AI vs everything else

Happy Sunday all,

It's Saskia here, with this week's edition of Tech and the City. The AI safety debate rumbles on in Washington; The FTC launched a formal investigation into whether AI labs have been misleading consumers, while tech CEOs privately challenged Dario Amodei at a White House gathering.

But it looked to be a slightly more productive week on home turf. Elevenlabs hit a $22bn valuation after a $300m employee share sale, doubling its value since February. Andy Burnham used Labour conference to announce Great British Grid, a publicly owned company designed to open electricity network infrastructure to competition and give data centre developers an alternative to waiting years for a connection. It is at least an acknowledgement that the current system is throttling the investment ministers are simultaneously trying to attract.

And in a boost to our tech sector, I visited Figma's London office opening on Tuesday - the New York-listed design software group unveiled its new space near Liverpool Street, with two thirds of the FTSE 100 now on its platform. Yet another American tech company doubling down on London.

Less cheerfully, however, MI5 published its first ever standalone espionage alert, warning that more than 100 UK-linked academics had contributed to research funded by a Chinese institute, whilst the bosses of Elevenlabs, Synthesia and a string of AI startups published an open letter calling for bans on lengthy non-competes, notice periods and garden leave. And AI minister Kanishka Narayan added a sobering note at Labour conference, saying the government was drawing up contingency plans for “unprecedented” AI-driven job losses - acknowledging that official figures may already be underestimating the impact as companies automate without explicitly saying so.

August is traditionally the month the news agenda takes a long lunch, but next week isn’t playing along. The EU AI Act's transparency obligations formally came into force on 2 August, meaning the watermarking commitments made this week by Anthropic, OpenAI and others are no longer voluntary gestures but legal baselines. How the European AI Office begins enforcing them, and whether xAI's absence from the voluntary code attracts early scrutiny, will be worth watching closely in the next few days.

Palo Alto Networks reports fourth-quarter earnings on Monday - the bellwether for enterprise cybersecurity budgets and a read on whether the wave of AI-driven threat activity documented this year is translating into actual spending.

The CMA's review of the ITV-Sky merger continues to take shape, with submissions due in and the definition of the advertising market - television-only versus the full digital landscape - set to become the central battleground.

And with the government's under-16 social media ban heading toward legislation before Christmas, young people this week called on Burnham to rethink the ban. Whether he will budge is onne to look out for as Meta reportedly removed over 750,000 teen accounts in Australia since their ban took place.

Here are the big stories shaping the week in tech.

Saskia

CHART OF THE WEEK

Despite years of wealth managers preaching the virtues of broad-market diversification, the stock market has essentially boiled down to a one-horse race. New returns data reveals that AI equities have utterly dominated global capital flows, comfortably outpacing standard benchmark indexes year after year.

What started as a 93 per cent blowout in 2023 has settled into a persistent structural lead over the likes of the the S&P 500. Strip out the hardware and software powerhouses fueling the boom, and the rest of the market is left scraping together modest single-digit gains - leaving traditional, non-AI portfolios struggling to stay relevant in a landscape dictated by a single trade.

Some of Britain’s leading tech founders have called on the government to tear up “unfair” employment restrictions they say are choking growth and leaving UK startups struggling to compete with Silicon Valley.

The bosses of Elevenlabs, Synthesia, Fuse Energy and a string of British AI startups have signed an open letter published on Tuesday demanding restrictions on lengthy notice periods, non-competes and garden leave.

The letter, titled Free to Start and Scale, warns that workers are increasingly “bound by unfair restrictions”, which prevent them switching jobs or starting companies, putting Britain’s technology ambitions at risk.

“UK growth is slow because we can’t build fast enough”, Alan Chang, chief executive and co-founder of Fuse Energy, told City AM.

Britain is preparing for the possibility of “unprecedented” AI-driven job losses, the AI minister has said, as companies increasingly cut staff and automate parts of their workforce.

Kanishka Narayan said one of his top priorities was drawing up a contingency plan for a severe disruption to the jobs market, which could include changes to labour policy and regulation.

“If it’s going to hit us in a big way, you are going to want to be as ahead of the curve as possible”, Narayan told a Labour conference event on Monday.

He stressed there was currently no evidence that AI had caused an overall fall in UK employment, but said the government had to “take seriously the possibility of an unprecedented impact on the jobs market”.

What’s your advice for UK founders?

Think big from the start. Entrepreneurs tend to focus on the tactical execution that’s right in front of them – but, if you are building something for long term success, that’s not enough.

Always think years ahead and optimistically about what real success looks like. Founders need to analyse the market and paint a picture of why there’s a huge addressable market for their startup if everything goes right.

Having grown up in Europe, this is one area where I’ve seen entrepreneurs in the US having an edge. While Europeans tend to pitch more conservative ideas, their Silicon Valley counterparts sell bigger ideas and get bigger valuations as a result.

That’s an important part of getting a strong valuation that ultimately protects your founder stake against dilution as you go through the many rounds of funding that lead to long term success.

Most undervalued UK tech sector at the moment?

Tough to opine on what’s undervalued, but if I were to pick one area of major opportunity, I’d pick Energy tech. It is one of the world's largest industries with a huge upside opportunity driven by AI and data centers. And it’s an area of relatively limited entrepreneurial innovation when looking back over past decades, which should create a lot of latent opportunities for new startup innovation.

Do you think we’re in an AI bubble?

I’ve been building AI-driven products long before AI became a daily headline. Whenever there's a major technological shift, expectations often run ahead of reality. But when people talk about an AI bubble, they're typically referring to valuations for companies with limited revenue and whether enough value will be created to justify that investment. There are pockets of the AI space where those valuations aren’t supported by fundamentals, but it's important to distinguish between excitement around AI and businesses with strong fundamentals.

AlphaSense is an example of a scaled AI platform with more than $600 million in ARR, serving thousands of enterprise customers. Our platform supports high-stakes business decisions, and our usage is deeply embedded in how our customers operate.

There are many businesses being built where AI is delivering everyday value across the business world, which will continue to excel even if some of the more bubbly pockets in the market lose steam.

What’s your go-to breakfast spot in the City?

When I'm in London, I spend most of my time around London Bridge, close to our office. There are lots of great breakfast spots in the area. What matters less to me is the specific venue and more the conversation. Some of the most productive discussions I have with customers, colleagues, and partners happen over breakfast before the day gets busy. It's a great time to step back, exchange ideas, and talk about the opportunities and challenges people are seeing in their businesses.

One of the things I enjoy most about visiting London is spending time with our local team. They always know the best places, and it's a great way to experience the city through the people who live and work there every day. London has incredible energy as a global business hub, and every visit reinforces why it's such an important market for AlphaSense.

What AI tool do you think everyone should use?

I don't believe there's one AI tool that everyone should use. The most valuable AI applications are purpose-built for specific workflows. A corporate strategist, a banker, an investor and a software engineer face different challenges – the right tool depends on the problem you're solving.

What is universal is the need for an information edge. We're living through an explosion of information. Everyday there is more content, data, and noise competing for our attention, yet the amount of time available to make decisions hasn't changed.

Whether you're evaluating an investment or planning a major business initiative, the challenge is often the same: finding the insights that matter and acting on them quickly.

The best AI tools help you find trusted information, surface the right insights, easily validate what the AI is giving you - and turn complexity into clarity. The goal isn't AI for its own sake, it’s making better decisions with speed and confidence.

Openreach is considering further targeted fibre discounts over the next five years after Ofcom blocked its most aggressive attempt to cut wholesale prices, the BT-owned network told City AM.

The broadband giant said it remained open to competition in different parts of the country after the regulator approved a separate £50 rebate for new full-fibre customers in areas covered by Virgin Media O2.

“We would expect to launch further offers over the five-year period of the TAR framework”, an Openreach spokesperson told City AM.

Ed Miliband has vowed Britain will use its G20 presidency next year to push for global rules on AI, warning governments “cannot leave it to corporations” to police the technology.

The foreign secretary said the economic potential of AI was “inspiring” but warnings from the companies developing the technology meant governments needed to act.

“The threat it poses, according to its own inventors, is daunting”, Miliband said.

“Some are calling for us to act, but other tech companies are saying we should leave it all to them”.

Miliband said history showed companies could not be relied on to set safeguards in the public interest because their purpose was to “maximise profits”.

In a week in which the world debated whether AI might end civilisation, OpenAI was separately dealing with a personality feature it had to quickly retire after an unintended reinforcement-learning signal caused its models to become fixated on goblins.The exact nature of the obsession has not been fully explained.

Elsewhere, developers dealing with hallucinating models went viral for a new debugging technique: telling their AI to breathe, count to ten and lock in before trying again - treating a language model like a stressed-out intern. In the same week that Dario Amodei warned of AI outrunning human control, it is worth knowing that some of them are apparently still working through some things.

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