This Week in European Tech: Has the West become too risk-averse?

25:59I think the secular trend is that technology is becoming ever more important. It is becoming ever more powerful. And therefore, cybersecurity is becoming ever more vital. And we're only just at the beginning, innings of this. One of the things we've seen in Ukraine is just how much warfare has changed. and right so that we've sort of gone from you know trenches and tanks and that sort of thing to drones but you know at the same time there is the cyber war which is is going to reach you know new proportions of things we haven't seen before and so we need to be armed we need to be ready we need to have the best tools and this i think is one of the dilemmas we are in in the west and i think the u.s in particular is in because on one hand they still have the best models and many people daria included are saying, look, we should retain these models just for U.S.

26:52use. We shouldn't let the Chinese access them. We shouldn't let them copy these models. But every time you do that, China then responds by creating more and more homegrown capability, simply sort of creating a parallel ecosystem, meaning that U.S. businesses then can't access those markets. And that long-term gives China an advantage. And so you're sort of damned if you do and damned if you don't. And I think the U.S. is just in a really challenging strategic situation where it can't really figure out what to gatekeep and what to keep open.

27:25Lomax Ward:I don't think you can gatekeep this stuff. It feels like once the genie is out of the bottle, you know, we're there. I mean, trade secrets aside, it just feels like they're going to get there anyway. It does feel a bit nuclear-ish, but obviously different. The same, same, but different. um i'm just wondering now leaning into the ownership piece and the sovereign piece maybe lomax one for you is it a good idea that governments own part of this sovereign control i don't know if you've got any thoughts on that well i don't think they need to own any shares in the company to try and exercise control right i mean they can set the laws the export control laws whatever in the country they necessarily need to be on the cap table to exercise control right So I think the two can actually be separated.

28:10This open AI, this refers to the 5 % offer from Sam Altman to the US government of 5 % of the company, right, as a gift or donation.

28:23Lomax Ward:I wonder where it'll go. Will it go into Trump's meme coin? He gives a full on his own tool and then encourages everyone else to do the same. He's like, well, if we're going to do it, you know, Dario should do it. And so I think that's politics, no? Isn't it? I mean, it seems - Is it or is it fealty? I don't know. I don't know. That's the same thing, I suppose, in this case. I mean, because obviously the economic value of those shares is big. I mean, the context of the US economy, it's not massive. What is that? That's between$550 and$75 billion worth. So it's not insignificant, assuming that the value holds.

29:06But it's politics, no? There are multiple questions in it, I think. It's one, should governments own stakes in private companies, right? That's kind of one fairly fundamental question. Two is, if they should, how should the shares be obtained? Should they be confiscated? Should they be gifted? Should they be bought, right? Is this a market-based transaction? So there are kind of lots of questions, I think, that are unfolding. Lomax, I don't know whether you have any thoughts on any of those. Well, historically, right? If you look at European, where you had a lot of privatizations in Europe, the government would retain so-called golden share, which would give it certain, particularly for critical industries, which AI clearly is.

29:47But in the context of what was then a critical industry in the 80s, like a water company or the postal service or whatever you're privatizing, that was from a control perspective at the corporate governance level. right it wouldn't may may retain some economic rights but the golden share is more around control negative control to block you know bad actors taking over the company um or certain like

30:10Lomax Ward:major strategic shifts um take place we're seeing more of it now we're seeing this we're seeing a bunch of the rail operators we're seeing some of the water operators come under national control well there's been massive massive news stories but it feels like there's more yes of course although the context is very different with the ai companies because those companies seem to have actually you know failed or struggle financially and out out in the wild of the private markets um whereas here you have like ostensibly um companies that are performing extremely well they have no problem in raising what we know they burn a lot of cash we have then we know they have no problem in raising money so this is um um and a company effectively you would never it's very rare for a company to offer itself up to um government ownership unless it really really needed it right and that's effectively needed a bailout right when the banks in the uk in the in 2008, 2009, et cetera.

30:59So I think it's a funny one to read. I mean, it's just politics now, isn't it? Yeah, I put it in the regulatory capture bucket. I put it in the politics bucket. I put it in all of the greasing buckets. But if you're sitting in government and you want to regulate AI, you don't need to own shares in the company.

31:16Lomax Ward:But listen, what happens when the market does turn? What happens when things – I mean, my thesis, as you both know, is that things are going to become much more on-prem, much more locally centralized, and the enterprise is going to wake up and all of these smart FDEs that we're going to talk about in a second that are coming through are going to start bringing these things into organizations for security and performance and all those good things. And my prediction for this week is that the AI bubble won't pop, it will just slowly transform. Again, we're going to talk about this in a second and it will just start to become uh less less financially what's the right turn of phrase hectic and all the kind of these billions and trillions that we're seeing it's just going to become more of a utility it's going to become become less of a financial gain and at that point you know you you might want governments to you might want a friendly government to help you know you become the the whatever the key supplier to this department and governments are going to be huge buyers of these toolkits.

32:17Yeah, but like if you're, I'm sorry, if you're like one of the lighthouse. Maybe I'm stitching together. Sorry, yeah. If you're one of the lighthouse AI model companies in the US and you want like closer ties with government, you don't need to like offer up your shares to them. You lobby, you build relationships. You do that. You don't need to. Sorry?

32:35Lomax Ward:Same, same? Well. I mean, obviously, people know that Anthropic is not the most popular in the US government and maybe OpenAI is, that maybe Dario should have done this and not Sam Altman. I don't know, but it just, it feels very similar. I don't know. It's a funny one that it's very different for, if you actually, if you look, I think Bernie Sanders, who has views on this, is like, he'd be like, well, from an economic perspective, we should be taking like 50 % of the company because then the people can benefit from, that goes to, that's kind of a different model. This is not obviously clearly what Altman and the US.

33:09Well, that's what he said.

33:10Lomax Ward:He said he wants the U.S. population to benefit from the AI boom. He's explicitly said that. Well, quite frankly, we call it the taxes, but yeah, okay, fine. Mads, you're good at politicking. What's your take? Well, yeah, he's saying that that's because that's what Trump has said, right? I mean, that's kind of the horseshoe theory of politics, right, where kind of the left and the right bends around and they sort of all mismead. And what's interesting is that what Trump has said is not too far from what Bernie Sanders has said. They both said it would be sensible for the government to own more of this stuff.

33:43And don't forget, the Trump administration already took a share in Intel. Yeah, 10 % was a massive, massive chunk. And so the question is how all of this should be done. And I think it absolutely, to answer the question I posed you before, Lomax, I do think there's a role for, should we say, the state or the public to own shares in companies. But it should be through arm's length sovereign wealth funds to accumulate wealth. I think one of the challenges we have today are things like pension liabilities. We build up massive pension liabilities. Why? Because we're not saving. So the national insurance that is paid in, all that does is that's just paid out straight away.

34:21It's not put aside. And that means that even though people believe that they're paying international insurance contributions, so there is money for pension in the future, that's actually not what's happening. It's a pay-as-you-go type of plan. I'd much rather see some of that money go into a sovereign wealth style fund or some kind of other superannuation scheme or something where money then is set aside and invested in real companies. And I think that's great, real assets. But do I think they should be owned by the Treasury sort of as a political instrument? Absolutely not. I think it's a disaster because all that is, which is blatantly what Sam and OpenAI are trying to do here, is they're trying to say, listen, we'll give you some shares.

35:00Now we become the incumbent. Now there are all these vested interests to say that, hey, listen, we should be the default and you should regulate and we should have a pole position. Why? Because you've got a stake in us. I mean, I just think it's terrible for competition. Competition is so important for the way the free market works. So I think there are elements of this that could work, but definitely not the way it's proposed here.

35:23Lomax Ward:Well, let's use that as an excuse to talk about markets in the kind of the broader picture. So we saw in June, pretty much, not just this week gone, But we saw this kind of rotation slash meltdown in AI just to unpack that a little bit. There were headlines like the bubble burst, trillions wiped out. But if you look behind the numbers, it just kind of tells a slightly different story. For context, first half of the year, S &P up 9.5%. NASDAQ up nearly 13%. Dow with a fresh record. Russell 2000 up almost 22%. Best H1 since 91. So you could argue like what meltdown? Who cares? but within the mag 7 the mega cap so the microsoft oracles and the hyperscalers got hit uh zoom out nasdaq's peak to trough was only about six percent which feels a bit routine-ish that feels fine uh it's already recovered at time of pod but the money didn't leave it just moved it moved down the stack out of the spenders into the suppliers namely chips which we've talked about a lot before.

36:25Lomax Ward:$2 trillion added to Micron, Intel and AMD in one quarter. Semiconductors now around 20 % of the entire S &P, which is a record, four times their weight as of six years ago. So the money's moving around rotation. Mads, maybe you can tee up some details around this. Rotation, not meltdown. Meltdown, not rotation. Where would you take this one? I think you've sort of already teed it up, Dan. I mean, yes, there has been a sector rotation. You've seen the S &P up. You've seen the Dow up. You've seen the Russell of kind of the smaller stocks up 22 % in the first half of the year. That's the best since 1991.

37:00And then we did see a bit of a meltdown in the MAX 7 here in June, a little over$2 trillion wiped off. And Microsoft, for example, had a very bad month, kind of worst month since December 2000. So there's been a rotation, as you said, from some type of spenders to suppliers. suppliers. Of course, everybody is a supplier and a spender. But what's really interesting is everybody's buying stuff from NVIDIA, which is a company with formidable revenue, formidable margins. They're buying a lot of stuff from the memory makers, the Microts and SK Hynix and Samsungs of this world, which are also companies, especially the pure play memory makers with very strong revenue growth and very high margins.

37:38Some of this is, there's a level of double counting. What's interesting is, I think this is something that's quite unique, is there's so much value and so much demand in AI that you're seeing multiple layers of the stack with 80 % gross margin. That's a bit counterintuitive, right? That you can have both memory at these mega high margins and NVIDIA on top of that, buying the memory, paying so much for it, and also having mega high margins.

38:03Lomax Ward:I saw South Korea. By the way, that's historically high margins for memory companies now, right? Oh, I don't know. Oh, crazy. Yeah, yeah, yeah. It's SAS margins. But I also saw South Korea investing 500 billion or just over half a trillion in some memory companies. And just to stay in the game, which I thought was like a massive bet. It takes a long time to stand up capacity. There isn't going to be much more capacity coming online in the next two to three years. So that means that if demand holds up, margins are going to hold up. And of course, that's why the stocks have gone through the roof.

38:37But Dan, where do you want to take this? I mean, we could talk a lot about sort of the intricacies of different companies, but is there sort of a bigger question you want to drill into?

38:46Lomax Ward:Yeah, I mean, I think the main thing on my mind was what next? So I was thinking, obviously, we all know that the Mag7, the Mega Caps, we talk about frontiers and hyperscalers, they're doing incredibly well. They're raising big chunks of change. change, then we've seen this move into RAM and chips and the more hardware layer. In my head, I'm thinking, what next? I don't know if either of you got any thoughts on this, but what are we going to see? Where are the next chokeholds or where are the next bottlenecks in this market? For me, it's energy. And I don't know why we're not seeing more. Maybe it's just not possible to transform in the same way.

39:26Lomax Ward:I don't know. But to me, there's the power piece, which I think is going to be the next massive move of investment that we see. But I don't know if you have any thoughts on that, Maz, before I hand over to Loma. Well, it's super regulated and hard to stand up capacity in a hurry. I mean, I guess the question you might ask is, could the people that produce the gas peakers, could they just triple the prices? And I think, yes, you have seen some price inflation. What they have been resistant to is to stand up more capacity. That's one of the reasons why we have these chokeholds. And, you know, folks are saying, look, we just don't believe that we're going to need and see this demand for many, many years to come.

40:02It's very cyclical. We've been here before. It's always boom and bust. Don't forget, this is, to some extent, this is just the more extreme version of it has always been this way. Right. You know, back to the mainframe era. You go back to the mainframe era in the 70s and early 80s. Mainframe margins were well in excess of 60 percent. And then they dropped down below 40 percent. Then you had in the 90s, dot-com boom, you had Sun and EMC. EMC had gross margins above 60%. That also created to below 20%. So wherever there is a bottleneck of something, that's where the value will migrate. I think the bigger concern, a question maybe you have from a Western lens is kind of the rare earths and some of the things where there are genuine shortages.

40:49And even if we wanted to, it would be hard to stand up more capacity because it's such a long supply chain. it may be hard to get a hold of some of the raw ingredients and also we are looking at we are

40:59Lomax Ward:pretty much globally looking at rate hikes this year so i don't know how i don't know how that then leans into the whole whatever public private markets low max i don't know if you've got any i would just say yeah i mean go back on the memories like you know history lesson on memories there's never been a memory super cycle that didn't end in oversupply right so i think that That is the thing to watch out for in that respect. But on the, no, I think stepping back at the more macro level, a couple of observations. So one is the one you just point out is that there's a huge exposure and risk to rate hikes, which will, I think, put a lot of these valuations clearly under pressure, right?

41:42So we'll see a rotation out of public equities in that case. clearly in the last when was the last fed um fed decision it was quite recently or no kevin walsh came out recently saying that he was gonna um i think he probably talked about it last week it's not gonna go for a rate hike immediately right but i think there's a risk that that will happen for sure it actually looks like the europeans did um raise rates uh recently but that looked like an erroneous decision because inflation in the context of europe taped out lower than people were were expecting um but that's the biggest that's a huge huge like fundamental

42:17structural risk that everyone faces in terms of what could go what could happen going forwards and then looking through where i read this week around that this week that hedge funds have been selling out of tech stocks at the fastest pace in a decade right so it sort of isn't that was a very good article that i read this week in that um with retail weird retail basically like claring in um shortfall like i don't think that's a great sign um so there's definitely um things to worry about one of the four horsemen of the apocalypse is when the smart money is selling and the less sophisticated money is buying yeah that's typically how does that fare for top of the market spacex

43:03Lomax Ward:then mad i mean that they're basically the spacex was held up by retail wasn't it i don't know if there's any connection on that one? Possibly. Well, let's talk about trade. Trade as a weapon, new trade wars. This week, we had Trump threatening 100 % tariffs on countries with digital services taxes just days before the 4th of July US-EU deadline. We also saw VW doubling its job cuts, which obviously is not great news across Europe and especially in Germany. So we've got both blocs looking at this kind of trade war forcing to defend their champions. More nation states are reaching for economic weapons, tariffs and taxes, and all these good things are becoming the new artillery.

43:54Lomax Ward:Three new fronts open this week. So Trump threatened this 100 % tariff. Volkswagen out. Alphabet, the 4 billion euro EU fine was upheld after eight years. I don't know if you guys saw that. On the actual trade deficit, the US European trade numbers, the US runs a 200 billion trade deficit with the EU. So at best, I would argue this is a tariff of mutual damage if this comes off. But Europe has only this one real lever, which is on the digital side, which is where most American giants make their money, why Trump is now threatening. So I don't know, Mads, maybe you can give us some details on this kind of this trade weaponization.

44:34Lomax Ward:And where are we at? And how do you see this playing forwards. There is so much going on here, both East and West. I mean, if you sort of start with the US, as you say, Europe's got one lever, really. The US has got a massive deficit on trade, on goods trade. So more than$200 billion deficit. They import more than they sell to the EU. But under services, it's 89 billion surplus. And services, of course, it's not, you know, hairdressers and people mowing lawns, it's digital stuff, right? It's really, it's Alphabet or Google, it's Apple, it's Meta. It's all the good stuff, all the tech. And Europe is a massive market for those companies.

45:19Not everybody realizes Google and Apple, they each sell for more than$100 billion in Europe, what they call EMEA, every year. Meta, probably a little bit less, maybe half, but they're massive markets. And the challenge is that these companies are highly, highly profitable. They deliver fantastic services. We love what they do. They don't pay very much tax. Now, we like them a lot in the UK and in London. They employ a lot of people here. But even so, it would be great if they could leave a little bit more of the economic benefit they create behind so that you don't have this deficit. And so on one hand, Trump, he's been saying, look, I don't like the deficit I have on goods.

46:01So I'm going to slap some tariffs on. and the EU agreed to the 15 % tariff, agreed to investment in the US, agreed to buying energy and Europe buys a lot of LNG from the US today. But digital was kept out of that deal. There's still kind of this notion of a digital services tax and now Trump has said, look, I really don't like that because he knows it's the one place where Europe really can hurt the US from a trade perspective and so he's going apoplectic over that. How is he threatening to do that? Well, he says, if anybody does it, I'm going to slam big tariffs on them. Europe created something called the anti-coercion instrument.

46:43So it's effectively something that can be used if a foreign power threatens EU nations on trade. You can sort of gang up and then head back. And it's actually quite powerful. It can do exactly the stuff people don't like. It can hit the services. It can hit procurement. it can hit IP. So you can actually go in and say, okay, well, if you are trying to coerce a member country, we can change how some of the IP rules are perceived and sort of dealt with. So this is the stuff where the US is strong and really can be heard. And so there is a big battle being set up. There was almost a showdown happening a few years ago between France and the US that was kicked into the long grass because there was a view that, look, maybe we can refer that to an international institution.

47:36That has now been dismantled. There is no good global approach to try and regulate digital services today. And so it's just going to be very interesting to see how this plays out. Let's come back to China in a second. Let's just pause there and see if there are any reactions on that.

47:54Lomax Ward:Hello, Max. You got any thoughts on this? I'm not any predictions maybe. I mean, I'm always intrigued as to how many new european services are coming online driven by this exact challenge and what the reality is about mistral serving more of france for example rather than buying an american service but lomax i don't know if you've got any predictions or thoughts or ideas around this kind of digital trade war no i mean i think i think it's it's funny we've talked when When we talked about tariffs in the past, especially in the context of Trump and the tariff wars in Q1, I guess it was, it was all around goods.

48:36We always used to make the point that tariffs don't apply to software, which they don't historically. And of course, we have the Digital Services Act in the UK and increasing efforts to try and tax that software revenue or effectively ad spend is what the revenue really is for most of those companies. But now it's coming into the software domain. And clearly, you know, Trump sees, given how critical AI and tech is to everything these days, it's the next big fighting ground.

49:08Lomax Ward:yeah and the eu ai act has been kicked into the long grass till end of 27 i think i'm not sure what that would affect on this side i mean i do wonder i do wonder whether people in the eu are just being like well let's wait for the midterms let's wait for trump you know if we make if we make a bet that that trump uh will have his wings clipped gradually i can't see that making that much of an impact on on his behavior i don't make the impact of his behavior but it will make an impact on how the europeans react to that behavior because if if they see effectively a person whose power is sun setting you know one to two years while it can be a very long time in politics it can also be a relatively short time and if people feel that he's more of a lame duck on the way out i think people may you know the europeans may be maybe more um inclined to just to crack on with what they think is best um and ignore the saber rattling in the white house i don't know i don't You know, maybe he's got one foot out the door anyway.

50:05I don't think he cares about succession particularly.

50:09Lomax Ward:I wonder if JD will make it. Anyway, that's all on the side. Mads, you wanted to talk about China. How would we, where does China fit into all this? Well, you were talking about Volkswagen. You were talking about potential layoffs. Of course, that's all about China and Chinese trade. China used to be a phenomenal market for German automakers going back 10. Do you remember when, I remember when Mercedes dropped off a cliff. If you remember, we did this maybe a year ago, and we were looking at the numbers of Mercedes sold in China. And it was like, boom, it was like, grow, grow. Oh, my God. And then it was off a cliff, just dropped.

50:40Lomax Ward:I think it was really interesting how you're, this exact point. That's exactly right. I mean, we used to say 10 years ago that China is very, very far from, if ever, you know, in a position where they can challenge kind of Western high-end automakers. And guess what? They just figured out how to do it. And the underlying notion, it's sometimes said that there's not really anything China wants to import or buy from the West because they're driving quite a mercantilist policy. So if you look at how they are structuring their economy, consumption is a low priority for them. They want to focus on boosting manufacturing and technology.

51:18And consumption is not something that they sort of naturally try to boost in the way they think. And so for them, it's really all about…

51:26Lomax Ward:Is that still the case, Matt? I thought they were trying to get more of the savers who were obviously then caught up in Evergrande and all the property shenanigans because the Chinese market is very saver-centric, isn't it? I thought the government was trying to get them to spend and build a local consumption. Is that still not the case? Yeah. If anything, it's in a mercantilist way. So buying things locally, making things locally, there's this notion that yes, customers, yes, but only to learn how to replicate what's important and then make it locally. And that's not great for the world economy because we sort of need to trade with each other.

52:09If one side only wants to make stuff and sell and not buy, we're not going to have a cycle of capital in a healthy way. And it doesn't work. Mechanism has been tried for hundreds of years. It's not a new notion. There was a reason we went away from it and moved towards a world with more free trade. But it sort of requires for everybody to play by those rules. And it seems like not everybody has got the same objective here. And so I think the US and sort of the EU is in a bit of a pickle where you sort of you almost have to retaliate or you have to find a way to get China to start importing and buying stuff because otherwise you're going to hurt your local economy and industry so much.

52:51And so one of the questions that are coming up, China sells more to Germany, for example, than Germany sells to China today. It wasn't always like that. It was much more in balance until 2019. But after COVID, it's just absolutely exploded. And so why doesn't Germany or the EU just slap some tariffs on Chinese imports? And here is the challenge. Yes, China exports consumer goods and cars and things that consumers buy. But they also export a lot of the parts that go into the supply chain of European industry. And what happens if we slap tariffs on those pot imports is that the cost of the input to European business will immediately go up.

53:36And what will that reflect?

53:38Lomax Ward:Yeah, we're importing inflation. Inflation. So although on paper it looks like Europe has got levers, actually Europe is in a really tricky spot. bought. And we can see this is exactly why Volkswagen is now talking about laying off 100 ,000 people. I mean, it sounds catastrophic, right, in numbers. And, you know, think about the ripple on effects for the local supply chain, those communities. It's not great. I think it probably has to get done because you've had an industry that is, you know, not efficient and can't compete. So you have to make some of those really, really difficult decisions.

54:16But gosh, it's a pickle to be in.

54:19Lomax Ward:One of my predictions from maybe six months ago was that the German automotive industry was going to be rescued by defence. And how wrong was I? I mean, maybe this is cyclical, maybe it's inertia, I don't know. But I just, I assumed when you were looking at these mega factories with these hundreds of thousands of employees, I said, fine, they're going to go and make subs and kinetics and other machinery to rebuild. But yeah, I was obviously flat wrong on that one. Lomax, any thoughts? I want to talk about FDEs very quickly before we close off today, but any thoughts on this, Lomax, before we move on?

54:50Yeah, I'm okay.

54:54Lomax Ward:I've got this thing about FDEs and forward deployed engineers. And as most people listening will know, a recent MIT study found that 95 % of enterprise AI implementations or pilots delivered very little to no measurable profit impact. And we've seen a number of stories around how the enterprise is struggling to get AI integrated into organizations. And we're seeing so many more large orgs now, basically, the frontiers, the hypers, and anyone selling AI, putting FDs, these forward deployed engineers, into organizations to effectively embed AI, get value from AI. And it just seems to be a massive movement.

55:37Lomax Ward:It's just weird. We've got this kind of what we thought was going to be much more of a tech push. It's now almost a human push, getting the humans back out into the market to go and implement all these incredible AI toolkits. We saw AWS became the first hyperscaler to spend billions standing up, a forward deployed engineering unit. Today, Friday, the 3rd of July, I saw Microsoft announce that they're spending billions getting this department stood up. We've seen other hyperscalers and frontier labs do the same. So we're not just seeing a rotation in financial markets, but also in labor markets.

56:12Lomax Ward:But Mads, how would you tee this one up? How would you think about this one? In what way? Well, it just feels like we're now moving out of AEs and kind of customer service agents and getting the engineers who may or may not be the best people to kind of look at business problems and solve them with technology. It used to be a different mindset, but now it's almost like we've got this engineering cohort now coming back into the workforce to get these incredible AI toolkits into business to create value. Where is it coming from? Is it a good idea? What's going to happen with it? I don't know. Take it wherever you want to take it.

56:52I don't think there's much new under the sun. I mean, look, in the 1970s, if you bought a main frame or rented one from IBM, IBM would send out engineers to help install it and configure it and set it up and it was ever thus. I think what happened, maybe the transition we've seen is that in the 80s and 90s with packaged software, we started to see enough standardization that you went from engineers and developers to consultants that would configure, right? So if you do a SAP implementation, yes, there's maybe some scripting and some configuration, but it's not sort of hardcore engineering to the same extent.

57:26Maybe the pendulum is swinging back a little bit. I think the reflection here is it's still very new technology. The kind of LLMs are three and a half years old. Everybody's still working out how actually to make them productive and useful in the enterprise setting. It takes a little bit more technical skill maybe than just loading a CD-ROM onto the server and configuring a few workflows. And so that's why you need engineers to do that. And the more the technology matures, the more you're going to swing back from actually needing engineers back to configuration and setting things up. So in my view, I mean, there's nothing really to see here.

58:02This is just what you expect. I literally think – Go ahead. Well said, that man. You've nailed it on the head, Demads, I think. Yeah. Do you? It feels like a bigger deal. Listen, there'll be money to make. I don't think it's a bigger deal than that. If you are Accenture, you're not necessarily in a great place because the people you have may not have the skills you need today to compete head-to-head with Anthropik's own services unit or OpenAI's own services unit or Mistral's own services unit. But they're going to figure it out and they're going to upscale their people. And, you know, in five years from now, these entities will go head-to-head.

58:41It was ever thus, right? IBM competed with Accenture. Accenture did extremely well. IBM would send engineers, Accenture would send consultants, but they were always very, very good at developing the senior level strategic relationships that would drive deals. So I'm not too worried for Accenture. They will also be here 10 years from now.

59:00Lomax Ward:Yeah, and also they'll obviously be doing more and better and different. But it feels like we're going to see this almost explosion of new roles within organizations and within the consultancies and within the suppliers and the vendors to create the value from these incredible toolkits. And I wonder what roles are going to be created and what are going to be morphed and how this kind of circular nature of humans. Because to me, the story here is that it's not AI installing AI, managing AI, running AI. There's this big human push, which I found was maybe from the human interest side was quite interesting.

59:35A hundred percent. No, look, it's not, as you say, just the AI is doing everything. Judgment is becoming really important because let's not forget, As the technology becomes more powerful and as you are still in a quite early stage in terms of how settled is the architecture and how is this configuration or is this genuine new deployment? Well, that means that the person who is on point to make it work has got a lot of power. Not the power in a bad sense, but just they can do a lot of stuff, a lot of good or bad, right? If they get it wrong, it's going to destroy a lot of value. If they get it right, it can unlock a lot of value.

1:00:07And because fewer people can do more with new technology, you can blend the roles more. So maybe in the past, you would have needed one project manager to kind of run the project trackers, a couple of engineers to configure and do stuff, one person to run the training. And now one person can have Claude run the project tracker, can set Claude code up to do the implementation and can answer some questions, and then maybe go do the training session themselves. So you concentrate value from more dimensions in maybe fewer people. And so that does make them more important in that sense.

1:00:45Lomax Ward:I think we're going to see more on this. I also, speaking with one of our portfolio founders, he now makes all of the engineering team at least once a month sit on a sales call. So engineering understands the commercial reality of a client or a prospect. And I just think we're going to see much more of this. Like you say, Mads, it's kind of slightly blended. It's not just separate people, separate departments. We all need to understand from the technical perspective how this commercial thing is going to be resolved. I think we'll see more. I think it's super exciting to me, but maybe it's my soft, squishy, humanistic side.

1:01:17Lomax Ward:I want to talk about deals of the week. Lomax, you've got a deal of the week. What is yours, my good man? And it's a big deal, actually. So Quantum Systems, Munich-based autonomous drone maker, has announced it raised yesterday$1.2 billion Series D. These billion-dollar raise amounts, they've been common in the US, but they're becoming increasingly more ubiquitous. It's hyperbole, but they're becoming more common. We're seeing them. At least we're seeing them now, right? I mean, this is a big deal. I think that's co-founded in 2015, an 11-year-old company, a kind of reminder that if you're in a hot space like drones like quantum systems is like you know it's not that you suddenly started the company yesterday you know they've been building for a long time a long time before this became hot and sexy and relevant right so yes a reminder that for the seed investors you should invest in the stuff that is not the hot sexy stuff now timing timing timing and luck like very very impressive company they've flown nearly 20 000 missions in ukraine in 2025 um multiple um you know deployments and customers across multiple geographies around the world um more than just defense initially started out a civilian use case then became defense but there's a it's a broader dual use company um and actually there's um being teased in the ft this week the founder um florian cybel who founded um this company quantum systems and stark which is a pure defense company there's now a kind of tease of potentially that and stark is backed by founders fund which is quite rare for a european company founders fund being peter teal's big you know us fund that you know turned 600 million into 60 billion um via spacex um is is a big becker of stock and you know there's now a merger kind of being mooted to create effectively a kind of super defense um like a european anduro which everyone thought was helsing or still maybe helsing which is last value to 12 billion um actually if these two companies came together then you know you would have another big future you know neo prime and it's a reminder you didn't talk about the defense investment plan this week which was finally released I don't think there's a lot of new news there but actually when it comes to defense the UK is not a great place to be but Germany is much better place to be because of which kind of makes sense more money because you know they have these these fiscal constraints that they wouldn't spend it yes in areas and And because they unlocked that in whatever it was in Q1, they have the kind of 100 to 120 billion to spend.

1:03:53The UK is trickling out hundreds of millions. So that's a reminder there.

1:03:58Lomax Ward:Show me the money, baby. Mads, what was your deal of the week? Equilibre, which is a Prague-based AI company. And Creandum has led a Series A at a valuation above$500 million. dollars. The size of the round was undisclosed, but it's Creandum's largest ever single bet. And what is it? They're reinforcement learning trading agents. So they're actually making AI that makes money in the stock market. And what's interesting is the backstory of the founders. So Schmidt and Rav Cech are Czech PhD students who built DeepStack, which was the first AI to beat professional poker players. And it was not just in one round.

1:04:38They proved that over more than 44 ,000 hands that had actually made something that was better than the pros. And it ran on one consumer gaming card. So they were really great at building a core algorithm that with limited hardware could do something quite impressive. They then went to join the DeepMind Lab in Edmonton, and they've done a number of really cool things before going back to Prague to set up this really impressive AI lab. Now, there's some impressive people working on it. There is Murray Campbell, who co-built IBM's Deep Blue, the machine that built Kasparov in chess. There's Michael Boulding, who's also advising them.

1:05:16He led the Alberta group that was behind DeepStack. And then there is Sutton, Rick Sutton, who won the Turing Award and who was the father of reinforcement learning. So in that company now and in that team, you have a person who worked on winning in chess and making the AI that beat the chess grandmaster in 97. You have the team that beat humans at poker in 2016, and now they're beating the markets and making a lot of money for investors. So, yeah, it's a very, very nice round and good to see. Good for them.

1:05:47Lomax Ward:Mads, what's happening this week? What have we got to look out for? So today we've got one of your favorite companies, Dan, Tesla, Q2 deliveries are landing. How well are they doing? Next week, we've got SpaceX joining the Nasdaq 100, and that should drive some more volume into that stock. We've also got Anthropic. They're going to move Fable 5 from All You Can Eat into usage credits. And we will all watch our bills soar. Same day on Tuesday, we should see Samson reporting on the memory, reporting earnings, Flash Q2. That'll be sort of a test, a litmus test of the memory super cycle we've been talking about.

1:06:26Later in the week, we've got the Rays Summit in Paris. Are you going to be over there, Lomax? No, not for you this time. It should be a good one. And then, of course, later in the week, the Volkswagen Supervisory Board is going to discuss the big plans. And we should know that by the time we are next week, how that pans out. TSMC will report June revenue next Friday. And that is really one of the cleanest reportings on what's happening in AI CapEx. So lots of news coming up.

1:06:55Lomax Ward:Ooh, exciting. Exciting summary news. Well, that is it from me. anything else from you fine gentlemen before we close off not today but then i can't wait you know next week we're going to be in person dan so we are we're going to be doing a lisbon special from the beach freak yeah so i can't i cannot wait for that that'll be super fun lovely to see you in the real world rather than through a lens uh gentlemen if there's nothing else we'll call it a day i love you both and we'll catch you all next week see you in the next one Bye. Bye.