Cloudy forecast for Big Tech and AI
The Nasdaq Composite Index looks set to open in the red on Wednesday after investors got a split-screen view of what two tech giants, Microsoft and Alphabet, were doing in their efforts to profit from artificial intelligence.
The verdict so far, based on its quarterly earnings report released Tuesday: Only one of them is showing early progress. It raises questions about the tech industry’s billion-dollar bet on the power of AI
Microsoft shares are up 3.9 percent, beating expectations. The company recorded sales of $56.3 billion, largely on the strength of its Azure cloud business. Some of that growth came from generative AI, where Microsoft has made big investments: It invested $13 billion in OpenAI, the firm behind ChatGPS, and built that technology into its Bing search engine.
Microsoft CEO Satya Nadella told analysts that more than 18,000 organizations are using Azure OpenAI, including new customers. (The Information reported on Tuesday that some early OpenAI customers were switching to cheaper alternatives… including Microsoft,
It was a different story for Alphabet, whose shares were down 6.2 percent premarket. The company said on Tuesday,meaningful developmentin its Google Search and YouTube business lines, but its cloud results came in well below forecasts. Analysts worry that it is lagging behind Microsoft and Amazon in the cloud computing market, which customers are buying to help power their AI initiatives.
On Tuesday’s earnings call, Alphabet CEO Sundar Pichai doubled down on technology. “We will do everything necessary to ensure we have the leading AI models and infrastructure in the world, leaving no one behind,” He said,
Alphabet also faces legal hurdles. The Justice Department’s antitrust case against the company will resume on Wednesday, with the internet giant scheduled to begin its defense soon. Here’s a recap of the historic proceedings, and what to expect next.
More tech giants betting big on AI are due to report soon. Later on Wednesday came Meta, whose shares have more than doubled this year, helped by a steady surge in its ad sales on Facebook and Instagram and broader cost-cutting initiatives. Investors will be looking for evidence that Meta’s investment in AI is helping grow its core advertising business.
As noted, Meta’s stock fell on Tuesday when more than three dozen states and the District of Columbia sued the company for violating consumer protection laws by designing platforms like Instagram for “compulsive and extended use” by young users. Filed. Meta said it is working to provide a safe environment for teens on its apps.
In other tech news: Spotify returned to profitability After last quarter it introduced more expensive subscription plans. And Snap returned to growth after two consecutive quarters of sales declines, another sign of a revival in the market for digital ads.
A reminder: the DealBook Summit will take place on November 29th. Guests include Elon Musk of Tesla and X; Jamie Dimon of JPMorgan Chase; and Representative Kevin McCarthy, former House Speaker. you can Apply to attend here,
What’s going on over here
House Republicans brainstorm two speaker nominees in one day. Lawmakers first selected Minnesota’s Tom Emmer as their nominee, but he withdrew after facing opposition from far-right legislators and Donald Trump. They then chose Mike Johnson, a little-known social conservative from Louisiana, but it is unclear whether he can ultimately break the GOP impasse that has stalled the House for three weeks.
The fourth defendant in the Georgia 2020 election fraud case has pleaded guilty. Donald Trump’s legal adviser Jenna Ellis, who publicly claimed that the presidential race was stolen, has pleaded guilty and agreed to cooperate with prosecutors. She joins fellow attorneys Kenneth Chesebro and Sidney Powell, as well as bailiff Scott Hall, in striking the deal.
Another fashion giant sinks as luxury spending slows. Shares of Kering, owner of Gucci and Saint Laurent, fell as much as 9 percent after the company’s report in Paris this morning. Greater decline in revenue than expected last quarter. Kering has joined LVMH in suffering falling sales as affluent consumers scale back their spending.
GM’s bad day
There has been little good news lately for General Motors, whose share price has fallen more than 13 percent in the past month as it faces a targeted strike by the UAW and slowing growth in demand for electric vehicles.
Several news developments Tuesday highlighted some of the company’s major struggles.
GM said quarterly profit fell 7 percent year-over-year. The UAW strike was a major factor; The carmaker said it expected the union action to cost it about $200 million a week. (Despite the walkouts, GM said revenue rose nearly 5 percent in the quarter.)
Then another 5,000 GM workers walked off the job at the company’s largest plant. A stoppage at the factory in Arlington, Texas, which makes large and profitable SUVs like the Chevrolet Tahoe and Cadillac Escalade, further increased the strike’s costs. The UAW’s move came as both sides were nearing an agreement; Some analysts said the actions may be aimed at squeezing every last dollar from the company.
GM abandons goal of making 400,000 electric vehicles by mid-2024, with citing a reference slower than expected growth In sales. The company, which has staked its future on its EV transition, also recently delayed an effort Expand Electric Pickup Production,
GM’s chief financial officer, Paul Jacobson, said the company is still embracing electric vehicles: “Our commitment to an all-EV future is as strong as ever,” he said Tuesday.
And finally… the carmaker’s Cruise autonomous vehicle division was moved out of California. State regulators ordered Cruise to shut down its driverless taxi service after several traffic accidents. This is bad news not only for GM, which invested $700 million in the division in the most recent quarter, but also for the autonomous vehicle business broadly.
“Across the Raytheon portfolio, you will see the benefits of this restocking.”
-Greg Hayes, CEO of RTX, Raytheon’s parent company. The defense giant is expected to benefit from a bigger Defense Department budget with more arms shipments to Israel and Ukraine, he told analysts on Tuesday. (Hayes began the call by acknowledging “the tragic situation going on in Israel today.”)
Protecting land amid US-China tensions
Land purchases in the US by companies with possible ties to the Chinese Communist Party are becoming a sour point between Washington and Beijing. Microsoft recently raised concerns about a Chinese-owned Bitcoin-mining center located near an Air Force base in Wyoming. And lawmakers have expressed concern over whether entities with ties to Beijing Buying vast tracts of American farmland,
Senator Tim Scott, a South Carolina Republican and 2024 presidential contender, introduced a bill on Tuesday aimed at fixing a “significant flaw” in the review process.
His legislation would require federal agencies to maintain lists of sensitive locations. Which will be provided to the Committee on Foreign Investment in America
The committee has been troubled by bureaucratic issues in the past: it said last year that it had no jurisdiction to review Land purchase by Fufeng GroupA Chinese food company, near the Air Force Base in Grand Forks, ND, because the Department of Defense had not marked the area.
A spokesperson for Scott told DealBook that his legislation “ensures that foreign adversaries cannot set up in sensitive locations.”
The Treasury Department, which oversees the committee, is also trying to resolve the issue. In May, the department proposed a rule To add certain military installations, including North Dakota bases, to the committee’s scope. The plan would create a process for agencies to inform the committee about sensitive locations and for the panel, in turn, to report to Congress.
States are taking matters into their own hands. Officer in Grand Forks Fufeng closed the deal in April, citing national security concerns due to the base’s proximity. State lawmakers across the US have introduced bills to Limit foreign ownership of land Near military bases.
This month, Arkansas ordered a seed company owned by state-controlled China National Chemical Co. sell 160 acres of land and pay fines under a new law targeting “proscribed foreign party-controlled” lands. Asked why the purchase threatened American intellectual property, Governor Sarah Huckabee Sanders said, “The seeds are technology.”
best among the rest
New York Mayor Eric Adams says the city has recovered all the jobs lost during the pandemic. Analysts say the recovery has been uneven. (NYT)
“Women to vote at Vatican meeting for the first time” (NYT)
Jay-Z has finally decided There was a long-running debate on the Internet about whether it was better to have dinner with him or take $500,000. (insider)
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