Scott Denne has covered the intersection of technology and capital markets for his entire career. In late 2023, Scott began his second tour at 451 Research, the technology research arm of S&P Market Intelligence, where he covers acquisitions, valuation trends and private equity investments. His research explores changes in dealmaking and shifts in valuation. His reports cover broad movements in the tech M&A markets, private-equity investments, analysis of specific deals and forecasts of deal activity in multiple sectors of the software industry. Previously, Scott spent two years as Director of Technology Research for BWG Strategy. In that role, Scott provided primary research to buyside equity investors through a mix of surveys and moderated group discussions. The coverage was built around collecting spend intention, sentiment and budget outlook from customers and channel partners across a universe of 50+ enterprise software tickers. Prior to an eight-year stint as an M&A analyst with 451 Research, Scott was a reporter covering startups and venture capital for several Dow Jones publications, including VentureWire, Private Equity Analyst and The Wall Street Journal. He has been quoted by financial and technology publications, including TheStreet.com, Wired, CNBC.com, AdExchanger and CMSwire.
Acquirers never quite took to generative AI. The ability to turn prompts into text, pictures and videos dominated discussions about the future of tech following the debut of ChatGPT three years ago. The commercial applications and impacts, while potentially profound, remained vague and buyers barely moved beyond a few dozen "acqui-hires" in 2023 and 2024.
Wall Street is punishing almost any software stock that's not putting up accelerating growth amid the AI buildout. This is creating an opening for strategic acquirers that are willing to wait and see if AI can reignite the top lines of aging software vendors. In paying $11.5 billion for Confluent, IBM becomes the latest to bet that the newest tech will, eventually, bolster older companies.
If you're not getting an AI premium, you're selling for a discount. Nowhere is that more apparent than in the M&A valuations for business application providers that are exiting the public markets. These days, Wall Street only has an appetite for companies seeing a sudden acceleration in their revenue as AI spending ticks up.
Projections for the AI infrastructure market keep gaining momentum, as Wall Street bumped up its long-term revenue expectations for the major cloud computing companies following a couple of rosy earnings reports last quarter. At the same time, the nature and scope of the applications that will consume all that infrastructure remain, at best, vague.
Venture capitalists are going all in on the next new thing while they struggle to sell the last new thing. Investors are pouring money into AI startups, pushing VC activity to a record. But as they make historic outlays, liquidity from past funds has stalled, impeding the industry's ability to raise money to back the next round of tech startups.
The venture capital industry needs the new new thing — AI — to paper over lackluster returns from the last new thing. Competition for those deals, however, is pushing up prices, creating a hurdle for outsized returns. Join us for our upcoming webinar, All in on AI: Strategies for a Rapidly Expanding Market, where we will unpack AI's impact on venture investments and liquidity.
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