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A major financial services CEO warns the economy hasn’t fully absorbed higher interest rates yet.
Thomas Michaud, who runs Stifel company KBW, notes there’s a delayed reaction in the marketplace from the last hike — calling a 25 basis point move at 5% a very different situation than off a half percent.

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“This is getting to be the real deal at the moment because of the level of rates,” he told CNBC’s “Fast Money” on Wednesday. “The bite of these higher rates is gaining traction almost every day.”
Michaud delivered the call hours after the Federal Reserve decided to leave interest rates unchanged. It comes after ten rate hikes in a row.
The Fed signaled on Wednesday two more hikes are ahead this year. Michaud expects one to happen in July. However, he questions whether policymakers will raise rates a second time.
“Trying to deliver a new message with these dots is not what I’m willing to hang my hat on from what I see happening in the economy,” he said. “The economy is slowing. So, I think we’re near the end of this rate increase cycle.”
He lists interest rate sensitive areas of the economy already in a recession: Office space in urban areas, residential mortgage originations and investment banking revenues. He sees the problems contributing to more pain in regional banks.

“Banks were already tightening in the fourth quarter of last year. It didn’t just start in March. Loan growth had been slowing,” added Michaud. “There are elements of like the global financial crisis that are in bank stocks right now.”
According to Michaud, the regional bank rally is a short-term bounce. The SPDR S&P Regional Banking ETF is up almost 18% over the past month.
“The overall industry rally for all participants probably doesn’t happen until we get some more stability in what we think the earnings are going to be,” said Michaud. “Earnings estimates haven’t settled. They haven’t stopped going down.”
He sees a shift from adjusting to the new interest rate environment to credit quality in the second half of this year.
“Before the first quarter we cut bank estimates by 11%. After the quarter, we cut them by 4%.” Michaud said. “My instincts are we are going to cut them again.”
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WASHINGTON, DC – MAY 03: Federal Reserve Board Chairman Jerome Powell delivers remarks at a news conference following a Federal Open Market Committee meeting on May 3, 2023 in Washington, DC. The Federal Reserve announced a 0.25 percentage point interest rate increase bringing the key federal funds rate to more than 5%, a 16-year high. (Photo by Anna Moneymaker/Getty Images) (Photo by Anna Moneymaker/Getty Images)
Anna Moneymaker | Getty Images News | Getty Images

The Federal Reserve paused its hiking campaign in June, but forecast it will raise interest rates as high as 5.6% before 2023 is over, according to the central bank’s projections released on Wednesday.
The Fed on Wednesday kept the key borrowing rate in a target range of 5%-5.25%. But it was its projections, the so-called dot-plot, that moved markets, sending them lower as the central bank projected two more increases. That’s if the central bank keeps its rate-hiking pace at quarter-point increments.

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Fed Chairman Jerome Powell said the next gathering for the committee in July remains a “live” meeting, signaling that a quarter-point hike isn’t baked in yet.
“We didn’t we didn’t make a decision about July. … Of course it came up in the meeting from time to time, but really the focus was on what to do today,” Powell said in a press conference Wednesday. “I would say … two things: One, a decision hasn’t been made. Two, I do expect that it will be a live meeting.”
Here are the Fed’s latest targets:

Arrows pointing outwards

Eighteen members of the Federal Open Market Committee indicated their expectations for rates in 2023 and further out in the dot plot. Four members saw one more rate increase this year and nine expect two. Two more members added a third hike while one saw four more. Only two members signaled that they don’t see more hikes this year.
The central bank also hiked their forecasts for the next two years, now projecting a fed funds rate of 4.6% in 2024 and 3.4% in 2025. That’s up from respective forecasts of 4.3% and 3.1% previously.

Meanwhile, Fed members raised their expectations for economic growth. The Summary of Economic Projections now shows a 1% expected gain in GDP as compared to the 0.4% estimate in March.
Officials also were more optimistic about unemployment, now seeing a 4.1% rate by year’s end compared to 4.5% in March.On inflation, the central bank raised its forecast to 3.9% for core (excluding food and energy) and lowered it slightly to 3.2% for headline. Those numbers had been 3.6% and 3.3% respectively for the personal consumption expenditures price index, the central bank’s preferred inflation gauge.
— CNBC’s Jeff Cox contributed reporting. More

After a two-day meeting, the Federal Reserve decided to leave interest rates unchanged.
“Holding the target range steady at this meeting allows the Committee to assess additional information and its implications for monetary policy,” the central bank’s post-meeting statement said.
The surprising aspect of the decision came with the “dot plot” in which the individual members of the FOMC indicate their expectations for rates further out. The dots moved decidedly upward, pushing the median expectation to a funds rate of 5.6% by the end of 2023.

WASHINGTON —  The Federal Reserve on Wednesday decided against what would have been an 11th consecutive interest rate increase as it measures what the impacts have been from the previous 10.
But the decision by the Federal Open Market Committee to hold off on a hike at this two-day meeting came with a projection that another two quarter percentage point moves are on the way before the end of the year.

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“We have raised our policy interest rate by five percentage points, and we’ve continued to reduce our security holdings at a brisk pace. We’ve covered a lot of ground and the full effects of our tightening have yet to be felt,” said Fed Chair Jerome Powell at a news conference following the central bank decision.
The possibility of further rate increases put pressure on stocks immediately after the news broke, but encouraging talk on the fight against inflation allowed the market to rebound briefly.

A ‘hawkish pause’

The central bankers said they will take another six weeks to see the impacts of policy moves as the Fed fights an inflation battle that lately has shown some promising if uneven signs. The decision left the Fed’s key borrowing rate in a target range of 5%-5.25%.”Holding the target range steady at this meeting allows the Committee to assess additional information and its implications for monetary policy,” the post-meeting statement said. The Fed next meets July 25-26.

Markets had widely been anticipating the Fed to “skip” this meeting – officials generally prefer the term to a “pause,” which implies a longer-range plan to keep rates where they are. The expectation leaned heavily against an increase after policymakers, particularly Powell and Vice Chair Philip Jefferson, had indicated that some change in approach could be in order.The surprising aspect of the decision came with the “dot plot” in which the individual members of the FOMC indicate their expectations for rates further out.The dots moved decidedly upward, pushing the median expectation to a funds rate of 5.6% by the end of 2023. Assuming the committee moves in quarter-point increments, that would imply two more hikes over the remaining four meetings this year. Bank of America said in a note after the meeting that it expects the Fed to move in July and September.
During the press conference, Powell said the FOMC hadn’t yet made a decision about whether another increase would be likely in July.

“People expected a hawkish pause and they got a very hawkish pause,” said David Russell, vice president of market intelligence at TradeStation. “Given the strong labor market, the Fed has room to crush inflation and they don’t want to miss their chance.”
“Still, policymakers skipped hiking rates so they can monitor the data,” he continuned. “This increases the importance of each incremental economic report. More good news like this week’s CPI and PPI could let traders look past the Fed’s tough talk and see a dovish turn later in the year. Jerome Powell is still a barking dog, but he may be losing his bite.”

Opinions vary on future hikes

FOMC members approved Wednesday’s move unanimously, though there remained considerable disagreement among members. Two members indicated they don’t see hikes this year while four saw one increase and nine, or half the committee, expect two. Two more members added a third hike while one saw four more, again assuming quarter-point moves.Members also moved up their forecasts for future years, now anticipating a fed funds rate of 4.6% in 2024 and 3.4% in 2025. That’s up from respective forecasts of 4.3% and 3.1% in March, when the Summary of Economic Projections was last updated.The future-year readings, though, do imply the Fed will start cutting rates – by a full percentage point in 2024, if this year’s outlook holds. The long-run expectation for the fed funds rate held at 2.5%.Those changes to the rate outlook occurred as members raised their expectations for economic growth for 2023, now anticipating a 1% gain in GDP as compared to the 0.4% estimate in March. Officials also were more optimistic about unemployment this year, now seeing a 4.1% rate by year’s end compared with 4.5% in March’s prediction.On inflation, they raised their collective projection to 3.9% for core (excluding food and energy) and lowered it slightly to 3.2% for headline. Those numbers had been 3.6% and 3.3% respectively for the personal consumption expenditures price index, the central bank’s preferred inflation gauge. The outlooks for subsequent years in GDP, unemployment and inflation were little changed.Fed officials believe that policy moves work with “long and variable lags,” meaning it takes time for rate hikes to work their way through the economy.The Fed began raising rates in March 2022, about a year after inflation started a dramatic climb to its highest level in some 41 years. Those rate hikes have amounted to 5 percentage points on the Fed’s benchmark to a level not seen since 2007.The increases have helped push 30-year mortgage rates over 7% and also spiked borrowing costs for other consumer items such as auto loans and credit cards.Recent data points such as the consumer and producer price indexes have shown the rate of inflation slowing, though consumers still face high costs for many items. The FOMC statement continued to note that “inflation remains elevated.”Inflation hit the U.S. economy due to multiple Covid pandemic-related factors – clogged supply chains, unusually strong demand for high-priced goods over services, and trillions in stimulus from both Congress and the Fed that had an abundance of money chasing a dearth of goods.At the same, the supply-demand mismatches in the labor market had pushed both wages and prices higher, a situation the Fed has sought to correct through policy tightening that has included both rate increases and a reduction of more than half a trillion dollars from the assets it holds on its balance sheet.
—CNBC’s Sarah Min contributed to this report. More

A man walks by a panel with the logo of Logitech on the campus of the Swiss Federal Institute of Technology of Lausanne in Lausanne, Switzerland, Nov. 27, 2019.
Fabrice Coffrini | AFP | Getty Images

Check out the companies making headlines in midday trading.
Logitech — Shares tumbled 11.1% after the company announced president and CEO Bracken Darrell is departing. Citi downgraded shares to neutral from buy following the announcement.

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UnitedHealth — UnitedHealth dropped 6.4% after Chief Financial Officer John Franklin Rex said more seniors are getting medical procedures they delayed during the Covid-19 pandemic, according to a FactSet transcript of a presentation made Tuesday at the Goldman Sachs Annual Global Healthcare Conference. It’s a trend that means rising costs for the health insurance company. Other insurers also dropped, such as Humana, which slid 13%.
Toyota — The Japan-based automaker’s shares gained 4.7% Wednesday. Shareholders reelected chairman Akio Toyoda in an endorsement of the company’s governance and new electric vehicle strategy. Toyota announced earlier in the week it would introduce a full lineup of battery electric vehicles with “next generation” batteries.
Lumen Technologies — The telecommunications stock gained 6.1% during midday trading Wednesday, adding to the 16% advance that was made Tuesday. On Monday, Lumen announced a new network interconnection ecosystem called ExaSwitch that was created in partnership with Google and Microsoft.
Maxeon Solar Technologies — The solar stock gained 0.1%. Roth MKM upgraded shares from buy to neural, noting strong demand and the potential for margin expansion ahead. Earlier in the week, the company announced a new partnership with electric vehicle software charging company ev.energy.
Advanced Micro Devices — The chip stock gained nearly 2.3% in midday trading, a day after the company announced its latest artificial intelligence chips. On Wednesday, Reuters also reported Amazon Web Services is considering using AMD’s AI chips. Several analysts were bullish, with Goldman Sachs upping its price target on AMD to $137 from $97 Wednesday, suggesting 10% upside from Tuesday’s close.

Anheuser-Busch InBev — Shares rose 1.9% after Bernstein reiterated its outperform rating. The Bud Light parent has struggled recently as its decision to work with a transgender influencer sparked conservative ire.
IPG Photonics — The laser company jumped 13.5% after Raymond James upgraded the stock to outperform from market perform. Raymond James said the company is underappreciated, specifically pointing to opportunities in the electric vehicle space.
Dave & Buster’s — Shares slid 5.8% following the company’s investor day. The sell-off comes despite Raymond James reiterating its strong buy rating following the company update. However, the firm did note some investors may take a “wait and see” approach to the stock given the potential for the health of the broader economy to affect discretionary spending.
Cinemark — The movie stock slid 6.3% on the back of a downgrade to neutral from buy by B. Riley. The firm cited its uncertain film slate, while noting the stock should have a longer-term opportunity to benefit from improvements in the domestic box office and growth in Latin America.
Li Auto — The Chinese electric vehicle maker popped 7.3% after Morgan Stanley added a positive catalyst watch on the stock, pointing to strong recent weekly shipment data and the potential for a recovery in the sector.
Netflix — The streaming giant rose 1.2% on the back of two calls from analysts. Wolfe Research reiterated shares as outperform, with the firm saying it’s bullish on the password-sharing crackdown. Though Barclays reiterated its equal rate rating, the firm raised its price target on shares to $375 from $250.
DoorDash — Shares of the food delivery company fell 2.3% after Gordon Haskett downgraded the stock to hold from buy. The firm said DoorDash’s current risk/reward profile is no longer enough to drive favorable share price reaction.
Deckers Outdoor — Shares of the outdoor apparel company jumped 3.3% to hit a 52-week high after Raymond James initiated the coverage on the stock as outperform. The Wall Street firm said it likes its wide array of products, particularly the Hoka brand, which it believes has strong momentum and is in the early innings of long-term growth globally.
Shift4 Payments — Shares advanced 0.8% following an upgrade from SVB Securities to outperform from market perform. SVB said the digital payments software name should see volume growth increase.
SoFi — SoFi gained 2.1% after BTIG names the stock a top pick in the financial technology space. The firm said shares could rally more than 45% as student loan payments resume.
Estée Lauder — Shares of the beauty stock rose 4.1% following an upgrade to buy from hold by Berenberg. The firm called the stock an attractive buying opportunity.
— CNBC’s Michelle Fox, Yun Li, Sarah Min and Hakyung Kim contributed reporting. More

The Federal Reserve on Wednesday is expected to take a break and skip another interest rate hike.
Following its two-day meeting, the central bank will release a statement along with economic and rate projections.
Chairman Jerome Powell then will hold a news conference where he’s expected to take a cautious tone and not rule out future increases.

Federal Reserve Chairman Jerome Powell holds a news conference after the release of U.S. Fed policy decision on interest rates, in Washington, May 3, 2023.
Kevin Lamarque | Reuters

On the heels of a 10-meeting streak of raising interest rates, the Federal Reserve on Wednesday is expected to take a break and let the U.S. economy catch its breath.
Markets are pricing in a high probability that central bank policymakers will “skip” — an expression they generally prefer to “pause” — at this month’s meeting as they digest the impact of 5 percentage points worth of increases going back to March 2022.

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21 hours ago

That doesn’t mean this will be the end of the hikes. It just means that with the pace of inflation waning, officials could feel this is a good time to evaluate.
“They’ve kind of set things up for a pause,” said Bill English, a former Fed official and now a finance professor at the Yale School of Management. “So they’ll probably pause, but I think they’ll very much want to avoid an outcome in markets where investors say, ‘Hurrah! The tightening cycle is over.'”
Indeed, there will be a lot of moving parts in Wednesday’s Fed action. Here’s a look at what to expect.

Rates

If the rate-setting Federal Open Market Committee does choose to pause, that will leave the benchmark borrowing rate in a target range between 5% and 5.25%.
In the market’s eyes, Tuesday’s consumer price index report, which showed the 12-month inflation rate falling to a two-year-low of 4%, cemented that decision.

However, the post-meeting statement could be massaged in a way that markets don’t assume that policymakers have gone quiescent on inflation and are set on halting the rate-hiking cycle.
“This could be a one-sided communication that they’re leaning in the direction of raising rates, but they’re not ready to commit just yet. They want some more information on how things are going,” English said. “A hawkish pause, if you like, is something that could get pretty broad support.”

The ‘dots’ and the economic outlook

If a hawkish pause indeed becomes the order of the day, that will send investors looking to the “dot plot,” a chart of individual members’ expectations of where rates are headed from here.
The general chatter — reflected in market pricing — is that the dots will “move up” and indicate an additional rate hike this year, likely at the July 25-26 meeting.
The last time the dots were updated, at the March gathering, there was a wide disparity among where members stood, with seven of 18 FOMC members expecting rates to go higher than the current range.
Along with the dots, members will update the Summary of Economic Projections, which lists the outlook for gross domestic product, the unemployment rate and inflation as gauged by the personal consumption expenditures price index. Market expectations are that the growth outlook likely will improve, even though the Fed’s own economists said in March and June that they expect a credit contraction to trigger a shallow recession later this year.
Communication from the Fed, then, likely will be, “We’re not convinced that this is the end of the rate hikes, but we want to take a look around see what kind of damage the banking crisis has inflicted on the economy,” said Mark Zandi, chief economist at Moody’s Analytics. “It also recognizes that there’s a lag between what we do and when it shows up in the economy and inflation. So we’re just going to pause here.”

The Powell presser

After the statement and projections are released, Fed Chairman Jerome Powell will be up next to field questions from the press and explain the intentions behind the actions.
There’s wide expectation that he’ll take a cautious tone, emphasizing the importance of bringing down inflation rather than focusing too much on the FOMC deciding to pass on a rate hike.
“The press conference is likely to emphasize that just because we did not hike at a given meeting, that does not mean that we’re done hiking,” said Dean Maki, head economist at Point72. “He will be very explicit about that. At the same time, I don’t think he wants to pre-commit to a July hike.”
Finding the balance between enough aggression to bring down inflation while not tanking the economy is the Fed’s ultimate goal.
History suggests that central banks that pause usually commence hiking soon after they discover that inflation hasn’t been vanquished, according to Goldman Sachs.
“We expect that any pauses will likely be driven by upside inflation surprises rather than tight labor markets given that the current inflation overshoot remains the main problem that central banks are trying to solve,” Goldman economists Giovanni Pierdomenico and Joseph Briggs said in a client note.
Powell and his colleagues generally have expressed confidence that they can control the levers of policy to bring down inflation without causing a recession. But there are no guarantees, and a recession remains the most likely case for most economists.
“The risk in continuing to raise interest rates is something will break more structurally than it has so far,” said Ed Yardeni, head of Yardeni Research. “Then they would have to lower interest rates if they cause a recession. In the past, we’ve had very few periods where the fed funds rate went up then plateaued. Usually, the Fed overdoes it.”
Correction: At the March gathering, seven of 18 FOMC members expected rates to go higher than the current range. An earlier version misstated a figure. More

Toyota cars are displayed on the sales lot at Toyota of Marin on May 11, 2022 in San Rafael, California.
Justin Sullivan | Getty Images News | Getty Images

Check out the companies making the biggest moves in premarket trading:
Toyota — The Japan-based automaker’s shares jumped about 5% after shareholders re-elected chairman Akio Toyoda to the board, in a broad endorsement of the company’s governance and new electric vehicle strategy.

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14 hours ago

Logitech International — Shares of the computer accessories company fell more than 10% after Logitech said CEO Bracken Darrell is leaving for an outside opportunity. Citi downgraded the stock to neutral from buy, saying Logitech needs to provide more clarity about its long-term plans after the leadership change.
Vodafone — The cell phone network added nearly 3% in premarket trading after Vodafone and CK Hutchison agreed to merge their U.K. businesses.
AMD — The chipmaker gained 3% premarket. On Tuesday, AMD said it will start shipping its most advanced GPU for artificial intelligence to some customers later this year. Amazon Web Services is considering using the new chips, Reuters reported Wednesday.
United Health — Shares fell nearly 6% premarket following comments by United Health chief financial officer John Rex at a conference this week that there has been elevated volumes of non-urgent surgeries in the second quarter. Other managed care companies also sank, with Humana sliding 7.5% and Cigna down 3.6%.
Lumen Technologies — Share rallied about 11%, one day after gaining 16% on news of Lumen’s new network interconnection ecosystem in partnership with Google and Microsoft.

Shell — The European oil stock was up 2.3% after Shell boosted its dividend and share buybacks and said it would keep oil production steady until 2030.
SoFi Technologies — Shares added 3.25% premarket. BTIG named SoFi as a top pick in the fintech sector as student loan payments resume. The Wall Street firm’s $14 price target implies more than 46% upside from Tuesday’s close.
— CNBC’s Hakyung Kim and Jesse Pound contributed reporting. More

A JD.com truck receiving incoming goods and preparing shipments at the Northeast China-based Gu’an warehouse and distribution facility in Gu’an, Сhina.
XiXinXing | iStock Editorial | Getty Images

Check out the companies making headlines in midday trading.
Biogen — Shares of the biotech stock dipped 2.8% after Biogen revamped its board of directors. Three current board members will not run for reelection, while the company’s former head of corporate strategy Susan Langer was nominated to the board, Biogen said Monday.

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9 hours ago

Oracle — Shares rose 0.2% to an all-time high on the back of a strong earnings report for the fiscal fourth quarter. Oracle reported $1.67 in adjusted earnings per share, while analysts polled by Refinitiv expected $1.58. Revenue also came in higher than expected at $13.84 billion against a $13.74 billion estimate. Goldman Sachs upgraded Oracle to neutral from sell following the report.
Norwegian Cruise Line Holdings — Norwegian Cruise Line Holdings jumped 5.7% to the highest since May 2022 after Bank of America on Monday raised its price target to $19 from $17, though the firm maintained a neutral investment rating. Carnival’s target went to $20 from $11, also rising to the highest since May 2022, while Royal Caribbean’s rose to $95 from $82 and the stock touched the highest since November 2021.
Urban Outfitters — The retailer gained 3.5% following an upgrade to overweight by Morgan Stanley. The Wall Street firm cited Urban Outfitters’ low valuation relative to peers and improving business fundamentals.
Devon Energy — The energy stock rose 2%. Goldman Sachs upgraded Devon to buy from neutral, saying it trades at an attractive valuation and looks poised to appreciate as its production and capital expenditure outlook improves.
Oil stocks — Oil shares rose broadly as WTI crude gained following Monday losses. The VanEck Oil Services ETF rose 2.2%. Shares of Halliburton jumped 3%, while Transocean climbed 2.6%. 

Zions Bancorporation — The Salt Lake City-based bank lost 1.5% after it said its net interest income outlook is “decreasing.” The bank’s previous outlook was “moderately decreasing,” according to StreetAccount. The update came in a presentation posted Monday afternoon.
Chinese internet stocks, metals and mining stocks — Shares of Chinese internet companies and metals and mining stocks jumped Tuesday after the People’s Bank of China cut a key short-term policy rate in an effort to stimulate a post-Covid recovery. The KraneShares CSI China Internet ETF rose 2.4% while JD.com gained 3.5%. Metals and mining stocks were also boosted by the news, with shares of Freeport-McMoRan and Steel Dynamics rallying 5.3% and 6%, respectively. 
— CNBC’s Samantha Subin, Sarah Min, Alexander Harring and Jesse Pound contributed reporting. More

Artificial intelligence-based video generation platform Synthesia has raised $90 million from investors, the company told CNBC exclusively.
The round, which values the company at $1 billion, was led by venture capital firm Accel and backed by U.S. chipmaker Nvidia.
Synthesia will use the cash to invest in AI research, advancing on collaborations with leading colleges like Munich’s TUM and London’s UCL. 

An animated avatar generated by the AI video platform Synthesia.

Synthesia, a digital media platform that lets users create artificial intelligence-generated videos, has raked in $90 million from investors — including U.S. chip giant Nvidia, the company told CNBC exclusively.
The London-based company raised the cash in a funding round led by Accel, an early investor in Facebook, Slack and Spotify. Nvidia came in as a strategic investor, putting in an undisclosed amount of money. Other investors include Kleiner Perkins, GV, FirstMark Capital and MMC. 

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Founded in 2017 by researchers and entrepreneurs Victor Riparbelli, Matthias Niessner, Steffen Tjerrild and Lourdes Agapito, Synthesia develops software that allows people to make their own digital avatars to deliver corporate presentations, training videos — or even compliments to colleagues in more than 120 different languages.
Its ultimate aim is to eliminate cameras, microphones, actors, lengthy edits and other costs from the professional video production process. To do that, Synthesia has created animated avatars which look and sound like humans, but are generated by AI. The avatars are based on real-life actors who speak in front of a green screen.
“Productivity can be improved because you are reducing the cost of producing the video to that of making a PowerPoint,” Philippe Botteri, at Accel, the lead investor in Synthesia’s Series C, told CNBC, adding that adoption of video has been proliferated by consumer platforms such as YouTube, Netflix and TikTok.
“Video is a much better way to communicate knowledge. When we think about the potential of the company and the valuation, we think about what it can return, [and] in the case of Synthesia, we’re just scratching the surface.”
Synthesia is a form of generative AI, similar to OpenAI’s ChatGPT. But the company says it has been working on its own proprietary generative AI for years, and that although ChatGPT may have only recently emerged into public consciousness, generative AI itself isn’t a new technology.

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Synthesia sells to enterprise clients, including Tiffany’s, IHG and Moody’s Analytics. The company doesn’t disclose its sales or revenue metrics, though it says it has “consistently driven triple digit growth,” with over 12 million videos produced on the platform to date. The number of users on Synthesia spiked 456% year over year, the company said.
Synthesia plans to ramp up investment into its technology, with a particular focus on advancing its AI research and making Synthesia avatars capable of performing more tasks. 
“We work with 35% of the Fortune 100 [with a focus on] product marketing, customer support, customer success — areas of the company you have a lot of text that you want to turn into video,” Riparbelli told CNBC.
“As we’re progressing to the next phase of the next generation of Synthesia technology, it’s all about making the avatars more expressive, be able to do more things, walk around in a room, have conversations,” he added.
Riparbelli explained Nvidia isn’t just a semiconductor manufacturer — it’s also a powerhouse of research and development talent with an army of engineers, academics and researchers who produce papers on the subject.
“They’re not just a chip producer,” he said. “They have amazing research teams that are very much leading in terms of, how do you actually train these large models? What works, what doesn’t work?”

Investor interest in A.I.

Business Insider previously reported that Synthesia was in talks with investors to raise between $50 million and $75 million in new funds at a valuation of around $1 billion.
The report didn’t include detail about Nvidia’s involvement, nor mention the total $90 million sum raised.
Synthesia is one of many firms attracting interest from investors with AI and enterprise software that can reduce costs involved in certain business processes. Companies are looking to lower expenses everywhere they can to combat climbing inflation and prepare for a possible recession. 
Last week, French business planning software company Pigment raised $88 million from investors including Iconiq Growth, Felix Capital, Meritech IVP and FirstMark, in part to ramp up its investment in AI.

Generative AI has been a rare bright spot in a European tech market reeling from declining funding and a pullback in valuations. Investors have rotated out of high-growth tech firms into value sectors with more resilient income generation, such as financials, industrials, energy and consumer staples.
Recently, a report from venture capital firm Atomico showed funding for Europe’s technology startups was on track to fall a further 39% in 2023 to $51 billion from $83 billion in 2022.
However, AI was one area that drew more investments, Atomico said, with generative AI accounting for 35% of total investment into AI and machine learning firms last year — the highest share ever and a big jump from 5% in 2022.

Ethical concerns about deepfakes

There are concerns that the use of video AI tools as advanced as Synthesia could lead to deepfakes, videos which take a user’s likeness and manipulate it to make it appear as though they are saying or doing something they’re not.
There has also been an increasing number of calls from tech leaders and academics for a global pause on AI development beyond systems like OpenAI’s GPT-4, because of fears that the technology is becoming so advanced it may pose an existential risk to humanity.
Synthesia first attracted mainstream attention in 2019 for a deepfake video that featured a digitally animated version of celebrity soccer player David Beckham speaking about a campaign to end malaria in nine languages.
While that was done with the consent of Beckham and for a good cause, more widespread use of deepfake technology has led to worries about the potential for misinformation.

To address that, Synthesia says it has kept ethics in mind while developing its software. The company requires consent from the people who feature as avatars in its software, and uses a mix of humans and machine learning to target material such as profanity and hate speech.
It is also signed up to Responsible Practices for Synthetic Media, a voluntary industrywide framework for the ethical and responsible development, creation and sharing of synthetic media.
“There are many different discourses going on right now. There’s one about the very long-term existential sort of risk scenarios. I think they’re important to talk about as well. But I’d love to see more focus on where are we today?” Riparbelli told CNBC in an interview.
“These technologies are already powerful. How do we deal with hallucinations? How do we deal with all of the problems that arise?” he added. “There’s definitely pitfalls. But there’s also just so much opportunity in it, I think, leveling the playing field and enabling people to do much more with less.” More