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  • Bank America says this corner of the bond market is a top play for 2024

    Bank America says this corner of the bond market is a top play for 2024

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  • Single-stock ETFs tap into the market’s ‘gambling mindset,’ expert says. What investors need to know

    Single-stock ETFs tap into the market’s ‘gambling mindset,’ expert says. What investors need to know

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    Traders work on the floor of the New York Stock Exchange.

    Brendan McDermid | Reuters

    More than a year after single-stock exchange-traded funds hit the U.S. market, risk-seeking investors continue to dive in.

    Single-stock ETFs were first introduced in Europe in 2018. There are now nearly four dozen single-stock ETFs in the U.S., many of which track the so-called “Magnificent Seven” stocks — Apple, Microsoft, Alphabet, Nvidia, Amazon, Tesla and Meta. Other names on Morningstar’s list of single-stock ETFs include Coinbase and Alibaba.

    Collectively, single-stock ETFs have about $3.3 billion of net assets, according to Morningstar. 

    The growth of these single-stock ETFs, which are leveraged, is not particularly surprising, given that the Nasdaq is up more than 40% this year and big-tech stocks in particular are soaring. But they’ve likely earned a long-term spot in the market.

    Single-stock ETFs “are here to stay,” said Bryan Armour, director of passive strategies research for North America at Morningstar. The strategy “taps into some of the gambling mindset that exists in markets,” he said.

    More from ETF Strategist

    Here’s a look at other stories offering insight on ETFs for investors.

    Here’s what investors need to know about the growth of the single-stock ETF market and where it could be heading. 

    Where the single-stock ETF action is, starting with Tesla

    There are 45 single-stock ETFs in total, according to Morningstar, from a handful of providers including Direxion, AXS, GraniteShares and YieldMax. These ETFs follow bull, bear or option income strategies.

    The largest by asset size is the Direxion Daily TSLA Bull 1.5X Shares, which tracks Tesla. In July, it became the first of its kind in the U.S. to surpass the $1 billion asset mark. 

    The second-largest single-stock ETF by asset size is the YieldMax TSLA Option Income Strategy ETF, which had around $841 million of assets at the end of November, according to Morningstar.

    In third place by asset size is the GraniteShares 1.5x Long NVDA Daily ETF, which tracks Nvidia and has soared in a year dominated by artificial intelligence optimism and the gains for chipmakers. It had about $245 million in assets at the end of November, Morningstar data shows.

    To achieve their stated returns, leveraged and inverse ETPs often use a range of investment strategies. This can include swaps, futures and other derivatives as well as long or short positions, according to a FINRA explainer.

    Expect more high-risk ETFs to hit the market

    Rich Lee, head of program and ETF trading at Robert W. Baird & Co., expects to see more single-stock ETFs with an options overlay strategy and income component. YieldMax offers several of these ETFs that seek to generate monthly income by selling/writing call options on single company stock exposures.

    There is continuous appetite for single-stock ETFs, and there will continue to be innovation, combining themes and exposures under the ETF wrapper, Lee said. “It’s a way to get quick exposure with leverage.”

    While the number and assets within these ETFs has mushroomed, there have been duds. Single-stock ETFs tracking Nike and Pfizer — the former whose shares are close to flat this year and the latter whose shares are down 45% — among a few others, closed down. Some stocks are too bland to get investors riled up one way or another, Armour said. If an ETF can’t get enough traction, investment managers have to decide where to focus their resources, he said. It’s something for investors to keep in mind: What’s on the market today may not be in a few months.

    Using single-stock ETFs is not a long-term strategy

    Performance is all over the map. The Direxion Daily TSLA Bull 1.5X, for instance, had a total one-year return of about 12% through November, but it’s up about 148% year to date through Dec. 15, according to Morningstar. The GraniteShares 1.5x Long COIN Daily ETF, which tracks Coinbase, had a one-year return through November of about 206% and returned about 488% year to date through Dec. 15, according to Morningstar.

    Not surprisingly, single-stock ETFs that take a bear strategy have seen negative returns of late.

    But performance over time isn’t really the point.

    The market for these vehicles is mostly traders and individual investors with an extremely high risk tolerance. There are other ways to gain leverage, without needing to pay fees in the 1% range, but for some more sophisticated retail investors who don’t have experience with leverage, a single-stock ETF can be a safer option, Armour said. “It’s just not a smart long-term strategy. It’s a very costly way to gamble in the stock market.”

    The SEC’s warning to retail investors

    These vehicles are appropriate for sophisticated retail investors and professionals that are willing to take a short-term view and are willing to monitor their positions daily, said Ed Egilinsky, head of sales and distribution and alternatives at Direxion.

    “These are not buy-and-hold products,” he said. “If someone is looking to buy something and not pay attention to it, this is not the vehicle.”

    The U.S. Securities and Exchange Commission issued an investor warning in August, reiterating the extra risks inherent to single-stock ETFs. “Because leveraged single-stock ETFs in particular amplify the effect of price movements of the underlying individual stocks, investors holding these funds will experience even greater volatility and risk than investors who hold the underlying stock itself,” the SEC said.

    “You definitely have to understand what investing or hedging investment you’re trying to achieve with these products,” Lee said. “For a lot of these leveraged products, people are using it to get intraday exposure or use it for some sort of hedging.”

    Which stocks could be targeted for the next hotly traded single-stock ETF?

    Success is determined in part by assets, daily volume and scale, said Egilinsky. While he declined to be specific about where Direxion is next looking to add to its single-stock ETF lineup, he did say AI is a hot area. “We’re going to let this play out over time. It’s still in its infancy stages and we’ll continue to look for single stocks that make sense for us to bring to the market.”

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  • Online shopping for holidays exceeds 2020 pandemic high, CNBC economic survey shows

    Online shopping for holidays exceeds 2020 pandemic high, CNBC economic survey shows

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    Click. Click. Gift.

    After a two-year slump below its pandemic high, online shopping made a comeback this holiday season. The CNBC All-America Economic Survey finds 57% of Americans naming online shopping as their top one or two destinations for Christmas gifts.

    In 2006, online shopping accounted for just 18% of responses. It hit an all-time high in 2020, at the height of the pandemic, when 55% responded it was the top destination. It scaled back to 51% last year, holding on to some but not all of its pandemic gains. But this year, hit yet another all-time high.

    The survey of 1,002 Americans throughout the country was conducted Dec. 8 through 12 and has a margin of error of +/-3.1%.

    The reason for the surge is unclear but a look at those spending more online this year suggests it could center around a search for bargains to combat inflation. Among those groups spending more online are women 50 and older who as a group reported more frugal holiday spending plans than average and are more concerned about inflation and the overall condition of the economy. Still, the group shops less online than younger women aged 18-49. Also spending more online this year than last are those with incomes below $30,000 and those who plan to spend only $200 on gifts, far below the $1,300 average.

    “We know from the rest of the data that inflation is a major factor in why people are spending less and more,” said Micah Roberts of Public Opinion Strategies, the Republican pollster for the survey.  “Everything costs more, so you’re going to have to spend more to buy it.”

    Amazon top destination

    While groups differ over how much they spend online, where they spend is fairly uniform: Amazon. Once again — and continuously since the question was first asked six years ago — Amazon is the No. 1 destination for online shopping and no one else is really close. Back in 2017, just 35% of the public said Amazon was their top online destination. Today, that percentage has risen to a commanding 74%, unchanged from last year but below its 2019 high.

    The only other competitor, Walmart, has made some modest gains, rising to 16% from 12% last year and from just 4% in 2017. Specialty goods stores, like Etsy and local store websites, also gained from 8% to 14%.

    Americans say they plan to use debt to pay for gifts this year in about the same percentages as prior, with 31% saying they will carry a balance from holiday spending, up 1 point from last year. But 10% say they will use “buy-now-pay-later” plans.

    The full survey can be viewed here.

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  • Japanese tech giant Rakuten plans to launch proprietary AI model within next two months

    Japanese tech giant Rakuten plans to launch proprietary AI model within next two months

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    The logo of Japanese tech giant Rakuten logo seen at the Mobile World Congress 2019.

    Paco Freire| SOPA Images | LightRocket via Getty Images

    Japan’s Rakuten plans to launch its own artificial intelligence language model within the next two months, its CEO told CNBC in an interview that aired Monday.

    It comes as the fintech-to-e-commerce giant looks to join other technology firms developing the rapidly growing technology.

    Hiroshi “Mickey” Mikitani said the company is working on its own large language model, or LLM. These are huge algorithms trained on massive data sets that underpin artificial intelligence applications, such as OpenAI’s ChatGPT.

    Rakuten has a number of businesses from banking to e-commerce and telecommunications, therefore has a large amount of “very unique” data to train its LLM on, according to Mikitani.

    “Nobody has a dataset like we do,” he added.

    The company plans to use the AI model internally to improve operational efficiency and marketing by 20%, Mikitani said.

    He also wants to offer the model to third-party businesses to build on, much like Amazon or Microsoft do.

    “So we can easily teach them [businesses], package it and provide the platform for them to completely they can use it for their business,” Mikitani said.

    The CEO added that Rakuten is going to “have something within a couple of months.”

    To date, major U.S. and Chinese technology giants have been launching their own large language models.

    OpenAI, Amazon and Google are among the most notable in the U.S. In China, Baidu, Alibaba and Tencent have launched their own models too.

    Japanese firms have fallen somewhat behind their U.S. and Chinese counterparts. But they are trying to quickly catch up.

    Telecommunications group NTT announced this month that its proprietary LLM will be available in March.

    The telecommunications arm of SoftBank announced in November that its generative AI computing platform is operational.

    Japanese firms have a chance to create LLMs specific to the Japanese language, potentially giving them an edge over their U.S. and Chinese rivals.

    Mikitani said the push into AI is going to give Rakuten “huge profitable growth.”

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  • From heart to head to diet, AI is learning to make a map of elite athlete bodies

    From heart to head to diet, AI is learning to make a map of elite athlete bodies

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    PARIS, ILE DE FRANCE, FRANCE – 2017/09/14: The Olympic Rings being placed in front of the Eiffel Tower in celebration of the French capital won the hosting right for the 2024 summer Olympic Games. (Photo by Nicolas Briquet/SOPA Images/LightRocket via Getty Images)

    Sopa Images | Lightrocket | Getty Images

    Training of elite athletes dates as far back as the Ancient Olympic Games, when so-called gymnastes advised runners, chariot racers, wrestlers and boxers on technique, nutrition and strength conditioning.

    Fast forward to today’s Olympians prepping for next summer’s Paris Games. Their trainers and coaches adhere to the same Olympic motto — faster, higher, stronger — yet have the added benefit of millennia of ever-advancing technology, which now has been super-charged with artificial intelligence.

    Trainers and coaches at U.S. Soccer, one of the 47 National Governing Bodies overseen by the United States Olympic and Paralympic Committee, are using AI technology to instantaneously identify and track player movements and ball positions. A suite of software tools allows them to study a variety of human performance metrics, such as body position, velocity, speed and timing in real time on the field of play.

    “Utilizing advances in AI and computer vision, we’ve been able to track and study personalized analytics from a variety of sports to determine the strengths and deficiencies in an athlete’s movement and help them make data-informed training and competition plans that can help them improve their performance, as well as their own health,” said Mike Levine, director of performance innovation business operations at the USOPC, based in Colorado Springs, also the home of a high-tech Olympic training center.

    While the USOPC and NGBs employ in-house experts in bleeding-edge technology development, data analytics and sports sciences and medicine, big tech companies lend their AI know-how as well. USA Surfing staff, for instance, has teamed up with Microsoft engineers to figure out how best to ride waves. They take digital videos of surfers in action and use AI to analyze data on body movement, surfboards and waves to determine what they did well and what could be improved.

    “This work saves coaches and staff hundreds of hours of video tagging, facilitates the accumulation of more and higher-quality data and affords analysts and coaches significantly more time to analyze the data and implement learnings into real-life training and performance,” Levine said.

    Creating 3-D models of athletes’ bodies with Intel technology

    These are manifestations of computer vision systems, which use AI technology to replicate the capabilities of the human brain responsible for object recognition and classification. A commercial application, called 3D Athlete Tracking (3DAT), was developed by Intel‘s Olympic Technology Group a few years ago and is now being utilized by trainers in numerous sports. 3DAT incorporates sensor-less motion capture and digital video to create three-dimensional models of an athlete’s entire body, from head to toes, which trainers use to tweak and improve performance.

    “We’re able to see ways athletes move and detect things not possible with just the human eye,” said Jonathan Lee, who as senior director of sports technology at Intel helped develop 3DAT and is now chief product officer at London-based sports tech company ai.io, which recently acquired the system from Intel.

    3DAT has been adopted by Exos, a coaching company in Scottsdale, Arizona, that trains college football players for the National Football League’s annual scouting combine, an evaluation ahead of the league’s yearly draft. “Exos uses 3DAT to analyze the 40-yard dash and help players get faster,” Lee said. Digital video cameras, mounted on timing gates incrementally positioned along the course, capture data on how a runner comes off the line, his acceleration and velocity, and his body’s angle of attack.

    The data instantaneously constructs a personalized skeletal model of each player for immediate review. Before a player’s next sprint, a trainer might say, “You need to be more upright or lean forward, and give him tips on how to achieve that,” Lee said.

    The NFL-Amazon digital player and concussion-risk tracking

    The NFL itself is harnessing AI and computer vision to enhance its Digital Athlete program, developed in partnership with Amazon Web Services beginning in 2019. The Digital Athlete provides a complete view of each NFL players’ experience by analyzing data from his training and game activity, which is captured by sensors and tags in equipment and hours of video from cameras in stadiums. Computer vision and machine learning systems track speed, collisions, blocks and tackles. This data is shared with clubs and allows teams to precisely understand what players need to stay healthy, recover quickly and perform at their best.

    “AI and machine learning are the backbone of the program,” said Jennifer Langton, NFL senior vice president of health and safety innovation. “We’re able to analyze a substantial amount of data and automatically generate insights into which players might benefit from altering either training or recovery routines, a process that used to be so manual and cumbersome.”

    The AI was taught to identify trauma by repeated exposure to and digestion of digital video images of helmets from all angles, Langton said, and then to cross-reference visual information from statistical data to determine what player was wearing what helmet. “With enough practice, the AI becomes exponentially faster and more reliable than humans at accurately identifying and classifying head collisions throughout a game and the season,” she said, allowing trainers and coaches to see which players are due to reduce their workloads and which have room for a more intensive workout.

    The Digital Athlete program was rolled out as a pilot with four NFL teams last year and this season is available to all 32 franchises via a dedicated online portal. “The portal provides teams with a daily training load and risk-mitigation information, as well as league-wide injury trends and benchmarks they hadn’t had before,” Langton said, adding that the NFL will assess the data at the end of the season to evaluate tangible results of the program.

    ‘The next big thing’: Twin hearts of elite athletes

    Another AI-enabled technology that’s making its way into elite athlete training is the digital twin, a virtual replica of a physical object, process or system that can be used to simulate, predict and improve real-world scenarios. Tata Consultancy Services, headquartered in Mumbai, recently announced a partnership with French tech developer Dassault Systèmes to produce a digital twin heart, mimicking the flesh-and-blood one of Des Linden, a two-time Olympic marathoner and winner of the 2018 Boston Marathon (sponsored by TCS, along with the races in New York, Chicago and London).

    Des Linden makes her way to the finish line during the 127th Boston Marathon in Boston, Massachusetts on April 17, 2023.

    Joseph Prezioso | Afp | Getty Images

    Linden’s avatar organ — created using AI-analyzed data from CT scans and MRIs — can simulate her heart rate, blood flow and oxygen levels, providing instant feedback that can be interpreted to adjust her training and competition. “We want to understand what is a safe zone for Des’ trainer to put her through,” said Dr. Srinivasan Jayaraman, a principal scientist at TCS. Instead of having her run on a treadmill or outdoors, “We can run simulations using her digital twin heart to vary different cardiovascular parameters and fine-tune her training.”

    Linden is no stranger to sports tech, from online message boards back in her high school days for remotely comparing times with other runners to today’s state-of-the-art running shoes that world-class marathoners have broken records wearing. “The digital twin heart is going to be the next big thing,” she said. “Being able to map out [my training] and see the gains and drawbacks ahead of time will allow me to work smarter, not harder.”

    That’s what Linden, aided by her digital twin heart, will be doing to train for the 2024 Olympic marathon trials in February. Qualifying for her third Team USA slot “will be a tough task,” said the 40-year-old runner, “but I’ll take a crack at it.”

    AI and sports training diets

    Although there’s no news yet of a digital twin of the human digestive system, AI is involved in planning Olympic athletes’ diet and nutrition. Alicia Glass, a senior sports dietician for the USOPC, designs meal plans for about 300 athletes with USA Track and Field and USA Swimming, a labor-intensive, hand-written task that’s been simplified with an AI-powered app called Notemeal. “They collected data from 37 dieticians from professional sports teams and organizations and used those data sets to generate individualized meal plans,” she said. “The value-add is that it’s a network of sports dieticians working with the best of the best athletes in the world.”

    Glass still relies on her professional skills to understand the events each athlete competes in, their training regimens and goals, as well as their genetics, lean body mass and metabolic rate. Even athletes who train and compete in the same events require totally individualized meal plans, she said. “Notemeal makes that process a lot easier,” she said.

    The athletes access Notemeal with a smartphone app. “I hit a toggle on my phone, and they get a text saying a meal has been created for you,” Glass said, adding that the app also applies AI to design personalized shopping lists and recipes.

    Glass won’t claim that high-tech dietary planning will win medals next summer in Paris, but “many athletes would admit it helps improve their lifestyle because they’re more aware” of their personal fueling needs.

    Linden says there is no turning back from the increasing role of technology in the lives of elite athletes. “Let’s just personalize the heck out of training and make sure we’re getting the maximum gains without setbacks from overworking,” she said.

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  • November's rally just erased two months of Fed tightening, economist says

    November's rally just erased two months of Fed tightening, economist says

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    Financial conditions are now looser than in September, says economist

    Financial conditions in the U.S. are looser than in September, says economist.


    Getty Images

    The feel-good tone gripping markets in the home stretch of 2023 may not be what the Federal Reserve had penciled in for the holidays.

    The stock market in December, once again, has been knocking on the door of record levels, driven by optimism about easing inflation and potential Fed rate cuts next year.

    But while the prospect of double-digit equity gains this year would be a reprieve for investors after a brutal 2022, the latest rally also points to looser financial conditions.

    Ultimately, the risk of looser financial conditions is that they could backfire, particularly if they rub against the Fed’s own goal of keeping credit restrictive until inflation has been decisively tamed.

    Read: Inflation is falling but interest rates will be higher for longer. Way longer.

    Specifically, the November rally for the S&P 500 index
    SPX
    can be traced to the 10-year Treasury yield
    BX:TMUBMUSD10Y
    dropping to 4.1% on Thursday from a 16-year peak of 5% in October.

    Falling 10-year Treasury yields from a 5% peak in October coincides with a sharp rally in the S&P 500 at the tail end of 2023.


    Oxford Economics

    The Fed only exerts direct control over short-term rates, but 10-year and 30-year Treasury yields
    BX:TMUBMUSD30Y
    are important because they are a peg for pricing auto loans, corporate debt and mortgages.

    That makes long-term rates matter a lot to investors in stocks, bonds and other assets, since higher rates can lead to rising defaults, but also can crimp corporate earnings, growth and the U.S. economy.

    Michael Pearce, lead U.S. economist at Oxford Economics, thinks the November rally may put Fed officials in a difficult spot ahead of next week’s Dec. 12 to 13 Federal Open Market Committee meeting — the eighth and final policy gathering of 2023.

    “The decline in yields and surge in equity prices more than fully unwinds the tightening in conditions seen since the September FOMC meeting,” Pearce said in a Thursday client note.

    The Fed next week isn’t expected to raise rates, but instead opt to keep its benchmark rate steady at a 22-year high in a 5.25% to 5.5% range, which was set in July. The hope is that higher rates will keep bringing inflation down to the central bank’s 2% annual target.

    Ahead of the Fed’s July meeting, stocks were extending a spring rally into summer, largely driven by shares of six meg-cap technology companies and AI optimism.

    From June: Nvidia officially closes in $1 trillion territory, becoming seventh U.S. company to hit market-cap milestone

    Rates in September were kept unchanged, but central bankers also drove home a “higher for longer” message at that meeting, by penciling in only two rate cuts in 2024, instead of four earlier. That spooked markets and triggered a string of monthly losses in stocks.

    Pearce said he expects the Fed next week to “push back against the idea that rate cuts could come onto the agenda anytime soon,” but also to “err on the side of leaving rates high for too long.”

    That might mean the first rate cut comes in September, he said, later than market odds of a 52.8% chance of the first cut in March, as reflected by Thursday by the CME FedWatch Tool.

    Stocks were higher Thursday, poised to snap a three-session drop. A day earlier, the S&P 500 closed 5.2% off its record high set nearly two years ago, the Dow Jones Industrial Average
    DJIA
    was 2% away from its record close and the Nasdaq Composite Index
    COMP
    was almost 12% below its November 2021 record, according to Dow Jones Market Data.

    Related: What investors can expect in 2024 after a 2-year battle with the bond market

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  • Here are Thursday's biggest analyst calls: Nvidia, Rivian, Apple, AMD, Amazon, Biogen, DataDog, Bumble & more

    Here are Thursday's biggest analyst calls: Nvidia, Rivian, Apple, AMD, Amazon, Biogen, DataDog, Bumble & more

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  • What to expect as Netflix, Disney and other big streaming names shift strategy

    What to expect as Netflix, Disney and other big streaming names shift strategy

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    Streaming customers are likely to see more familiar faces and less megabudget content in the coming year.

    Shifting consumer tastes and corporate strategies portend changes in programming, with artificial intelligence looming in the background, as major streaming services consider how to use technology and new forms of programming without escalating annual multibillion-dollar content budgets.

    “The big quandary is, how do we make [services] profitable? Things have shifted so dramatically and so quickly in how people consume,” Cole Strain, head of research and development at Samba TV, which tracks viewership of shows, said in an interview. “The streamers that find out what consumers truly want — they win.”

    Streaming services are facing some big choices, noted Jacqueline Corbelli, CEO of software company BrightLine. “The cost of the content and the length of the content war will force them to make some major decisions. They are trying to figure it out,” she said in an interview.

    “Great content has to be paid for, and investors want to see an increasingly efficient and profitable business,” she said, adding: “Right now the economics of these are at odds with one another.”

    This year’s prolonged Hollywood strikes, the prevalence of up-close-and-personal sports documentaries and the increased licensing of older cable-TV shows are the most tangible evidence so far of how content is evolving. Throw in cost-cutting, and customers of services like Netflix Inc.
    NFLX,
    +0.28%    ,
    Walt Disney Co.’s
    DIS,
    -1.33%
    Disney+ and Hulu, and Amazon.com Inc.’s
    AMZN,
    +1.41%
    Prime Video are looking at a vastly different content landscape.

    What’s at stake? Streaming’s big guns continue to spend lavishly in the pursuit of engagement, which is the single most important metric in media. During its third-quarter earnings calls, Netflix said it would spend $17 billion on content in 2024, while Disney pledged $25 billion, including sports rights.

    “‘I think when it comes to creativity, quality is critical, of course, and quantity in many ways can destroy quality.’”


    — Disney CEO Bob Iger

    Complicating matters and raising the urgency is the pressure, particularly at Disney, to cut costs. The very future of blockbuster movies is also in doubt in the wake of box-office misfires such as “Wish,” “Indiana Jones and the Dial of Destiny” and the latest Marvel entries, “Ant-Man and the Wasp: Quantumania” and “The Marvels.”

    “One of the reasons I believe it’s fallen off a bit is that we were making too much,” Disney CEO Bob Iger said at a recent employee town hall meeting in New York City. “I think when it comes to creativity, quality is critical, of course, and quantity in many ways can destroy quality. Storytelling, obviously, is the core of what we do as a company.”

    Also read: Disney CEO Bob Iger walks back comments about asset sales

    Speaking at the New York Times DealBook Summit last week, Iger acknowledged that “the movie business is changing. Box office is about 75% of what it was pre-COVID.” Noting the $7 monthly fee for a Disney+ subscription, he said the experience of viewing content from home on large TV screens is both more convenient and less expensive than going to the movie theater.

    Iger’s task is significantly more fraught than those faced by his rivals. He is in the midst of a turnaround at Disney aimed at making streaming profitable and is simultaneously fending off yet another proxy fight from activist investor Nelson Peltz.

    Part of Iger’s plan is to slash costs. Of the $7.5 billion Disney intends to save in 2024, $4.5 billion will come out of the content budget. Previously, the company was aiming at a $3 billion content cut out of a total annual reduction of $5.5 billion. Disney plans to spend $25 billion on content in 2024, down from $27.2 billion in 2023 and a record $29.9 billion in 2022.

    Read more: Bob Iger: ‘I was not seeking to return’ as Disney CEO

    What streamers have done so far hews closely to the classic TV model of producing original movies and series, broadcasting live sporting events and throwing in licensed content, or syndication. They’ve also displayed a willingness to place ads on their services after vowing not to (in the case of Netflix) and have managed to mitigate spending on pricey sports rights with behind-the-scenes content.

    Most prominently, Netflix has licensed older shows like USA Networks’ “Suits,” reintroducing the cast, including a then-unknown Meghan Markle, to solid viewership. “As the competitive environment evolves, we may have increased opportunities to license more hit titles to complement our original programming,” Netflix said in its third-quarter earnings statement. 

    During the company’s earnings call in October, Netflix co-CEO Ted Sarandos pointed to the historic streaming success of “Suits.” “This continues to be important for us to add a lot of breadth of storytelling,” he said. “Our consumers have a wide range of tastes, and we can’t make everything, but we can help you find just about anything. That’s really the strength.”

    The success of “Suits” and of original sports programming, among several tweaks, indicates that consumers like what they see so far. Streaming additions at Netflix and Disney were significant — 8.76 million and nearly 7 million, respectively — during the recently completed third calendar quarter.

    Read more: Netflix’s stock jumps more than 10% on huge spike in subscribers, price hikes

    “There exist a lot of popular, good shows that people hadn’t seen before. HBO Max has licensed ‘Band of Brothers.’ ‘Yellowstone’ is on the CBS network after performing well on Paramount Global
    PARA,
    -2.76%
    and Comcast Corp.’s
    CMCSA,
    -3.41%
    Peacock,” Jon Giegengack, founder and principal of Hub Entertainment Research, said in an interview. “Consumers increasingly don’t care if a show is new, if they haven’t seen it before.”

    On the sports front, Netflix and Amazon Prime Video have sidestepped expensive rights to live sporting events and instead produced docuseries such as Netflix’s “Quarterback” and “Formula 1: Drive to Survive” and Amazon’s “Coach Prime” and “Redefined: J.R. Smith.” Amazon also continues to air “NFL Thursday Night Football.”

    Competition for eyeballs is tight with so many suitors — from Alphabet Inc.’s
    GOOGL,
    +1.33%

    GOOG,
    +1.35%
    YouTube to TikTok, both of which are developing long-form content — and viewers face “too many streaming options,” said Brittany Slattery, chief marketing officer at OpenAP, an advertising platform founded by the owners of most of the large TV networks.

    “There is a high churn rate, because consumers keep popping in and out of services because they can’t afford all these services,” Slattery said in an interview.

    Also see: Here’s what’s worth streaming in December 2023: Not much new, yet still a lot to watch

    Mark Vena, CEO and principal analyst at SmarTech Research, sums up the typical customer experience: “There are too many services for streaming. I will buy service for a month, watch a movie and then cancel.”

    Using technology for a new experience

    Major streamers are pinning many of their hopes on technology as a way to entice viewers and expand beyond the traditional TV model they’ve adopted. Strategies include mobile gaming (Netflix), gambling (Disney’s ESPN Bet) and shoppable media (Amazon).

    The biggest near-term change would bring ESPN exclusively to streaming, perhaps as early as 2025, although big games would probably be simulcast on network TV to retain older viewers.

    “Technology will be a major impetus for being in the winning circle,” said Hunter Terry, head of connected TV at global data company Lotame, pointing to Amazon’s shoppable-media strategy during Prime Video’s broadcast of an NFL game on Black Friday.

    The NFL game, the first ever on a Friday, featured QR codes of Amazon ads for direct purchases via mobile devices and PCs, contributing greatly to what the e-commerce giant said was its best-ever sales day — 7.5% higher than Black Friday 2022. The game drew between 9.6 million and 10.8 million viewers, according to Nielsen and Amazon, making it the highest-rated show on Black Friday for young adults (18-34) and adults (18-49).

    And what of generative AI, a major flashpoint in the writers and actors strikes that roiled Hollywood for months earlier this year? Creators feared generative AI would be used to produce low- and middle-brow entertainment without the need for writers, actors or production crew.

    The technology is as intriguing to streamers as it is vexing. Full-blown adoption would rankle creators as well as customers. There are also limitations: AI-created content is lacking in humor and original thought, said David Parekh, CEO of SRI International, a leading research and development organization serving government and industry.

    “The pressing question is, who goes first among the streamers and risks getting blowback from studios and consumers?” said Rick Munarriz, a contributing analyst at the Motley Fool who covers streaming-service stocks. “You don’t want to offend people, but there are tools to create ideas” at little cost.

    AI and machine learning are already being used to mine data to find out what resonates with viewers.

    “It is very hard to produce successful content,” said Ron Gutman, CEO of Wurl, which helps streamers and publishers monetize and distribute content, and which was recently acquired by AppLovin Corp.
    APP,
    -0.80%
    for $430 million. “The market is so fragmented. The problem is connecting people to content.”

    Straight to streaming?

    Big-budget busts present another potential source of content, by salvaging unreleased movies, according to experts.

    The so-called dust-bin option is the natural successor to straight-to-video and straight-to-pay-per-view movies. There has been some precedent, with the release of Disney’s superhero hit “Black Widow” simultaneously on streaming and in theaters in May 2021.

    Will streaming services end up as the first stop for movies abruptly canceled before release? Candidates include “Batgirl,” which cost $90 million to make and was in post-production when Warner Bros. Discovery Inc.
    WBD,
    -4.57%
    pulled the plug.

    The same fate could also await two other shelved Warner Bros. movies, “Scoob! Holiday Haunt” and the completed “Coyote vs. Acme.”

    While the $90 million “Batgirl” is a tax write-off, there could be upside to “Coyote” and “Scoob!” if they went to streaming without a costly marketing campaign, said SmarTech Research’s Vena.

    Still, the long-term plans of streaming giants to meld tech to TV remains a ticklish task, said Wurl’s Gutman. “TV is a lean-back experience, not a lean-into technology medium,” he said. “People are looking at their phones while watching TV. It is a passive experience.”

    Tracy Swedlow, founder and co-producer of the TV of Tomorrow Show conference, said: “They’ve been burning a candle at both ends, investing in original content as well as licensing long-tail content such as ‘Suits’ and ‘Breaking Bad.’ Something has to give.”

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  • Amazon broke federal labor law by calling Staten Island union organizers 'thugs,' interrogating workers

    Amazon broke federal labor law by calling Staten Island union organizers 'thugs,' interrogating workers

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    Amazon and consultants for the company violated federal labor law by interrogating and threatening employees regarding their union activities, and racially disparaging organizers who were seeking to unionize a Staten Island warehouse, a National Labor Relations Board judge ruled.

    The NLRB said Friday that Administrative Law Judge Lauren Esposito found Amazon “committed multiple violations” of federal labor law at its largest warehouse in New York, called JFK8, between May and October 2021, a period that saw an increase in organizing activity.

    In April 2022, employees voted to join the Amazon Labor Union, a grassroots group of current and former workers, becoming the first unionized Amazon facility in the U.S. Since that victory, the group has been fighting to reach a contract with Amazon. 

    The judge in New York heard testimony from Amazon employees, managers and labor consultants in virtual hearings that went on for almost a year. Esposito determined Amazon illegally confiscated organizing pamphlets from employees that were being distributed in on-site breakrooms and conducted surveillance of employees’ organizing activities.

    Amazon also violated labor laws when it sent an employee at a neighboring facility to JFK8 home early from his shift and changed his work assignments in retaliation for supporting the union, the judge found. The employee, Daequan Smith, sorted packages at a delivery station called DYY6, down the street from JFK8.

    Additionally, the judge found that Amazon broke the law when a “union avoidance” consultant, Bradley Moss, who was hired by the company, threatened employees, telling them it would be “futile” to vote to join the ALU. Amazon and other companies often hire labor consultants like Moss, referred to as “persuaders,” to dissuade workers from unionizing. The company spent $14 million on anti-union consultants in 2022, the Huffington Post reported in March, citing disclosure forms filed with the Department of Labor.

    As a result of the ruling, Amazon will be required to post notices reminding workers of their rights at its JFK8 and DYY6 facilities. The company also has to make Smith “whole for any loss of earnings and other benefits,” the NLRB said.

    In one exchange with a JFK8 employee, Natalie Monarrez, Moss discussed the union campaign at another Amazon facility, BHM1, in Bessemer, Alabama. Monarrez said Moss told her the Bessemer campaign was “not a serious union drive,” but a “Black Lives Matter protest about social injustice.”

    “Moss then pointed to the front of the JFK8 warehouse and said, ‘Just like these guys out here, they’re just a bunch of thugs,’” Esposito wrote in her judgment, citing testimony from Monarrez.

    Moss and representatives from Amazon didn’t immediately respond to a request for comment.

    Employees at BHM1 voted against joining the Retail, Wholesale and Department Store Union in April 2021, but the results of the election were tossed after the NLRB found Amazon improperly interfered in the vote. A do-over election was held last year, but the results remain too close to call.

    Amazon’s labor record has been scrutinized heavily, especially as union organizing ramped up in its warehouse and delivery workforce during the Covid pandemic. The company faces 240 open or settled unfair labor practice charges across 26 states, according to the NLRB, concerning a range of allegations, including its conduct around union elections.

    The company has also clashed with Chris Smalls, a former Amazon employee and one of the leaders of ALU. A leaked memo obtained by Vice revealed David Zapolsky, Amazon’s general counsel, had referred to Smalls, a Black man, as “not smart or articulate,” and recommended making him “the face” of efforts to organize workers.

    Amazon continues to challenge the JFK8 election results, as well as the NLRB and the union’s conduct during the drive. The agency upheld the results of the election in January.

    WATCH: Amazon favored ‘Magnificent Seven’ stock

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  • Amazon hires three rocket launches from Musk’s SpaceX

    Amazon hires three rocket launches from Musk’s SpaceX

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    Amazon.com Inc.
    AMZN,
    +0.64%
    said Friday it has hired Elon Musk’s SpaceX for three Falcon 9 rocket launches to support deployment plans for Project Kuiper, Amazon’s low Earth orbit satellite broadband network. The deal, the first between the companies, is considered a surprise since the Kuiper system is likely to compete with SpaceX’s Starlink in the satellite broadband market. Amazon previously ordered launches from three of SpaceX’s top rocket rivals, including Jeff Bezos’ Blue Origin. Amazon declined to comment on terms of the new deal with SpaceX.

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  • No, Jeff Bezos hasn’t been unloading Amazon stock

    No, Jeff Bezos hasn’t been unloading Amazon stock

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    A number of Amazon.com Inc. executives have disclosed sales of some of their Amazon stock holdings in recent weeks, but Jeff Bezos, the company’s executive chair and a mega-shareholder, was not among them.

    Despite some reports to the contrary, Bezos hasn’t disclosed any sales of Amazon shares AMZN for two years, but he has given some shares away to nonprofit organizations.

    There…

    Master your money.

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  • iRobot shares close up 39% on report Amazon deal set to get EU approval

    iRobot shares close up 39% on report Amazon deal set to get EU approval

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    iRobot’s Roomba.

    Source: iRobot

    Shares of iRobot, the maker of Roomba vacuums, closed up about 39% Friday after a report said the European Union is set to approve Amazon’s $1.7 billion acquisition of the company.

    Reuters said Thursday morning the deal is set to “win unconditional EU antitrust approval,” citing three sources familiar with the matter. The European Commission is expected to rule on the deal by Feb. 14.

    Representatives from the European Commission didn’t immediately respond to CNBC’s request for comment.

    The deal is still under review by the U.S. Federal Trade Commission. The U.K.’s Competition and Markets Authority said in June the deal would not result in “a substantial lessening of competition” in the U.K.

    Amazon shares were flat.

    Amazon announced its intention to acquire iRobot in August 2022 for $61 a share in an all-cash deal.

    The acquisition marks Amazon’s fourth-largest deal, behind its $13.7 billion purchase of grocery chain Whole Foods in 2017, its $8.45 billion purchase of film studio MGM in 2021 and its $3.9 billion acquisition of boutique primary-care provider One Medical, announced last July.

    — CNBC’s Annie Palmer contributed to this report.

    Subscribe to CNBC on YouTube. 

    Don’t miss these stories from CNBC PRO:

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  • Just in time for the holidays: Amazon Prime Visa offering $200 gift card welcome bonus

    Just in time for the holidays: Amazon Prime Visa offering $200 gift card welcome bonus

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    Both new and existing Prime Visa cardholders are in for an extra treat as they work their way through their holiday shopping list this year.

    If you’re interested in signing up for this Amazon credit card, you’ll immediately earn a welcome bonus of a $200 Amazon gift card upon approval from now through Dec. 4, 2023. This is double the $100 Amazon gift card the Prime Visa typically offers new cardholders, so if you’ve been toying with the idea of getting this card, now’s the time to move.

    Prime Visa

    • Rewards

      Earn unlimited 5% back at Amazon.com, Amazon Fresh, Whole Foods Market and on Chase Travel purchases with an eligible Prime membership, unlimited 2% back at gas stations, restaurants and on local transit and commuting (including rideshare), 10% back or more on a rotating selection of products and categories at Amazon.com, unlimited 1% back on all other purchases

    • Welcome bonus

      Get a $200 Amazon Gift Card instantly upon approval exclusively for Prime members

    • Annual fee

      $0 (but Prime membership is required)

    • Intro APR

    • Regular APR

    • Balance transfer fee

      Either $5 or 4% of the amount of each transfer, whichever is greater.

    • Foreign transaction fee

    • Credit needed

    Both new and existing cardholders can take advantage of a limited-time offer of 10% cash back on eligible gift purchases. The selection of eligible gift purchases spans multiple shopping categories, so you have a ton of choices to shop and save on.

    On top of that, if you have an eligible Prime membership and either a Prime Visa or another eligible Prime card, you can now earn an extra 1% cash back on orders if you choose the No-Rush Shipping option at checkout. Since cardholders with an eligible Prime membership already earn 5% back on their Amazon purchases, this brings the total rewards potential to up to 6% cash back on your orders. This offer is valid from now through Dec. 28, 2023.

    CNBC Select highlights what you need to know about the offer, details about the Amazon credit card and which purchases qualify for 10% back in rewards.

    Amazon Prime Visa Card elevated welcome offer and bonus rewards

    Now through Dec. 4, new Prime Visa applicants will receive a $200 Amazon gift card immediately upon approval with no minimum spending requirement. The gift card will be automatically loaded onto your Amazon account so you can use it immediately.

    Prime Visa cardholders need to have an Amazon Prime account to qualify for the card, although you can still get an Amazon credit card without a Prime membership. However, non-Prime members will earn less cash back on their Amazon and Whole Foods purchases instead of the 5% enjoyed by Prime members.

    Read more: How to get an Amazon Prime membership for free

    But it doesn’t stop there. Cardholders can also take advantage of 10% back when purchasing items from a variety of categories, including Amazon devices, home, kitchen, electronics, furniture and more. For example, you can get 10% cash back on select Ring Video Doorbell Pro 2, Kindle e-readers, TVs and more. You can find all eligible products here but note that the 10% cash back deal expires at different times for different products.

    Plus, Prime Visa and Amazon Visa cardholders can now take advantage of My Chase Plan®. My Chase Plan® is a digital feature from Chase that allows eligible cardholders to pay off a purchase (of at least $100) in fixed monthly installments over a period of time. You won’t be charged interest on the monthly amount and My Chase Plan can only be used on purchases of at least $100.

    Amazon Visa and Prime Visa cardholders can now use this feature by selecting a recent transaction (remember, it needs to be at least $100) and choosing a repayment timeframe and monthly amount that works best for them.

    Other great credit cards to earn rewards on Amazon purchases

    The Platinum Card® from American Express

    On the American Express secure site

    • Rewards

      Earn 5X Membership Rewards® Points for flights booked directly with airlines or with American Express Travel up to $500,000 on these purchases per calendar year, 5X Membership Rewards® Points on prepaid hotels booked with American Express Travel, 1X points on all other eligible purchases

    • Welcome bonus

      Earn 80,000 Membership Rewards® Points after you spend $8,000 on purchases on your new Card in your first 6 months of Card Membership. Apply and select your preferred metal Card design: classic Platinum Card®, Platinum x Kehinde Wiley, or Platinum x Julie Mehretu.

    • Annual fee

    • Intro APR

    • Regular APR

    • Balance transfer fee

    • Foreign transaction fee

    • Credit Needed

    Wells Fargo Reflect® Card

    On Wells Fargo secure site

    • Rewards

    • Welcome bonus

    • Annual fee

    • Intro APR

      0% intro APR for 21 months from account opening on purchases and qualifying balance transfers.

    • Regular APR

      18.24%, 24.74%, or 29.99% Variable APR on purchases and balance transfers

    • Balance transfer fee

      Balance transfers fee of 5%, min $5.

    • Foreign transaction fee

    • Credit needed

    Citi Double Cash® Card

    • Rewards

      Earn 2% on every purchase with unlimited 1% cash back when you buy, plus an additional 1% as you pay for those purchases. To earn cash back, pay at least the minimum due on time. Plus, for a limited time, earn 5% total cash back on hotel, car rentals and attractions booked on the Citi Travel℠ portal through 12/31/24

    • Welcome bonus

      Earn $200 cash back after you spend $1,500 on purchases in the first 6 months of account opening. This bonus offer will be fulfilled as 20,000 ThankYou® Points, which can be redeemed for $200 cash back.

    • Annual fee

    • Intro APR

      0% for the first 18 months on balance transfers; N/A for purchases

    • Regular APR

    • Balance transfer fee

      For balance transfers completed within 4 months of account opening, an intro balance transfer fee of 3% of each transfer ($5 minimum) applies; after that, a balance transfer fee of 5% of each transfer ($5 minimum) applies

    • Foreign transaction fee

    • Credit needed

    Subscribe to the CNBC Select Newsletter!

    Money matters — so make the most of it. Get expert tips, strategies, news and everything else you need to maximize your money, right to your inbox. Sign up here.

    Bottom line

    If you haven’t already started thinking about holiday shopping, Amazon’s Prime Visa welcome offer might inspire you to sign up and start working your way through your list. And if the online retailer isn’t your cup of tea, don’t forget that there are plenty of 0% APR cards, travel cards, and rewards cards that help you make the most from every swipe.

    Catch up on Select’s in-depth coverage of personal finance, tech and tools, wellness and more, and follow us on Facebook, Instagram and Twitter to stay up to date.

    For rates and fees of the Platinum Card from American Express, click here.

    Information about Amazon credit cards has been collected independently by Select and has not been reviewed or provided by the issuer prior to publication; if you purchase something through Select links, we may earn a commission.

    Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.

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  • Some OpenAI customers are thinking about switching to rivals amid chaos

    Some OpenAI customers are thinking about switching to rivals amid chaos

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    Jaap Arriens | Nurphoto | Getty Images

    When there was a companywide protest at OpenAI after its CEO Sam Altman was ousted, software startup CEO Arjun Bansal began fielding increased calls from customers asking for help to lessen their use of OpenAI’s GPT large language models.

    At his startup Log10, Bansal oversees the production of tools that third-party developers can use to build LLM-powered applications. Since the OpenAI drama unfolded, Bansal told CNBC the startup’s instability was a reason customers cited.

    “People have been reaching out on how they would go through that process of being able to fine-tune different models or try out different providers with minimal disruption to how their code is set up,” Bansal told CNBC. “It is a very unprecedented situation, that a company of this size with this very unusual governance structure has gone through so much change in just over a weekend.”

    A spokesperson for OpenAI declined to comment but said the startup’s services are working again following three hours of issues.

    OpenAI’s board of directors fired Altman Friday after determining he was “not consistently candid in his communications” with them, according to a statement.

    After a long weekend of negotiations that appeared to result in reinstating Altman at the company, ex-Twitch CEO Emmett Shear announced he had been appointed interim head, and Microsoft CEO Satya Nadella said the software maker would hire Altman, along with fellow OpenAI co-founder Greg Brockman and their colleagues.

    However, more than 90% of OpenAI employees signed a letter to the company’s board demanding that they resign, or staffers might choose to leave. Now, Shear is reportedly considering leaving if the board doesn’t provide evidence of their reasoning for firing Altman in the first place.

    Bansal is one of several startup entrepreneurs who told CNBC they or their customers are considering relying less on OpenAI’s GPT family of LLMs in the days since the board pushed out Altman.

    “There’s definitely people taking it quite seriously,” Bansal said.

    One founder of an AI startup, who asked not to be named in order to discuss internal matters, said he uses multiple application program interfaces from OpenAI and has considered switching to offerings from Anthropic, the AI startup founded by former OpenAI executives with backing from Amazon and Google.

    The startup founder said he considered alternatives over the weekend after Altman was ousted, and their concerns grew stronger once OpenAI announced it had selected Shear as Altman’s successor.

    Shear is a Silicon Valley veteran, having founded livestreaming platform Justin.tv in 2007 that eventually evolved into Twitch, a popular streaming site for gamers. Amazon acquired Twitch for almost $1 billion in 2014. The source, who previously worked alongside Shear, said Shear is “very smart” and admires his integrity.

    Open revolt at OpenAI: Nearly all employees threaten to leave

    But he’s not sure if Shear is the right person to lead a company like OpenAI that’s at the forefront of the world’s AI boom.

    Martin Kon, president and chief operating officer of Cohere, which also provides LLMs for use in applications, said in a Tuesday statement that he’s seen an increase in inquiries since OpenAI’s drama unfolded.

    “Enterprises value certainty, as the significant increase of inbound inquiries we’ve seen this week demonstrates we are still early in enterprise AI adoption, and companies are taking a hard look at how much they value cloud flexibility and independence from big tech,” Kon said.

    But some startups are struggling to incorporate multiple LLMs into their applications.

    One founder CNBC spoke with said Anthropic has a waiting list, so that even if people are clamoring to use its services, they might not be able to do so right away.

    While there are a variety of LLMs available to use, including open-source options such as Meta’s Llama 2 AI software, the consensus is that the GPT-4 model is the most capable of performing complicated tasks at an affordable price. OpenAI lowered its fees earlier this month.

    OpenAI employees try assuring clients

    Although the tech industry has credited OpenAI for popularizing the use of AI software that analyzes written text and produces human-like copy, the company now finds itself in a defensive position.

    OpenAI employees are trying to assure customers that they are committed to them.

    “We are still fully committed to our incredible community of developers and users,” Srinivas Narayanan, whose profile lists him as an OpenAI vice president, wrote on X Tuesday.

    “The API team is here. The ChatGPT team is here,” wrote Steven Heidel, a member of OpenAI’s technical staff, in a post Tuesday. “We are all still fully committed to our developers and users.”

    Nadella attempted to quell concerns during an interview with CNBC’s Jon Fortt Monday evening.

    “Quite frankly, Microsoft has all the capability to just do that on our own but we chose to explicitly partner with OpenAI and we want to continue to do so,” the CEO said.

    Watch CNBC's full interview with Microsoft CEO Satya Nadella

    Some of OpenAI’s customers, however, see more upside in sticking with OpenAI.

    Michael Buckley, CEO of a company called Be My Eyes, which makes a mobile app that uses image recognition to help describe objects to the visually impaired, told CNBC that one of its products has been using the GPT-4V model with support for analyzing images since February. He’s decided to stick with OpenAI despite an influx of calls asking him to do otherwise.

    “I’ve been bombarded by sales calls from rival LLM companies seeking some opportunistic business wins,” Buckley said. “That’s fair game and business is a contact sport so I get it. And we were already evaluating backup providers as a hedge before the drama.”

    Buckley added that he believes OpenAI’s models are “excellent” and that he’s appreciated the company’s loyalty to him since its early days.

    Alexander Kvamme, co-founder and CEO of startup Pathlight, said that while his company draws on multiple LLMs in its customer support and sales software product, OpenAI’s GPT models can outperform on more complex tasks — such as analyzing thousands of sales calls, so that companies can ask questions about customer churn and related trends that the AI software can presumably answer.

    Kvamme said his team hasn’t experienced any major GPT-related issues yet and members of OpenAI’s customer support team have been answering technical questions despite the corporate drama.

    “To Sam’s credit and Satya’s credit, they are finding ways to keep the lights on and kind of keep things working through all this turmoil given the kind of OpenAI and Microsoft relationship,” Kvamme said, referring to OpenAI’s use of Microsoft’s Azure infrastructure. “At the end of the day so far, our customers and developers have not been impacted.”

    Other technologists told CNBC that while they haven’t experienced significant problems with GPT-enabled services in the past few days, they are concerned it’s only a matter of time before they do.

    “I do know quite a few companies that are basically trashing their current product roadmap and saying, like, you know, we need new infrastructure,” Kvamme said.

    On Wednesday, Brockman wrote on X (formerly known as Twitter) that a voice-activated version of OpenAI’s popular ChatGPT app is now available for everyone to use for free.

    “Give it a try — totally changes the ChatGPT experience,” Brockman said.

    — CNBC’s Jordan Novet and Annie Palmer contributed to this report.

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  • Nvidia’s revenue triples as AI chip boom continues

    Nvidia’s revenue triples as AI chip boom continues

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    Nvidia shares moved down 1% in extended trading on Tuesday after the chipmaker reported fiscal third-quarter results that surpassed Wall Street’s predictions. But the company called for a negative impact in the next quarter because of export restrictions affecting sales to organizations in China and other countries.

    “We expect that our sales to these destinations will decline significantly in the fourth quarter of fiscal 2024, though we believe the decline will be more than offset by strong growth in other regions,” Nvidia’s finance chief, Colette Kress, said in a letter to shareholders.

    On a conference call with analysts, Kress said Nvidia is working with some clients in the Middle East and China to obtain U.S. government licenses for sales of high-performance products. Nvidia is trying to develop new data center products that comply with government policies and don’t require licenses, but Kress said she didn’t think they would be meaningful in the fiscal fourth quarter.

    Here’s how the company did, compared to the consensus among analysts surveyed by LSEG, formerly known as Refinitiv:

    • Earnings: $4.02 per share, adjusted, vs. $3.37 per share expected
    • Revenue: $18.12 billion, vs. $16.18 billion expected

    Nvidia’s revenue grew 206% year over year during the quarter ending Oct. 29, according to a statement. Net income, at $9.24 billion, or $3.71 per share, was up from $680 million, or 27 cents per share, in the same quarter a year ago.

    The company’s data center revenue totaled $14.51 billion, up 279% and more than the StreetAccount consensus of $12.97 billion. Half of the data center revenue came from cloud infrastructure providers such as Amazon, and the other from consumer internet entities and large companies, Nvidia said.

    Healthy uptake came from clouds that specialize in renting out GPUs to clients, Kress said on the call.

    The gaming segment contributed $2.86 billion, up 81% and higher than the $2.68 billion StreetAccount consensus.

    With respect to guidance, Nvidia called for $20 billion in revenue for the fiscal fourth quarter. That implies nearly 231% revenue growth.

    During the quarter, Nvidia announced the GH200 GPU, which has more memory than the current H100 and an additional Arm processor onboard. The H100 is expensive and in demand. Nvidia said Australia-based Iris Energy, an owner of bitcoin mining data centers, was buying 248 H100s for $10 million, which works out to about $40,000 each.

    Computing instances based on the GH GPUs are coming soon to Oracle’s cloud, Kress said on the call.

    As recently as two years ago, sales of GPUs for playing video games on PCs were the largest source of Nvidia’s revenue. Now the company gets most revenue from deployments inside server farms.

    The introduction of the ChatGPT chatbot from Microsoft-backed startup OpenAI in 2022 caused many companies to look for ways to add similar generative artificial intelligence capabilities to their software. Demand for Nvidia’s GPUs strengthened as a result.

    Nvidia faces obstacles, including competition from AMD and lower revenue because of export restrictions that can limit sales of its GPUs in China. But ahead of Tuesday report, some analysts were nevertheless optimistic.

    “GPU demand continues to outpace supply as Gen AI adoption broadens across industry verticals,” Raymond James’ Srini Pajjuri and Jacob Silverman wrote in a note Monday to clients, with a “strong buy” recommendation on Nvidia stock. “We are not overly concerned about competition and expect NVDA to maintain >85% share in Gen AI accelerators even in 2024.”

    Nvidia is still working on its plan to grow supply throughout next year, Kress said on the call.

    Excluding the after-hours move, Nvidia stock has gone up 241% so far this year, vastly outperforming the S&P 500 index, which is up 18% over the same period.

    WATCH: The major risk to Nvidia earnings is its relationship with China, says Degas Wright

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  • Stocks making the biggest moves midday: Amazon, Medtronic, American Eagle, Lowe’s, C3.ai and more

    Stocks making the biggest moves midday: Amazon, Medtronic, American Eagle, Lowe’s, C3.ai and more

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  • OpenAI shakeup has rocked Silicon Valley, leaving some techies concerned about future of AI

    OpenAI shakeup has rocked Silicon Valley, leaving some techies concerned about future of AI

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    Sam Altman, CEO of OpenAI, attends the Asia-Pacific Economic Cooperation (APEC) CEO Summit in San Francisco, California, U.S. November 16, 2023.

    Carlos Barria | Reuters

    A wide swath of Silicon Valley has hitched its hopes and fortunes over the past few years to the kind of generative artificial intelligence technologies that OpenAI helped popularize.

    Many industry experts point to the debut of ChatGPT late last year as an iPhone-like moment, ushering a potential shift in the way people interact with computers via written prompts that can produce creative, seemingly human-like text.

    Just as Apple had the late Steve Jobs acting as the company’s esteemed figurehead, articulating the appeal of the iPhone and personal computers to the masses, so too did OpenAI have its own charismatic leader in Sam Altman.

    With Altman out as CEO — at least for now — after his sudden firing on Friday, the Apple comparisons are flowing freely. Jobs was fired as CEO of Apple in 1985, a move that lives in Silicon Valley lore, since it was after his return in 1997 that Apple found the path that eventually made it the most valuable company in the U.S.

    Altman, who previously ran startup accelerator Y Combinator, has spent the past year cozying up to world leaders and making routine appearances at tech events, turning the 38-year-old executive into an industry celebrity, in the mold of Jobs, Meta CEO Mark Zuckerberg, Amazon founder Jeff Bezos and Tesla CEO Elon Musk.

    Along with Altman, OpenAI’s board removed Greg Brockman from his role as chairman. Later Friday, Brockman said he was quitting the company.

    “What happened at OpenAI today is a Board coup that we have not seen the likes of since 1985 when the then-Apple board pushed out Steve Jobs,” longtime startup investor Ron Conway said Friday evening in an X post. “It is shocking; it is irresponsible; and it does not do right by Sam & Greg or all the builders in OpenAI.”

    Efforts are already underway by OpenAI investors to get Altman back, according to people familiar with the matter. Microsoft, Tiger Global, Sequoia Capital and Thrive Capital are among a number of OpenAI’s top backers that are trying to reinstate Altman, said the people, who asked not to be named because discussions are confidential. The Verge reported on Saturday that Altman is “ambivalent” about the possibility of returning.

    Airbnb CEO Brian Chesky referred to Altman in an X post as “one of the best founders of his generation” who “has made an immense contribution to our industry.”

    Silicon Valley reacts to OpenAI

    Matt Schlicht, the CEO of the startup Octane AI, told CNBC that Altman and Brockman, who was formerly the chief technology office of Stripe, “made a technology available that we’d only ever dreamed about” and called it “the most exciting and powerful development of our lifetime.”

    Octane is one of many new startups using the so-called large language models that OpenAI packages under its GPT family of software tools. Schlicht said the technology has so far “enabled us to put human-level intelligence inside of our code, and because of that we have helped entrepreneurs generate over half a billion in revenue.”

    “I’ve known both Sam and Greg for over a decade, they are incredible and inspiring leaders,” Schlicht said. “After hearing about their untimely departure I was immediately filled with sadness. Innovation in the world was suddenly halted.”

    Ryan Jannsen, CEO of Zenlytic, shared Schlicht’s sentiment.

    “The AI community is reeling,” Jannsen said, adding that technologists are confused about the circumstances related to Altman’s firing and what it means for OpenAI going forward.

    “Sam and OpenAI were the catalyst that showed the world what AI tech is capable of,” Jannsen said. “A huge amount of the excitement and activity in AI today is very directly thanks to their pioneering work.”

    Whether or not Altman returns, the turmoil at OpenAI could give rivals an advantage in what’s quickly become a highly competitive market for advanced LLMs. From heavily funded startups like Anthropic and Cohere to cloud computing giants Google and Amazon, companies will likely be “looking for the next best alternative,” given the perceived instability at OpenAI, said industry analyst Patrick Moorhead.

    “They’re not the only game in town,” Moorhead said.

    Josh Wolfe, a partner at venture firm Lux Capital, said OpenAI is taking a huge reputational hit at a time when companies are deciding what models they’re going to use as building blocks.

    “There was a perception of steady, predictable, reliable reputable progress and engagement and communication with industry,” Wolfe said. “The surprise capriciousness of the move signals total unpredictability, which is terrible for companies making plans to work with or trust OpenAI.”

    OpenAI’s unusual structure

    A big part of the challenge in understanding OpenAI is its unusual company structure. The board of OpenAI oversees the nonprofit, of which the corporate entity is a part, and “acts as the overall governing body for all OpenAI activities,” according to the blog post announcing Altman’s ouster.

    The post said that a “deliberative review process by the board” concluded that Altman “was not consistently candid in his communications with the board, hindering its ability to exercise its responsibilities.” 

    Silicon Valley’s high-profile startup CEO firings typically involve wrongdoing, rather than just philosophical differences about where the company is headed.

    Several investors told CNBC that OpenAI’s hybrid model presented a red flag from the beginning, in part because incentives can too easily be misaligned. Now, they said, the company risks severe brain drain if top talent chooses to follow Altman to his next project or a competitor in the industry.

    Altman, meanwhile, has the advantage of having made such a name for himself that he’d have no problem raising money for a new project from investors who view him as the next great tech luminary.

    “Sam Altman is a hero of mine,” former Google CEO and investor Eric Schmidt said in an X post. “He built a company from nothing to $90 Billion in value, and changed our collective world forever. I can’t wait to see what he does next. I, and billions of people, will benefit from his future work- it’s going to be simply incredible.”

    Eric Schmidt, the former CEO of Google, arrives for the Inaugural AI Insight Forum in Russell Building on Capitol Hill, on Wednesday, Sept. 13, 2023.

    Tom Williams | Cq-roll Call, Inc. | Getty Images

    Airbnb’s Chesky wrote that he’d spoken with Altman and Brockman and that they have his “full support.”

    “I’m saddened by what’s transpired,” Chesky wrote. “They, and the rest of the OpenAI team, deserve better. He added in a separate post that Altman is “one of the best founders of his generation.”

    As for Microsoft, whose CEO Satya Nadella was reportedly caught off guard by the shakeup, several venture capitalists were surprised that the company could be so unaware of what was brewing given the billions they’ve invested in the company.

    “I imagine Microsoft might ask for a board seat next time they decide to plow $15 billion into a startup,” said Zachary Lipton, a Carnegie Mellon University professor of machine learning and operations research.

    Industry analyst Moorhead said Microsoft could “figure out how to buy this company and how to put Sam in charge.”

    “That’s the first play, it’s potentially finding ways to remove the current board of directors, reinstall new board of directors and then bring Sam and company back in — making sure the band stays together,” Moorhead said.

    Regardless of the current chaos, Carnegie Mellon’s Lipton said he expects investors to remain bullish on AI.

    “This story has elements of corporate and ideological discord, but not even a whiff of diminished promise,” Lipton said.

    — CNBC’s Lora Kolodny contributed to this report

    WATCH: OpenAI says Sam Altman exiting as CEO because ‘board no longer has confidence.’

    OpenAI says Sam Altman exits as CEO after board loses confidence

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  • Elon Musk’s X apocalyptic moment

    Elon Musk’s X apocalyptic moment

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    Is this the beginning of the end for X, the social-media site previously known as Twitter?

    In the last two days, major advertisers, ranging from IBM Corp. IBM, Apple Inc. AAPL, Lions Gate Entertainment Corp. LGF.A, Walt Disney Co. DIS, even the European Union, have pulled their ads from X, after Elon Musk appeared to endorse antisemitic conspiracy theories and because these big spenders weren’t thrilled with the algorithm’s product placement nestled alongside pro-Nazi posts.

    Earlier…

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  • CNBC Daily Open: Rate cuts might not be in the cards despite cooling inflation

    CNBC Daily Open: Rate cuts might not be in the cards despite cooling inflation

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    The Marriner S. Eccles Federal Reserve building during a renovation in Washington, DC, US, on Tuesday, Oct. 24, 2023.

    Valerie Plesch | Bloomberg | Getty Images

    This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

    What you need to know today

    Downbeat Asian markets
    U.S. stocks ticked up Wednesday as another report showed inflation’s cooling. Despite that, Treasury yields rose. Asia-Pacific markets, however, fell Thursday. Hong Kong’s Hang Seng Index dropped 1.26%, dragged down by Xpeng’s 3.83% decline after the Chinese electric vehicle company reported disappointing earnings results.

    ‘Planet Earth is big enough’
    U.S. President Joe Biden met Chinese President Xi Jinping yesterday on the sidelines of the Asia-Pacific Economic Cooperation conference. Both leaders agreed to resume high-level military communications. As part of the agreement, senior U.S. military commanders will engage with their Chinese counterparts. As Xi said in his opening remarks, “Planet Earth is big enough for the two countries to succeed.”

    Emptying Citi
    Citigroup will start laying off workers as part of CEO Jane Fraser’s corporate overall, CNBC has learned. Citi employees who will be let go will be informed starting Wednesday U.S. time, and the process will continue until early next week, according to people with knowledge of the situation. It seems no one will be spared: chiefs of staff, managing directors and lower-level employees will all be affected.

    Microsoft’s own AI chip
    At its Ignite conference in Seattle, Microsoft announced two custom chips. The first, its Maia 100 artificial intelligence chip, could compete with Nvidia’s AI chips. The second, a Cobalt 100 Arm chip, is designed to tackle general computing tasks and could supplant Intel processors. But Microsoft is planning to use its chips internally, and doesn’t intend to let other companies buy those chips.

    [PRO] Magnificent One
    Shares of the Magnificent Seven stocks — Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla — have surged this year, propelling the S&P 500 higher. They’ve also drawn criticism that their prices are too high, based on their price-to-earnings ratio. But there’s an exception: Morgan Stanley thinks one of them is “pretty inexpensive relative to free cash flow growth or earnings growth.”

    The bottom line

    After a very encouraging consumer price index reading on Tuesday, we have more evidence that inflation’s truly cooling.

    Wholesale prices in October, as measured by the producer price index, fell 0.5% for the month against the expected 0.1% increase. That’s the biggest decline in more than three years. When producer prices fall, it takes a while for those lower prices to seep into the general consumer economy, so it’s plausible we’ll see CPI continue dropping in the months ahead.

    Major U.S. indexes rose — slightly — on that encouraging news. The S&P 500 increased 0.16% and the Nasdaq Composite edged up 0.07%. The Dow Jones Industrial Average gained 0.47% for its fourth consecutive winning session.

    The stock market rally over the past two days, it seems, was fueled by investors’ expectations that lower inflation readings will prompt the Federal Reserve to cut rates sooner rather than later. Investors think there’s a 29.6% chance the Fed will slash rates by a full percentage point by the end of next year, according to the CME FedWatch tool.

    But that flurry of cuts is two times as aggressive as the timeline the Fed itself penciled in two months ago, noted CNBC’s Jeff Cox. And that, to put it mildly, “may be at least a tad optimistic,” Cox wrote.

    Investor optimism, ironically, may be counterproductive as well. Expectations of a rate cut forced down Treasury yields Tuesday (though they rose again yesterday). Treasury yields tend to serve as the benchmark for loans and other assets, so when they drop, financial conditions loosen — exactly what the Fed doesn’t want to see.

    “Financial conditions have eased considerably as markets project the end of Fed rate hikes, perhaps not the perfect underpinning for a Fed that professes to keeping rates higher for longer,” said Quincy Krosby, chief global strategist at LPL Financial.

    Indeed, “this is at least the 7th time in this cycle that markets [anticipate] … a potential dovish pivot,” wrote Deutsche Bank macro strategist Henry Allen. (Spoiler alert: Investors have, without exception, been disappointed the previous times as the Fed refused to budge.)

    In short: While it’s undeniable inflation’s dropping, there’s no guarantee rates will fall in tandem. It might be better to be pleasantly surprised than to be disappointed.

    — CNBC’s Jeff Cox contributed to this report.

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  • Warren Buffett’s Berkshire trimming holdings, keeping new stock secret

    Warren Buffett’s Berkshire trimming holdings, keeping new stock secret

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