Uncover Tech Insights - October 23-27
Weekly market stock moves
Former Partner Executive at AWS shares some interesting insights into the cloud industry and the competitive landscape
The expert explains that cloud companies like Amazon, Microsoft and Google often want middlemen/resellers between them and the clients. Especially when it comes to government customers because of intellectual property issues that might require extra integrations.
In his experience, most use cases for hybrid on-prem setup were because of sensitive information that the clients did not want to share on the cloud.
The expert mentions that they ran into a lot of clients that have applications that are Microsoft based, thinking they better move to Microsoft cloud as well. But the counterargument was that Amazon’s AWS not that long ago was running more Microsoft applications than any other cloud, including Microsoft’s own Azure.
The expert thinks clients will look at the recent AI hype and start to base their decisions on one cloud or the other based on that. But that is, in his view, only because of branding and marketing, not because of the technology. He argues that AI is not a new thing and has been in those cloud providers for many years already.
One of the essential jobs the cloud providers will have is helping clients understand and build a business use case for them to make use of AI because the clients often don’t have the staff themselves for that.
The expert thinks AWS is going to lower prices in the future because cloud is becoming more commoditized. And the way they will do it is by also lowering their own costs with things like in-house build chips.
Former Amazon Senior Regional Manager who worked in Logistics shares his insights into Amazon’s Logistics
On a scale of 1-10, Amazon is currently in the 6-7 range when it comes to network efficiency.
Amazon is moving more of their delivery stations to newer, bigger ones that are fully automated and do 120,000-230,000 packages a day at peak capacity instead of the legacy ones where there is more headcount needed and with a capacity of 40,000-50,000 packages a day. The main reason for doing so for Amazon is to reduce the headcount.
The new stations can require only a third more people but can handle 3x the volume of the old ones. He estimates that around 80-90% of current volumes are driven through the newer stations.
Amazon is getting into sub-same-day delivery, which is different than Prime Now because it covers more SKUs. In his view, Amazon will always keep a small portion of its delivery volumes for delivery partners like UPS because it also wants to have delivery covered in the highest peak periods.
Most impactful news of the week
Google has committed to investing $2 billion in Anthropic, an artificial intelligence company. The investment is structured as a convertible note, which will convert into equity during Anthropic's next funding round. This investment follows Amazon's earlier commitment to invest up to $4 billion in Anthropic. With this financing, Google has invested $500 million and plans to add an additional $1.5 billion in the future. This is in addition to the $550 million Google previously invested in Anthropic earlier in the year.
In the realm of artificial intelligence, two of the biggest tech giants are still working to harness its potential for significant business outcomes. However, the latest quarterly results indicate that Microsoft might be leading the charge. Both Microsoft and Alphabet, Google's parent company, showcased improved performance in their core businesses during the September quarter, as revealed in their recent financial reports. Google experienced a 9% year-over-year growth in advertising revenue, totaling $59.6 billion for the quarter. This exceeded Wall Street's expectations and marked a notable improvement from the 3% growth observed in the June period. A key contributor to this growth was the 12% increase in YouTube's advertising revenue, a reflection of the impact of labor strikes in the entertainment industry, which led to a decrease in new TV shows and movies being released.
Amazon's impressive performance in the third quarter of 2023, marked by a nearly tripled profit of nearly $10 billion, reflects the company's resilience and adaptability across its diverse business sectors, encompassing cloud computing, advertising, and retail. These results demonstrate Amazon's ability to navigate changing market dynamics and effectively address challenges stemming from the post-pandemic environment. Amazon's CEO, Andy Jassy, remains optimistic about the company's future growth. He emphasized the potential of generative AI opportunities within Amazon Web Services (AWS), the company's cloud computing arm, which has been instrumental in Amazon's overall success by offering cloud-based services to global businesses and organizations.
A U.S. federal trade agency has ruled that Apple violated a rival tech company's patent, potentially leading to an import ban on certain models of Apple's smartwatch. The case involves medical-technology company Masimo, which claimed that Apple infringed on its patents related to measuring blood-oxygen levels. Apple has included a sensor, called a pulse oximeter, in most new models of the Apple Watch since 2020.The U.S. International Trade Commission found Apple in violation of U.S. trade law and issued a limited exclusion order on certain Apple Watches, preventing their import into the U.S. The Biden administration has 60 days to overrule the trade commission's decision.
Nvidia and AMD are reportedly working on Arm-based CPUs for Windows-based PCs. This marks a significant expansion of Microsoft's Windows on Arm efforts, which have so far been exclusive to Qualcomm. Both Nvidia and AMD could potentially launch their Arm-based PC chips by 2025. This development could provide more options for Windows on Arm devices, diversifying the ecosystem beyond Qualcomm's offerings. Microsoft executives are reportedly involved in Qualcomm's upcoming Snapdragon launch, indicating their interest in the platform.
Apple is increasing the monthly cost of its TV streaming service, Apple TV+, from $6.99 to $9.99. This represents a significant price hike of over 40%. Additionally, Apple is also raising the prices for its other services, including Apple Arcade, Apple News+, and the Apple One bundle. This price increase follows a trend in the entertainment industry, where companies have been raising the prices of ad-free streaming services by an average of about 25% over the past year.
Apple is facing a new geopolitical challenge in China, related to its supplier Foxconn Technology. Foxconn, one of Apple's major suppliers, is currently being investigated by Chinese authorities in tax and land-use probes. These investigations come as Foxconn's founder, Terry Gou, is exploring a bid for the Taiwan presidency, adding a new layer of geopolitical risk for Apple in China. This development could further complicate Apple's relationship with China, which is one of its most critical markets.
BP is purchasing $100 million worth of Supercharger hardware from Tesla, marking the first instance of a company buying DC fast-charging equipment from Tesla for use in a third-party charging network. This hardware acquisition will support BP's EV charging subsidiary, BP Pulse, as it expands its charging network across the UK. BP Pulse has ambitious plans to invest up to $1 billion in building a nationwide charging infrastructure by 2030, with $500 million allocated for the next two to three years.
The US v. Google antitrust trial underscores the significance of defaults in digital services. The default search engine or platform that appears when a device is turned on holds considerable influence, and Google has invested heavily in securing its position as the default option. In 2021, Google spent an astonishing $26.3 billion to ensure it was the default search engine across various browsers, phones, and platforms. This substantial sum, reflecting all of Google's search distribution deals, came to light during the trial's proceedings, emphasizing the competitive value of defaults.
Meta Platforms, the parent company of Facebook, announced its highest quarterly revenue since going public over a decade ago. The revenue reached $34.1 billion, marking a growth of more than 23% compared to the previous year. This marks the third consecutive quarter of revenue growth, signifying a turnaround for the company, which had faced declining business performance for most of 2022. The increased revenue is attributed to improvements in ad-targeting capabilities and advancements in artificial intelligence, helping recover from losses due to privacy changes implemented by Apple in 2021.
Microsoft experienced a sales growth of 13% in the last quarter, driven by heightened demand for its cloud computing services, particularly in the realm of artificial intelligence. The company's revenue reached $56.5 billion, surpassing analysts' expectations and marking an increase from the previous year's 11% growth. Microsoft's Azure cloud division grew by 29%, slightly less than the prior year but exceeding analyst predictions, with artificial intelligence services playing a significant role.
Google's parent company, Alphabet, reported its third-quarter results, revealing its strongest business growth in over a year. The company posted Q3 revenue of $77 billion, marking an 11% increase compared to the same period the previous year. This growth demonstrated Google's continued recovery following an economic slowdown that temporarily impacted its advertising sales. However, the results showed mixed performance, with Google's cloud division experiencing a slowdown in its sales growth. The cloud division is responsible for the servers powering the company's AI programs. It reported a 22% growth compared to the third quarter of the previous year, falling short of Wall Street's expectations. The division generated $8.4 billion in revenue and reported its third consecutive quarter of operating profit, with a profit of $266 million. The weaker cloud sales performance reflects the competitive landscape in the cloud computing and artificial intelligence industries, where companies like Amazon Web Services (AWS) and Microsoft's Azure are also vying for market share. This competitive environment has made it challenging for Google to maintain its growth in the cloud sector.
Google's Bard AI chatbot has been updated to provide real-time responses to user questions. Previously, it would only provide responses when it had generated a complete answer. This new feature allows users to see responses as they are being generated. Users can also switch between real-time and complete responses using the settings menu. This update makes Bard more interactive and responsive in its conversations, similar to Microsoft's Bing Chat AI.
LinkedIn is experimenting with generative artificial intelligence to enhance its cybersecurity information access. The platform's security team has developed a chatbot that uses OpenAI's large language models to provide quick responses to cybersecurity queries from employees. The chatbot aims to reduce wait times for employees and external suppliers seeking cybersecurity policy information, which could expedite business decisions and improve efficiency.
Qualcomm's upcoming Snapdragon 8 Gen 3 chip for Android phones is expected to place a strong emphasis on AI features. Leaked marketing materials reveal that the chip will support AI-driven camera tools like object removal from videos, photo area expansion, and background generation. The chip will also have an upgraded Hexagon neural processor that is reported to be 98 percent faster, potentially enhancing its AI capabilities and performance. AI execution is becoming a focal point for Qualcomm in the Gen 3 chip, given the increasing importance of AI technology.
Intel, which has fallen behind other chipmakers in the AI market, is exploring a different strategy by offering specialized AI software and services. The company is partnering with consulting firms to develop applications similar to ChatGPT for clients who lack the expertise to create them. Intel initially collaborated with Boston Consulting Group on this project and has since expanded its partnerships with other consulting firms. Additionally, Intel is directly selling its app-building software to corporate customers, although the specific names of these customers have not been disclosed.
Thanks for reading Uncover Tech Insights! Subscribe for free to receive new posts and support my work.
We would really appreciate it if you could share it with someone you know who would be interested in tech investing news. Organic, and especially word of mouth, is the main way our newsletter will grow. We will always put quality before quantity. Thank you.
Source: the expert interviews are found on Alphasense, a platform specialized for expert interviews and other investment data.
Nothing contained in this website and newsletter should be understood as investment or financial advice. All investment strategies and investments involve the risk of loss. Past performance does not guarantee future results. Everything written and expressed in this newsletter is only the writer's opinion and should not be considered investment advice. Before investing in anything, know your risk profile and if needed, consult a professional. Nothing on this site should ever be considered advice, research, or an invitation to buy or sell any securities.