rising breadth of edge AI applications,” CEO Fermi Wang said in a call with analysts Thursday.
Wang singled out strength in “portable video, robotic aerial drones and edge infrastructure.”
Edge computing refers to the direct processing and storing of data at the device level instead of those actions being handled remotely in the cloud at a data center.
Ambarella had a net loss of $20 million, a loss of 47 cents per share in the second quarter. That narrowed from the same quarter a year ago, when the company had a net loss of $35 million, a loss of 85 cents per share.
The company said stock-based compensation and the amortization of acquisition-related costs weighed on earnings.
In June, Bloomberg reported that the company was considering a sale and had held talks with banks. Shares climbed 20% higher on the news.
Ambarella year-to-date stock chart.
Marvell Technology Group Ltd. headquarters in Santa Clara, California, US, on Friday, Sept. 6, 2024.
David Paul Morris | Bloomberg | Getty Images
Shares of Marvell Technology plunged 15% on Friday after the artificial intelligence chipmaker’s data center revenue fell short of estimates and it gave lackluster guidance for the current quarter.
Here’s how the company did in comparison with LSEG consensus:
- Earnings per share: 67 cents adjusted vs. 66 cents expected
- Revenue: $2.01 billion vs. $2.01 billion expected
Revenue jumped 58% from a year ago in the fiscal second quarter that ended Aug. 2, a record for the company that was fueled in part by “strong AI demand” for its custom silicon and electro-optics products, Marvell CEO Matt Murphy said in a statement.
The company had net income of $194.8 million, or 22 cents per share, compared with a net loss of $193.3 million, a loss of 22 cents per share, during the same period last year.
For the fiscal third quarter, the company called for revenue to be $2.06 billion, plus or minus 5%. That was slightly below the $2.11 billion forecast by analysts, according to LSEG.
Marvell is known for creating customized chips and hardware, which it offers to cloud providers such as Amazon and Microsoft.
Sales in its data center segment reached $1.49 billion during the quarter, which fell short of Wall Street’s projected $1.51 billion, according to StreetAccount.
On a conference call with investors, Murphy said the company expects “overall data center revenue in Q3 to be flat sequentially,” which he attributed to nonlinear growth in its custom AI chips business. Fourth-quarter growth is expected to be “substantially stronger” than the third quarter, Murphy said.
He added that “lumpiness” of the guidance is normal as large hyperscalers build out infrastructure.
Still, some investors were hoping for greater clarity around the company’s pipeline of new customers.
“Without this, we find it very difficult underwriting the company’s 20% data center market share target,” Cantor analysts wrote in a Thursday note to clients. “Thus, we wait for more bottoms up granularity before potentially turning more positive.”
Analysts at Bank of America downgraded Marvell’s stock to neutral from buy on Friday and lowered their price target to $78 per share from $90, partly on concerns around the company’s AI growth prospects “in the near/medium term.”
Marvell year-to-date stock chart.
Mukesh Ambani, Chairman and Managing Director of Reliance Industries, arrives to pay his last respect to Indian industrialist Ratan Tata at the National Centre for the Performing Arts (NCPA) ahead of its cremation in Mumbai on October 10, 2024.
Punit Paranjpepunit Paranjpe | AFP | Getty Images
Indian conglomerate Reliance Industries on Friday announced new partnerships with Google and Meta to accelerate the company’s push into artificial intelligence.
Speaking at an annual shareholders’ meeting on Friday, Reliance Chairman Mukesh Ambani also disclosed ambitions to list Reliance Jio, India’s largest mobile network, in the first half of 2026.
“A decade ago, digital services became a new growth engine for Reliance — the opportunity before us with AI is just as large, if not larger,” Ambani said, as he revealed a new fully owned subsidiary called Reliance Intelligence.
In a pre-recorded video played during the AGM, Google CEO Sundar Pichai said that Reliance would leverage the internet giant’s AI and cloud computing capabilities to boost innovation across sectors like energy, retail, telecommunications and financial services.
The pair will establish a dedicated cloud region in India, powered by clean energy provided by Reliance Industries and connected through Jio’s network.
Separately, Ambani also announced a new joint venture with Meta to make use of the tech group’s open-source AI models and deliver “sovereign, enterprise-ready AI for India.”
Under the new venture, Reliance Industries and Meta have committed an initial investment of $100 million to capitalize the unit in a ratio of 70% and 30% respectively, the two companies said in a joint statement Friday.
Meta boss Mark Zuckerberg hailed the partnership as “a key step forward towards ensuring that everyone has access to AI and eventually super intelligence.”
The partnerships signal a deeper push from U.S. tech names into India at a time when the country is seeing significant economic growth. It is not the first time that either Google and Meta has shown an interest in Reliance.
In 2020, Meta invested $5.7 billion into Jio Platforms, which is the parent company of Reliance Jio. Google separately announced a $4.5 billion investment in Jio Platforms that same year.
Jio Platforms owns a number of brands, including its telecommunications business Reliance Jio, which has grown rapidly over the past decade thanks to competitive pricing.
Reliance’s deeper pacts with Google and Meta come at a precarious time for U.S.-India relations. U.S. President Donald Trump has imposed hefty tariffs on India over its purchases of Russian oil.
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