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(#41) Microsoft's pyramid of priorities; Amazon found its new focus and 7 companies in S&P 500 made >50% increased in 2023
OpenAI is rumoured to bring Jony Ive onboard for...AI products. Bad move, I'd say.
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There are 6 months during the year when nothing that much happens and then we have September, October, and November when we have all these new launches: Apple, Amazon, Microsoft, and, of course, the Chinese companies (e.g. Huawei, Xiaomi, etc).
These are the big fish and what they do shapes entire industries.
Onto the update:
The most notable tech event last week was the departure of Panos Panay, Chief Product Officer at Microsoft leading the company’s Surface line, to…Amazon.
Here are some ideas:
1/ Last week Microsoft held its annual event usually dedicated to hardware (i.e. Surface line), but it was mostly about AI. The two new Surface laptops were presented at the end, starting with minute ‘45. The entire presentation had 59 minutes! LINK
This occurrence was not accidental, but it shows the list of priorities at Microsoft and hardware is not among them.
2/ The Surface line was introduced to compete on quality and design with Apple products, but the sales have been low (mostly in line with the PC industry decline); now, the sales are at the 2016 level.
These two points can be sufficient for most of us to conclude that Microsoft is and will remain a software company.
3/ He could have chosen another company but Microsoft and Amazon are platforms, while Silicon Valley is about product. A totally different environment, no matter who you ask.
4/ It is said that if your division can’t bring $10 bn you are somehow ignored:
So, his transition to Amazon, which is building an army of products, is natural. Their office is just across the lake.
In conclusion, we can say that this event showed clearly what the priorities at Microsoft, as briefed below by your truly:
Amazon 2023 Devices and Services event
I just said we had a busy week, from our last newsletter. Amazon went on stage to present new products: Alexa with generative AI, Echo Show 8, Echo Frames, Eero Max 7 (router), Echo Hub, Ring and Blink security cameras, Fire TV, Kids’ stuff, Alexa Emergency Assist, and more. LINK
Here are my takes:
1/ Amazon’s focus is the house because that is the place where we stay the most and the phone is not dominant. Sure, they can’t build iPhones, but they can build something that combined can beat the iPhone in revenue + subscriptions. I think this a great strategy, which will bring them a large pool of revenue besides the AWS and Ads. LINK
2/ The most notable product was the Echo Frames - Smart Audio Glasses with Alexa (3rd gen). This has the potential to replace your AirPods, contact lenses, and many more over time. My two cents is that this product will be heavily used ar work, especially by blue worker collars. LINK
3/ The USA (and the ‘Western world’) needed a company like Amazon to build these ordinary products for many reasons, but first and foremost for security against Chinese counterparts.
EV’s future in the USA
From The Wall Street Journal:
“Starting next year, buyers can’t use the credit on cars that contain battery components from any source that the U.S. deems a “foreign entity of concern,” a vague term meant to reduce American reliance on Chinese batteries and materials.” - LINK
The credit tax is $7,500, hence this move to take out the Chinese players in the battery industry:
Why do these batteries matter? Well, most of the lithium-ion battery supply chain is in China. Reason? Part luck (e.g. resources), part industrial policy (e.g. many Western countries gave us these ‘ugly businesses’: chemical refining and production, anode and cathode production, etc.).
P.S. Read the story of BYD (China’s Tesla) to understand more about this topic. LINK
Amazon Prime with Ads.
Business Insider: “Amazon Prime will now have ads — unless you fork over an extra $2.99 a month”.
Translation: price increased by $2.99 unless you upgrade.
Smart and expected move
Why? Except for Netflix, all streaming providers lose money, so they have two options: (1) cut costs (e.g. stuff, production, etc) and (2) increase costs. Probably they are doing both.
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Meta brings a personal AI chatbot to everyone
Why? To attract young users.
So, what’s in it for Meta? Information. (=everything you talk with the chatbot).
Can they drop the information collection? Yes, partially, the overall North Star metric is (increasing) engagement with their products and services. LINK
OpenAI announced, directly and indirectly, two things:
1/ The Information: “Designer Jony Ive and OpenAI’s Sam Altman Discuss AI Hardware Project”. LINK
Software companies don’t know how to make hardware. There are exceptions, but those exceptions have exceptions too.
2/ Launching DALL-E 3:
“DALL·E 3 is built natively on ChatGPT, which lets you use ChatGPT as a brainstorming partner and refiner of your prompts. Just ask ChatGPT what you want to see in anything from a simple sentence to a detailed paragraph.”
The demo is pretty compelling, so I can hardly wait to try it. LINK
Sequoia Capital on Generative AI’s Act Two
The well-known VC made significant investments in this field and now presents what got right, what got wrong, and what’s coming next with the 2nd act. LINK
Here is a snip from their take:
Let’s take ChatGPT for a short analysis:
1/ The product is not benefiting at all from the network effects (unlike Youtube, Instagram, and alike)
2/During the summer there was a significant drop in usage, hence the theory that most of the time is used by students for homework. Can be, but in the meantime, the company is looking at a $80-90bn valuation. LINK
Amazon is investing in an Anthropic
How much? $4bn
Why? To compete with Google and Microsoft (OpenAI)
Why isn't Amazon building a competitor of OpenAI? Well, that’s not their core business, they don’t have the start-up mentality (+, probably, the skills = people) and they save loads of time and money. If it works, yey, if not,...it’s $4bn. They made $38bn last year from ads. LINK
Technology Report 2023 from Bain. LINK
The magic 7
Seven companies in S&P 500 are up >50% in 2023, the remaining 493 stocks are basically flat, according to Apollo's Slok.
Dapp Gambl presented its annual report “The Evolving Landscape of the NFT Market” - “95% of NFTs are dead”. LINK
My theory of NFTs is the following: probably most of its value lies in business tokenization, not in collectibles and alike. May take 5-10 years to move the niddle beyond the ‘innovators’.
Inside Apple’s Edy Cue and its plan to bring sports to Apple. LINK
What’s in the iPhone 15 PRO? LINK
Intelligence report: How goods reach Russia, despite the current boycott. LINK
Video of Los Angeles in the ‘40s. LINK
It’s again that time of the year when people do extreme stuff to iPhones. Issues raised: durability concerns, easily scratches, and extreme overheating, LINK
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