Uncover Tech Insights - Oct / Nov 30-3
Weekly market stock moves
Expert interviews
Former Senior Manager at Amazon working on Prime Video gives valuable insights for investors to better understand Prime
Prime Video is one of the key drivers for people subscribing to Prime. One of the key metrics Amazon watches is the first stream a user makes after subscribing, to understand which content drove the subscription moment.
Prime subscribers expect the content to be exclusive to that subscription, so Amazon has to be careful of what content goes to their free version on Freevee.
The expert thinks the main reason for Amazon to go to a part ad-supported model is that consumer behavior is shifting because of moves done by other streaming companies in the industry.
The spending in terms of content is multiples greater than what it was 5 or 10 years ago. In the expert's opinion, the ad-supported model is probably a step towards long-term profitability.
The expert thinks right now it’s hard to turn a profit in the streaming business. Amazon is probably not in the rush because Prime subscribers are the ones that drive their flywheel and so the streaming business doesn’t have to be profitable by itself. The expert thinks that in the coming years, margins on streaming will get squeezed, and consolidation will hit the industry.
VP from an Ad agency shares his thoughts on Pinterest and what he is seeing from clients using Pinterest
Pinterest is in an interesting position for them, especially for retail clients, as it is used more like a Google Search than a social network. Users have a clear intent, it is very brand-safe, and users like to engage with brands on Pinterest
The most important thing in the expert’s eyes for Pinterest is user growth. The biggest reason why advertisers aren’t spending more ad dollars on Pinterest is scale. Advertisers like to advertise with the platforms that have the largest scale.
The Amazon - Pinterest partnership makes sense for the expert. He is going even further and thinks Amazon or Walmart buying Pinterest would be a smart step. “It’s almost like Amazon is the back-end commerce and Pinterest is the front-end showroom...”
The expert sees the new CEO, Bill Ready, as a significant benefit for Pinterest. In the last year Pinterest CEO has reached out and invited many of his clients for dinner. He is very active in building new relationships and getting more advertisers. Some clients that had dinner are now more found to Pinterest and want to allocate more of their budget to Pinterest.
Current Sr. Product Manager at AWS AI unit shares his views on the new AI boom and who stands to benefit most in his view
Believes that the hyper scalers Amazon, Microsoft and Google cloud offerings are almost one-to-one mapped in terms of offering.
Sees making your own custom silicon as a significant competitive advantage if you are a cloud provider that will reap the results in a few years.
Shares his view on who, besides the big cloud providers and Nvidia, are the biggest beneficiaries of generative AI. Names Intel Corporation, Oracle, Micron Technology, Marvell Technology, Broadcom and many more public companies, as well as private companies like Hugging Face, Datarobot, CoreWeaver, Lambda Labs, and others.
Sees Nvidia almost doubling its value in the next 3 years, but after the 3-5 year period, thinks the public cloud giants will get ahead of Nvidia .
Most impactful news of the week
Meta Pledges to Allow Marketplace Customers to Opt Out of Data Sharing, U.K. Regulator Says
The U.K. competition regulator, the Competition and Markets Authority, has announced that Meta Platforms (formerly Facebook) has committed to allowing its Facebook Marketplace customers to opt out of having their data used by the company. Additionally, Meta has agreed to limit how it uses advertising data for its own product development. These commitments have been made as a result of separate investigations, and they are aimed at protecting fair competition on the Facebook Marketplace platform.
Microsoft starts selling AI tool for Office, which could generate $10 billion a year by 2026
Microsoft is preparing to introduce AI Copilot through its Microsoft 365 platform, allowing CIOs to test the technology's value in business settings. AI Copilot employs generative AI across the Microsoft 365 suite to perform tasks such as summarizing video calls, composing draft email responses, and converting Word documents into PowerPoint presentations. While CIOs express interest in adopting this AI assistant, some acknowledge that cost is a factor to consider.
Amazon Executives Discussed How Its Policies Hurt Sellers, FTC Suit Says
Amazon executives reportedly discussed the "punitive aspect" of the company's pricing policies on sellers, as revealed in internal documents cited in unredacted portions of the Federal Trade Commission's (FTC) lawsuit against Amazon. The FTC also alleges that Amazon deliberately deleted two years' worth of encrypted internal text messages to hinder the investigation and knowingly increased the number of irrelevant ads on its website to boost profits. The FTC, along with 17 state attorneys general, filed a lawsuit against Amazon on antitrust grounds, accusing the company of violating laws by influencing prices on the internet through its lowest price requirement for sellers. Amazon has disputed these allegations and vowed to contest them in court.
Nvidia’s $5 Billion of China Orders in Limbo After Latest U.S. Curbs
New U.S. export controls may force Nvidia to cancel billions of dollars in upcoming orders for its advanced chips to China, potentially impacting Chinese tech companies' access to vital AI resources. Nvidia had completed deliveries of its advanced AI chips to China for the current year and was attempting to accelerate some 2024 orders before the new export rules were set to take effect in mid-November. However, the U.S. government informed Nvidia in a letter last week that the export restrictions on high-end chip sales to countries, including China, would be immediately enforced.
Amazon unveils buy now, pay later option from Affirm for small business owners
Amazon is expanding its partnership with Affirm to offer a buy now, pay later (BNPL) checkout option for small businesses through Amazon Business, catering to sole proprietors and small businesses owned by a single individual. The BNPL service will provide loans ranging from $100 to $20,000, and it is expected to be available to all eligible customers by Black Friday, which falls on November 24. This move aims to assist small business owners using Amazon's online platform.
Meta Pauses Ads for Users Under 18 in Europe as It Rolls Out Subscriptions
Meta Platforms, the parent company of Facebook and Instagram, is planning to launch subscription-based versions of its social-media products in Europe to comply with regulations. As part of this plan, Meta will temporarily stop showing ads to all users under the age of 18 in the European Union and regions that follow EU rules. Users aged 18 and above will have the option to either agree to targeted advertising or pay a monthly subscription fee to access Facebook and Instagram without ads. The subscription fee will be €9.99 for desktop users and €12.99 for mobile users to cover app-store fees. This move is set to begin the week of November 6, 2023.
Dall-E 3 Is So Good It’s Stoking an Artist Revolt Against AI Scraping
Dall-E 3, the latest image-generating software developed by OpenAI, is capable of creating a wide range of images based on textual prompts. It can generate watercolor portraits, personalized birthday greetings, or even fictitious images like Spider-Man eating pizza with just a few words of input. Released in September, Dall-E 3 is considered a significant advancement in AI-generated images, offering improved detail and more reliable text rendering. However, its capabilities have also raised concerns among illustrators who worry about the potential of being replaced by computer programs that can mimic their work.
Musk Teases AI Chatbot 'Grok,' With Real-time Access To X
Elon Musk has introduced a new AI tool called "Grok," which can provide real-time access to X (formerly Twitter) and will initially be available to the platform's top-tier subscribers. Musk emphasized that this integration with X gives Grok a significant advantage over other generative AI models. Grok has a penchant for sarcasm, which Musk humorously noted. The name "Grok" is derived from Robert Heinlein's science fiction novel, "Stranger in a Strange Land," and it means to understand something thoroughly and intuitively. Once it exits the early beta phase, Grok will be accessible to all X Premium+ subscribers, with the social network offering the Premium+ plan for $16 per month, featuring benefits like an ad-free experience.
Inside the War Between Square and Cash App at Dorsey’s Block
During Jack Dorsey's tenure as the CEO of Twitter, he faced criticism for his hands-off approach and was often seen as contributing to the company's uneven growth and slow-paced cultural evolution. This played a part in Twitter's acquisition by Elon Musk. However, in his other company, Block (formerly known as Square), a different issue arises. Block's divisions are locked in intense feuds that prevent them from reaching agreements, even on minor points of cooperation. An example of this is a negotiation between Square and its sibling division, Cash App, over sharing technology to integrate Apple Pay's Tap to Pay on iPhone feature. These internal disputes have yet to be resolved, leading to a situation where Square offers the feature while Cash App does not. Jack Dorsey, the CEO of Block, has not intervened to mediate the disagreements.
Meta’s AI research head wants open source licensing to change
Meta released its large language model, Llama 2, in July with a relatively open approach, offering it for free. However, this openness comes with certain limitations. While it may appear to be open-source, Meta's license for Llama 2 does not fully meet the requirements of the Open Source Initiative (OSI). According to the OSI's Open Source Definition, true open-source software should offer free redistribution, access to the source code, allow modifications, and not be tied to a specific product. Some researchers and experts have criticized Meta's claims of being open-source, stating that it's misleading because of the limitations and fees associated with its usage, especially for developers with more than 700 million daily users. These restrictions have led to questions and debates about the true nature of Meta's openness with Llama 2.
Apple stock dips after weak outlook for December quarter revenue
Apple reported its fiscal fourth-quarter earnings, exceeding analyst expectations for sales and earnings per share. However, the company revealed a decline in overall sales for the fourth consecutive quarter. Several hardware segments, excluding the iPhone, experienced year-over-year declines, with significant drops in the iPad and Mac segments. While Apple did not provide formal guidance, its CFO, Luca Maestri, indicated that the company anticipated December quarter revenue to be "similar to" that of the previous year, although it's worth noting that this year's December quarter will have one fewer week.
Chinese tech giant Alibaba launches upgraded AI model to challenge Microsoft, Amazon
Alibaba has unveiled the latest version of its artificial intelligence model, Tongyi Qianwen 2.0, as part of its efforts to compete with U.S. tech giants like Amazon and Microsoft. This large language model (LLM) represents a significant upgrade over its predecessor and is designed to power generative AI applications. LLMs, like Tongyi Qianwen, are trained on vast amounts of data and serve as the foundation for various AI applications. Alibaba's move highlights the company's ambition to advance its AI capabilities and offerings in the global tech landscape.
Disney is about to own all of Hulu
Disney is acquiring Comcast's 33 percent stake in Hulu for an estimated $8.61 billion, giving Disney full ownership of the streaming service. However, the final purchase price may be higher, as both companies agreed to an appraisal process to determine Hulu's equity fair value as of September 30th. If the valuation exceeds the guaranteed floor value, Disney will have to pay Comcast the difference. This deal results from the agreement between Disney and Comcast to purchase Comcast's stake in Hulu, initially set for 2024 but moved up to September 30th. The appraisal process's timing is uncertain but is expected to conclude next year.
Hidden gems
X Puts Company Value at $19 Billion
X Corp. has informed its employees that the company is valued at approximately $19 billion, a figure significantly below the $44 billion acquisition price set by Elon Musk just a year ago. This valuation represents a decrease of about 55%. Employees are being granted stock at a price of $45 a share, indicating the lower valuation, according to an internal document seen by The Wall Street Journal. Musk has been actively working to reshape X into a multifaceted platform offering diverse services, but the changes have prompted staff layoffs, alterations to content moderation, and shifts in the verification process.
OpenSea, a leading NFT marketplace, has reportedly laid off around 50% of its workforce in the latest round of layoffs. This comes as the NFT market has seen a significant decrease in trading volume, down 99% since the beginning of 2022, and increased competition from platforms like Blur, which don't charge trading fees. OpenSea's valuation was around $13.3 billion at the beginning of 2022. OpenSea CEO Devin Finzer mentioned a transition to "OpenSea 2.0" but didn't provide specific details about the upgrade. This move aims to reposition the company in the evolving NFT space.
Meta’s Free AI Isn’t Cheap to Use, Companies Say
Some companies seeking cost savings have considered switching to free, open-source alternatives for artificial intelligence instead of paying for OpenAI's services. However, they are discovering that open-source technology can be more expensive than using OpenAI. For instance, Baseten, a startup helping developers work with open-source large language models (LLMs), found that using Llama 2 "out of the box" can cost 50% to 100% more than using OpenAI's GPT-3.5 Turbo. Open-source becomes a more cost-effective option for companies that require customizing an LLM by training it on their data, where a customized Llama 2 model is around one-fourth the cost of a customized GPT-3.5 Turbo model. Furthermore, Baseten found that OpenAI's most advanced model, GPT-4, is approximately 15 times more expensive than Llama 2 but is typically only necessary for highly advanced generative AI tasks, such as code generation, rather than most tasks that large enterprises need.
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Source: the expert interviews are found on Alphasense, a platform specialized for expert interviews and other investment data.
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