Biometrics stocks this week: Synaptics in talks to sell
The Mercury News reported yesterday that San Jose-based sensor maker Synaptics is in talks to sell itself to U.K.-based Dialog Semiconductor. Investors clearly like the idea. The stock spiked Wednesday by 11.5% as news of the discussions leaked into markets.
A statement released by Synaptics confirmed that “transaction discussions” were occurring, but it also warned there should be “no assurance” that there would be an acquisition.
That said, a tie-up might make sense for Dialog Semiconductor.
The company has been busy building power-management chips for Apple. But some analysts suspect Apple is going to begin doing more chip design in-house. It may be doing the types of power management chips that Dialog makes itself by 2020. Such a move would leave Dialog scrambling to replace a huge chunk of its business. That Dialog would look to Synaptics to find a new direction for its business makes perfect sense.
Synaptics, of course, makes the controllers and touch-based sensors that are being built into the Internet of Things (IofT), and many of the new smart-home digital products now coming to market. Both Synaptics and Dialog see opportunities in the IofT space as well as the automated vehicle sector (among other possibilities). Dialog has recently acquired companies that are experts in the electronics of digital devices. A tie-up with a company making the biometrics-based sensors that will be on all these new products makes sense. So no wonder the talks. Shares in Dialog (which trade in Europe) have dropped by half over this past year. The sell-off occurred after analysts began speculating about the future of the business. Now Dialog is clearly hustling to find a new business path. That’s good for the shareholders of Synaptics. If Dialog is extremely eager to get a deal done, management at Synaptics should be able to pull out a good offer from the negotiations. The big spike in the share price this week is perhaps no surprise is one considers Dialog needs to get a deal done to sooner than later.
Another biometric tech story this week concerns the super stock of graphics chip maker, Nvidia. The company was the subject of an analyst report distributed this week by one the big global investment banks, UBS. One of the company’s analysts raised his outlook on Nvidia stock, suggesting the price of this already-booming stock could rise yet, from USD $266 to $285.
As the UBS analyst points out Nvidia is now reaping the benefits of being one of the key chip makers in the AI-face ID market. The company holds a 90 percent share of the market for AI chips, which are the wafers that do the epic number crunching to allow artificial intelligence programs to scan video footages and classify all the human action in those images. As more and more AI-powered surveillance cameras are deployed, this is going to be a staggering amount of business for companies in this sector. Nvidia is one of these, even if it came by its current success in a roundabout way.
The company started out making high powered graphics chips for video games. And that business allowed the company to motor along for several years. But recently, as the company got caught up in the hype around automated vehicles, the company’s shares have skyrocketed. Nvidia stock has been one of the best performers over the past two years.
It was only at the beginning of 2016 that Nvidia shares were trading at record highs of about $28 a share. But as the hype around automated vehicles picked up shares in the company seemed to get caught up as well. Investors realized that the chips needed to process video for self-driving cars would be in greater demand. Investors began to jump into Nvidia stock.
By the last day of trading in 2016 shares were a bit above $106 a share. Through 2017 they increased to $193. Now they’re trading at $265, up another 40% on the year so far. Which is an amazing run. But now the shares are going to be caught up in the AI face ID boom as well. Can Nvidia shares keep growing?
According to the UBS analyst one of the first big commercial uses of AI will be in the face ID and surveillance sector. That is, as more surveillance cameras go up there will be more video chips of the type Nvidia makes needed to process the images. According to the UBS analyst the, “… market for mass facial recognition and traffic monitoring could be worth up to $5 billion in additional sales for Nvidia by 2020.” This boom in AI surveillance cameras will be global according to the analyst. It is already the case that “real-time facial recognition to identify jaywalkers” is already deployed at many intersections in Shenzen China. But it won’t just be in China that this boom will occur. It’ll be here in North America as well. An Illinois bill permitting police surveillance drones at protests is being debated in Chicago. The bill amends the Freedom from Drone Surveillance Act to allow police to fly surveillance drones over “large scale events” in the city. The demand for face ID devices is also driving brisk business for Amazon’s controversial Rekogntion face-ID device (we’ll look at the shareholder resistance to that product in next week’s column). Whatever ones politics on the issue, there is no doubt that demand is huge and growing right now. One estimate is that over 2 billion surveillance cameras that can do face ID will be deployed globally by 2023. According to the UBS analyst, “China to lead the way, but rest of world will use facial recognition too.” If you’re worried that the deployment of Big Brother is unavoidable, buy Nvidia.
Another interesting bit of biometrics-related stock news arrived this week from China. Reuters news service this week reported that the massive Chinese financial services firm, Ant Financial Services Group, raised an astounding $14 billion in a round of private fundraising. Some called it the largest amount of cash ever raised by a private company, ever. But then the company does have a promising future. It already operates China’s largest online payment platform, Alipay. As China leapfrogs developed nations in terms of its adoption of a cash-less payment system Ant Financial is the company providing the biometrics-based, secure digital payment system that is most popular in the world’s most populous nation. No wonder the company could raise so much money. Ant Financial will surely have some say in what the future of secured online payments looks like. Ant Financial has already deployed AI-based collision repair estimators for auto insurers. It’s also working on biometrics-based account setup and security systems that it will provide to other financial services firms in the country. Back in the fall of 2017 it secured an agreement with a Kansas-based biometrics firm, EyeVerify (now Zoloz), which is now involved in the development of Alipay, and has already doubled the staff at its U.S. offices to keep up with demand from from the Chinese financial services firm.
Ant was spun off from Jack Ma’s Alibaba just before that company went public in 2014. According to reports Ant was “likely to be valued at around $150 billion”, making it one of the world’s most valuable financial firms. An analyst quoted in the report said Ant is the most “uniquely positioned” fintech company in the world. It is thought the funds from this financing round will be used to “speed up the adoption of the Alipay payment platform” on a global level. The Reuters report also suggests that the company expects 65 percent of revenue to come from business-oriented financial technology including, “… providing fraud prevention services.” Keep an eye out for a rumoured IPO from Ant next year when it is said the company will float shares on the Hong Kong stock exchange.
Could biometric tech be a part of one of the biggest IPOs in the world next year? Stay tuned.