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Apple, Microsoft Dodge EU Tech Crackdown; Bing, iMessage Avoid Regulation

* Two stock ideads | AI development

Hello, all readers!

It has been a while, but now I think I have found a content structure that feels great. Let us know what you think!

Today, we have various updates from the world of tech with a heavy focus on AI. We also present two “profit-taking” stock ideas we have found.

Enjoy!

TECH BRIEF

Apple, Microsoft Dodge EU Tech Crackdown; Bing, iMessage Avoid Regulation

⚡️ Quick: Apple's iMessage and Microsoft's Bing, Edge browser, and Advertising service are exempt from new EU Big Tech rules. However, under the Digital Markets Act, they will face restrictions on various other services from March 7.

Microsoft's Bing, Edge browser, advertising services, and Apple's iMessage have escaped new EU rules aimed at curbing the dominance of Big Tech, deeming them non-dominant in their respective markets. While relieved, both companies will still face various other restrictions concerning their remaining services under the EU's Digital Markets Act, to be effectual from March 7.

💡 Why this matters: The EU's decision to exempt iMessage and Bing from the Digital Markets Act may lead to these platforms gaining an unexpected competitive edge. This could incentivize similar tech services to diversify or dilute market dominance to dodge regulatory scrutiny, potentially disrupting the Big Tech dynamic.

💰 Tech earnings - Twilio and Shopify both exceeded Q4 FY2023 expectations, with Twilio achieving $1.08 billion in revenue and a non-GAAP EPS of $0.86, and Shopify posting earnings per share of 34 cents on $2.14 billion in revenue. Despite these successes, both companies saw their shares plummet—Twilio's by 9.9% due to slow customer growth and a cautious Q1 2024 revenue forecast of $1.03 billion, while Shopify's fell 13.4% following a dim outlook for reduced income and free cash flow margin. Notably, Twilio reported stable net revenue retention and an improved gross margin of 49.4%, and Shopify rebounded with a Q4 net income of $657 million, contrasting sharply with the previous year's loss. These developments highlight the market's sensitivity to growth forecasts and operational efficiencies amidst financial overperformances.

🥽 Apple Vision Pro returns - Early adopters of Apple's Vision Pro are considering mass returns, citing three main reasons: the device is seen as too isolating, uncomfortable due to heaviness, and lacking in day-to-day use other than entertainment. Despite mostly positive reviews, the hefty price tag of $3,499 is seemingly hard to justify for many users. Apple's liberal return policy might also be encouraging this trend. However, most of these early adopters indicate an interest in future, potentially optimized versions of the headset.

🚀 AI integration - OpenAI, Slack, and Google are spearheading the adoption of cutting-edge AI features, transforming both user interaction and workplace productivity. OpenAI has enhanced ChatGPT with a new "memory" capability, enabling it to retain information about users and their conversation history, thereby offering a more customized chat experience. This update prioritizes privacy, with options for users to erase their data, disable memory, or use the chatbot in "incognito" mode.

In parallel, Slack has introduced an AI suite aimed at facilitating workplace communications. This suite offers summaries of discussions and recaps of channel activities, along with answering job-related inquiries, specifically catering to enterprise clients. These AI-powered tools are designed to help manage the influx of information, with Slack planning to extend these capabilities to include additional languages and improved summarization techniques.

Google has launched Gemini 1.5, a more sophisticated AI model that caters to developers and businesses, featuring an extended context window to handle larger queries, indicating Google's dedication to pushing the boundaries of AI for professional use.

Moreover, OpenAI's unveiling of Sora, a revolutionary technology that creates videos from text, marks a significant milestone in content creation. This innovation allows for a broader range of individuals to engage in video production, showcasing the potential of AI to transform creative industries.

STOCK IDEA - Nvidia

Nvidia Corporation (NVDA): Anticipating Significant Q4 Earnings, Analyst Suggests Hedging Strategy Amid Potential Risks

Nvidia Corporation, a global leader in AI chip production, is expected to post significant earnings for Q4 of fiscal 2024 due to its role as a leading supplier to major tech corporations such as Google, Amazon, and Microsoft. It's imperative to note that Nvidia's stock has witnessed an astounding 300% rise since the start of 2022, and now trades at 83 times earnings, indicating a potential overpricing from future growth expectations. There are concerns about a deceleration of growth as the company's predicted growth rate for 2024 is 63%, a stark comparison to the current TTM growth rate of 222%. Furthermore, the market should keep an eye on the development and success of major tech corporations' own AI chips as it may impact Nvidia's competitive edge. Given the high valuation and potential risks, a strategy of hedging the position with protective puts is recommended.

Ticker: NVDA | Price: $739 | Timeframe: 12 months | Source: Seeking Alpha

🖥️ Technology/Semiconductors | 🔮 Growth Deceleration | 😐 Neutral idea

📝 Analysis: Dig deeper into this stock idea: Financials, valuation, moat analysis, timing, and more…upgrade to Limited Partner for access, only $14 per month.

STOCK IDEA - Snowflake

Snowflake Inc. (SNOW): Time to Lock in Gains and Wait for Price Retreat, Says Analyst

Snowflake Inc. (SNOW) has experienced a notable surge of over 25% year-to-date, prompting analyst Gary Alexander to recommend taking profits now and considering re-entry around the $200-$210 price range. This recommendation comes amidst Snowflake's high valuation of approximately 20x FY25 revenue, without significant new developments to justify the increase. Despite the potential for growth through generative AI applications, slowing customer consumption trends raise concerns. Financial projections indicate a 30% year-over-year growth, leading to a revenue of $3.64 billion in FY25. However, the current market cap of $78.25 billion, adjusted to an enterprise value of $73.75 billion, results in a steep valuation of 20.3x EV/FY25 revenue. Snowflake's robust competitive advantages, including high switching costs and unique technology, present a strong investment case. Yet, the primary risks involve its consumption-based revenue model and the potential impact of a market pullback on its inflated valuation. Investors are advised to monitor market trends and Snowflake's performance closely.

Ticker: SNOW | Price: $230 | Price target: $200 | Timeframe: 1-3 months

☁️ Cloud Computing | 💰 Profit-taking time | 😐 Neutral idea

📝 Analysis: Dig deeper into this stock idea: Financials, valuation, moat analysis, timing, and more…upgrade to Limited Partner for access, only $14 per month.

Disclaimer - Not Investment Advice

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