• Front Research
  • Posts
  • 🍏 Apple's 14-16% Profit from Google at Risk Amid Antitrust Case

🍏 Apple's 14-16% Profit from Google at Risk Amid Antitrust Case

Today: AI Market 2024 Challenge | Stock Surge: Dot-com Crash? | AI & Vector Databases

Welcome back readers,

Today is Thursday, October 12. As we venture into the heart of October, here are the top tech tidbits to keep you ahead of the curve:

  • Apple vs. Google: Profit at risk due to antitrust concerns.

  • AI's 2024 Hurdles: Predicted market challenges ahead.

  • AI Meets Vectors: Harnessing generative AI with advanced databases.

  • Asia's Funding Shift: Signs of market stabilization.

  • Tesla's Milestone: Celebrating the 20-millionth 4680 battery cell.

  • Bubble Alert?: Rising stocks and looming debt spark concerns.

  • and more…

We've delved deep to bring you these insights. Read on to get the full scoop and stay informed!

Tech Companies

Google’s annual payment to Apple for being the default search engine reportedly comprises 14-16% of the latter's total profits. This payment is currently under threat due to the antitrust case against Google by the Department of Justice (DOJ), arguing its anti-competitive nature. If Google loses, the payment to Apple may be banned, representing a $18-20 billion loss in pure profit. However, industry analysts suggest Apple could find an alternative search engine partner or launch its search engine.

💡 Why does this matter?

Google's annual payment to Apple for default search engine status, estimated to be in the $18-20B range, forms 14-16% of Apple's total profits. This substantial income is now under scrutiny due to an antitrust case against Google. If the payment is banned, it could open up opportunities for other search engines to compete or even push Apple to launch its own search engine, significantly altering the landscape of the search engine market.

Tesla has broken ground with 4680 battery cell production, producing its 20 millionth cell at Gigafactory Texas. Initially revealed at Battery Day in 2020, the 4680 cell promises over 50% reduction in battery cost. Currently manufacturing approximately 800,000 cells a week, Tesla's output potentially allows for the weekly production of over 1,200 vehicles. The company aims for an annual battery cell production rate of over 100 GWh at Gigafactory Texas.

💡 Why does this matter?

Tesla's breakthrough in 4680 battery cell production matters for tech industry stakeholders as it signifies potential advancements in electric vehicle production and battery technology. This could pave the way for increased vehicle production, cost reductions and potentially open new avenues for energy storage solutions.

Samsung Electronics reported a 13% sales decline to $50 billion in Q3, marking the fourth consecutive quarter fall amidst an industry-wide downturn. Analysts attribute this slump to reduced orders from PC and smartphone manufacturers due to weaker gadget demand and overstocked chip inventory. Nevertheless, a U.S. waiver allowing the expansion of Samsung's chipmaking operations in China alleviates some operational uncertainties. Additionally, Samsung's attention to developing AI tools and doubling its high-bandwidth memory production by 2024 sets a hopeful outlook amidst the economic instability.

Apple is opposing Australia's move to regulate digital wallets like credit cards, arguing it will hamper innovation and increase regulatory errors. Currently, digital wallets represent around 35% of Australia's card transactions.

Tesla has sold its wireless charging unit Wiferion to Puls, with the latter focusing on manufacturing and intralogistics industries. The financial terms remain undisclosed.

Startup Scene

Asia's startup funding scene reflected a slight drop in Q3 2023 compared to the previous year, signaling a potential equilibrium in the funding market. Despite a decrease year-on-year, the quarter observed an 8% rise from the previous quarter, with startups raising $22.3 billion. Major contributors included late-stage rounds and growth funding, while seed and early-stage investments struggled. Deal flow dropped 17% from Q2, with fewer deals announced. Late-stage and growth rounds, particularly in Chinese startups, saw significant growth.

AI Corner

Vector databases are becoming an essential element of large-scale Generative AI operations, tackling the complexity of high-dimensional data by optimizing similarity searches.

These scalable databases manage vast amounts of multi-dimensional data, including text, images, and sound. They are particularly crucial in creating and leveraging embeddings for natural language processing and image generation tasks. This growth in AI capabilities has spurred investments in vector database startups and led to platform enhancements such as Microsoft's Azure Cognitive Search.

💡 What can we learn from this?

Vector databases are crucial in managing high-dimensional data for Generative AI applications, facilitating similarity searches and large-scale data handling. They create efficiencies in natural language processing models like OpenAI's GPT and Google's BERT. Companies investing in these databases, like Pinecone, Chroma DB, and Weviate, are enhancing capabilities in AI tool creation and advanced data retrieval. Thus, the existing tech industry must embrace vector databases for optimal utilization of AI and machine learning applications.

CCS Insight predicts a challenging future for generative AI in 2024 due to high costs and complexity. Large firms like Google and Meta could manage these costs, but most organizations may need help. This prediction follows concerns over the global shortage of chips, a crucial component for AI functioning. In response, Nvidia plans to triple the production of its expensive processor chips, and OpenAI is reportedly considering creating its own chips.

💡 Why does this matter?

CCS Insight's prediction might dampen prospects for the tech industry, especially for startups unable to shoulder high AI deployment costs. However, this creates an opportunity for Microchip producers like Nvidia or potential chipmakers like OpenAI, especially given anticipated global chip shortages.

Geoffrey Hinton, the renowned AI scientist, has raised concerns about the rapid development of artificial intelligence systems, highlighting potential job loss and misinformation spread as key risks. He also warns of a possible threat where advanced AI could surpass human intelligence, underscoring the need for regulations and measures to manage AI advancement. Hinton also drew attention to how AI transforms healthcare, drug development, and defense sectors but calls for collective accountability to ensure its positive effects and risks are manageable.

Microsoft 365 is set to launch its new AI assistant, Copilot, into OneNote in November. Offering features such as list generation, note-rewriting and summaries, and chat-bot functionalities, Copilot will be available to business and enterprise users. Future plans include incorporating the Copilot system into the consumer version of Microsoft 365.

Markets & Money

Most Federal Reserve officials anticipate one more interest rate hike and a subsequent period of continual elevated rates driven by inflation trends. The Fed held its key lending rate steady at a 22-year high in September, while economic uncertainty circles around the impact of the Fed's 11 rate hikes since March 2022. The upcoming October 31-November 1 monetary policy meeting and future economic data may further influence this decision. Fewer rate cuts are anticipated for next year, which suggests higher rates could persist longer than expected.

US stocks are nearing their priciest levels compared to the debt market in over two decades, reminiscent of the dot-com boom, warns research firm MacroEdge. The equity risk premium is near historic lows, a sign of major market corrections. Despite a bullish rally pushed by slow inflation and AI hype, indicators suggest overstretching valuations and potential correction risk, fueled by the higher-for-longer rate stance of the Federal Reserve and bond-market rout.

Apps & Gadgets

Google is escalating its drive to replace passwords with passkeys, making them the default option on all its services. The technology, which utilizes methods like fingerprinting, face scans, or PIN entry, keeps one set of keys on the device and another public one on the cloud, improving security. Microsoft, Uber, Ebay, and Apple also support the use of passkeys.

Your next read.

If you’re down here, I bet you’ll like these newsletters too:

The Average Joe - Become a better investor in just 5 minutes. Receive the best free investing newsletter, simplifying the stock market with the latest trends, analysis, and ideas. Join now.

Bay Area Times - 🗞️ The visual daily newsletter on business and tech. 📈 Analyzing the news with one visual per story. Join 200,000+ subscribers now.

Join the conversation

or to participate.