It’s encouraging to see three Club stocks on the bullish side of Goldman Sachs’ new list of 25 tactical trades for earnings season. Asset allocation can be strategic or tactical. Strategic asset allocation generally refers to longer-term investing — think of this as your buy-and-hold approach. Tactical allocation, on the other hand, is more about trying to temporarily allocate assets to shorter-term opportunities in an effort to capture some quick upside. While we normally shy away from this approach, especially ahead of earnings, we find Wall Street notes like this one from Goldman useful for the homework behind the convictions. The three portfolio holdings highlighted on this list are Wells Fargo, Humana and Nvidia. WFC YTD mountain Wells Fargo YTD Goldman Sachs called out Wells Fargo as “one of the best positioned large bank stocks heading into 3Q23 earnings where a) weakening NIMs due to rising deposit costs, b) credit concerns around commercial real estate and other delinquencies driving up reserve builds and c) implementation of Basel 3 Endgame norms are the biggest focus areas for investors.” Wells Fargo (WFC), which reports its quarter Friday, currently trades on the cheap side at 8.3 times forward earnings estimates — below the five-year average multiple of 11.2 times. The Goldman research analysts think Wells Fargo’s management has “adequately de-risked its NIM [net interest margin] guidance to incorporate potentially higher-for-longer policy rates.” They see Wells Fargo’s “lower commercial real estate exposure at 6.6% vs. peer average of 7.5%” this year as a positive. They also predict the bank likely has “a relatively better capacity for share buybacks vs. peers even after accounting for the higher capital requirements.” HUM YTD mountain Humana YTD Humana (HUM) — which trades at 15.8 times forward earnings estimates — was highlighted by Goldman analysts who are “positive on the company’s 2024 outlook.” The analysts see favorable risk/reward with the stock trading at a “lower multiple vs. its 5-year average.” They also have “incremental conviction into next year given stabilizing utilization and a greater understanding of the potential impact of utilization/Medicare Advantage (MA) rate changes on 2024.” In their view, the company is “well positioned to grow MA membership above the market” next year. NVDA YTD mountain Nvidia YTD Nvidia (NVDA) maintains a spot on the Goldman Sachs conviction list, with analysts calling out its “status as the accelerated computing industry standard for the foreseeable future given its competitive moat and the urgency with which customers are developing and deploying increasingly complex AI models.” Nvidia — the Club’s only other “own it, don’t trade it” stock besides Apple (AAPL) — trades at 31.1 times forward earnings estimates. That’s below its 39.4 times five-year average. The analysts predict that “data center demand is not abating anytime soon as NVDA’s GPUs [graphics processing units] have become instrumental for customers looking to generate greater compute power.” With the supply chain showing signs of improvement, the analysts believe that current Street estimates underestimate “the potential gross margin uplift stemming from improving mix (i.e. faster growth in Data Center) as well as the [operating expense] leverage that is inherent in NVDA’s GPU platform-based business model.” Bottom line While we obviously love to see our names on this kind of list, we don’t advise trading around earnings releases. It’s simply too difficult. How often have we seen companies’ results beat estimates and stocks sell off due to profit-taking over high expectations or disappointment with a random line item? Rather, we encourage investors to view the Goldman research as a positive update on names for which we see material longer-term upside, and use it as a guide for listening to management commentary around the upcoming earnings releases. (Jim Cramer’s Charitable Trust is long WFC, HUM, NDVA. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
The Goldman Sachs logo is seen on at the New York Stock Exchange on September 13, 2022 in New York City.
Michael M. Santiago | Getty Images News | Getty Images
It’s encouraging to see three Club stocks on the bullish side of Goldman Sachs’ new list of 25 tactical trades for earnings season.
The logo of generative AI chatbot ChatGPT, which is owned by Microsoft-backed company OpenAI.
CFOTO | Future Publishing via Getty Images
Artificial intelligence might be driving concerns over people’s job security — but a new wave of jobs are being created that focus solely on reviewing the inputs and outputs of next-generation AI models.
Since Nov. 2022, global business leaders, workers and academics alike have been gripped by fears that the emergence of generative AI will disrupt vast numbers of professional jobs.
Generative AI, which enables AI algorithms to generate humanlike, realistic text and images in response to textual prompts, is trained on vast quantities of data.
It can produce sophisticated prose and even company presentations close to the quality of academically trained individuals.
That has, understandably, generated fears that jobs may be displaced by AI.
Morgan Stanley estimates that as many as 300 million jobs could be taken over by AI, including office and administrative support jobs, legal work, and architecture and engineering, life, physical and social sciences, and financial and business operations.
But the inputs that AI models receive, and the outputs they create, often need to be guided and reviewed by humans — and this is creating some new paid careers and side hustles.
Prolific, a company that helps connect AI developers with research participants, has had direct involvement in providing people with compensation for reviewing AI-generated material.
The company pays its candidates sums of money to assess the quality of AI-generated outputs. Prolific recommends developers pay participants at least $12 an hour, while minimum pay is set at $8 an hour.
The human reviewers are guided by Prolific’s customers, which include Meta, Google, the University of Oxford and University College London. They help reviewers through the process, learning about the potentially inaccurate or otherwise harmful material they may come across.
They must provide consent to engage in the research.
One research participant CNBC spoke to said he has used Prolific on a number of occasions to give his verdict on the quality of AI models.
The research participant, who preferred to remain anonymous due to privacy concerns, said that he often had to step in to provide feedback on where the AI model went wrong and needed correcting or amending to ensure it didn’t produce unsavory responses.
He came across a number of instances where certain AI models were producing things that were problematic — on one occasion, the research participant would even be confronted with an AI model trying to convince him to buy drugs.
He was shocked when the AI approached him with this comment — though the purpose of the study was to test the boundaries of this particular AI and provide it with feedback to ensure that it doesn’t cause harm in future.
Phelim Bradley, CEO of Prolific, said that there are plenty of new kinds of “AI workers” who are playing a key role in informing the data that goes into AI models like ChatGPT — and what comes out.
As governments assess how to regulate AI, Bradley said that it’s “important that enough focus is given to topics including the fair and ethical treatment of AI workers such as data annotators, the sourcing and transparency of data used to build AI models, as well as the dangers of bias creeping into these systems due to the way in which they are being trained.”
“If we can get the approach right in these areas, it will go a long way to ensuring the best and most ethical foundations for the AI-enabled applications of the future.”
In July, Prolific raised $32 million in funding from investors including Partech and Oxford Science Enterprises.
The likes of Google, Microsoft and Meta have been battling to dominate in generative AI, an emerging field of AI that has involved commercial interest primarily thanks to its frequently floated productivity gains.
However, this has opened a can of worms for regulators and AI ethicists, who are concerned there is a lack of transparency surrounding how these models reach decisions on the content they produce, and that more needs to be done to ensure that AI is serving human interests — not the other way around.
Hume, a company that uses AI to read human emotions from verbal, facial and vocal expressions, uses Prolific to test the quality of its AI models. The company recruits people via Prolific to participate in surveys to tell it whether an AI-generated response was a good response or a bad response.
“Increasingly, the emphasis of researchers in these large companies and labs is shifting towards alignment with human preferences and safety,” Alan Cowen, Hume’s co-founder and CEO, told CNBC.
“There’s more of an emphasize on being able to monitor things in these applications. I think we’re just seeing the very beginning of this technology being released,” he added.
“It makes sense to expect that some of the things that have long been pursued in AI — having personalised tutors and digital assistants; models that can read legal documents and revise them these, are actually coming to fruition.”
Another role placing humans at the core of AI development is prompt engineers. These are workers who figure out what text-based prompts work best to insert into the generative AI model to achieve the most optimal responses.
According to LinkedIn data released last week, there’s been a rush specifically toward jobs mentioning AI.
Job postings on LinkedIn that mention either AI or generative AI more than doubled globally between July 2021 and July 2023, according to the jobs and networking platform.
Meanwhile, companies are also using AI to automate reviews of regulatory documentation and legal paperwork — but with human oversight.
Firms often have to scan through huge amounts of paperwork to vet potential partners and assess whether or not they can expand into certain territories.
Going through all of this paperwork can be a tedious process which workers don’t necessarily want to take on — so the ability to pass it on to an AI model becomes attractive. But, according to researchers, it still requires a human touch.
Mesh AI, a digital transformation-focused consulting firm, says that human feedback can help AI models learn mistakes they make through trial and error.
“With this approach organizations can automate analysis and tracking of their regulatory commitments,” Michael Chalmers, CEO at Mesh AI, told CNBC via email.
Small and medium-sized enterprises “can shift their focus from mundane document analysis to approving the outputs generated from said AI models and further improving them by applying reinforcement learning from human feedback.”
Caroline Ellison, former chief executive officer of Alameda Research LLC, exits court in New York, US, on Tuesday, Oct. 10, 2023.
Yuki Iwamura | Bloomberg | Getty Images
Caroline Ellison, who ran Sam Bankman-Fried’s crypto hedge fund while also dating the FTX founder, told jurors in her second day of testimony that one way her boss was considering repaying FTX customer accounts was by raising money from Saudi Crown Prince Mohammed bin Salman.
Ellison, 28, pleaded guilty in December to multiple counts of fraud as part of a plea deal with the government and is now viewed as the prosecution’s star witness in Bankman-Fried’s trial. In damning testimony Tuesday, she said Bankman-Fried directed her and other staffers to defraud FTX customers by funneling billions of dollars to sister hedge fund Alameda Research.
Assistant U.S. attorney Danielle Sassoon wasted no time diving back into the questioning Wednesday when court was called to session.
After previously detailing how FTX customer funds were used to repay Alameda loans, Ellison said Wednesday that crypto lender Genesis called back a bunch of loans in 2022 and asked to see a balance sheet. Because Alameda’s actual balance sheet showed it had $15 billion in FTX customer funds, Bankman-Fried directed Ellison on June 28, 2022, to come up with “alternative” balance sheets that didn’t look as bad, she said.
Ellison, wearing a buttoned gray blazer with her long hair swept over her left shoulder, said she discussed her concerns with Bankman-Fried as well as top execs Gary Wang and Nishad Singh. She said the group brainstormed ways to make the balance sheet look better.
After the meeting, Ellison prepared a number of different balance sheet variations to send to Genesis. Eventually, according to Ellison, Bankman-Fried chose the one that omitted a line saying “FTX borrows,” hiding $10 billion in borrowed customer money. “Some was netted against related-party loans,” she said, and “some netted against crypto.”
Assistant U.S. Attorney Danielle Sassoon questions Caroline Ellison as defense lawyer Mark Cohen stands to object at Sam Bankman-Fried’s fraud trial before U.S. District Judge Lewis Kaplan over the collapse of FTX, the bankrupt cryptocurrency exchange, at Federal Court in New York City, U.S., October 11, 2023 in this courtroom sketch.
Jane Rosenberg | Reuters
That made it seem “like we had plenty of assets to cover our open term loans,” Ellison said.
Ellison told jurors she “was in a constant state of dread” since she knew there were billions of dollars of loans being recalled that could only be repaid with money from FTX customers. She said she was “worried about the possibility of customer withdrawals” that could happen at any time.
“I was concerned that if anyone found out, it would all come crashing down,” Ellison said. When asked by Sassoon why she continued with the scheme, Ellison said, “Sam told me to.”
By October 2022, the internal balance sheet had liabilities of $15.6 billion, while the numbers they showed the lender indicated just under $8 billion. Ellison said Bankman-Fried was talking about trying to raise money from Mohammed bin Salman, also known as MBS, as a way to make FTX customers whole.
Ellison, a Stanford graduate and one of Bankman-Fried’s earliest recruits to Alameda in 2017, was reportedly persuaded by Bankman-Fried to ditch her job at Wall Street trading firm Jane Street to join Alameda as a trader. At the time, the hedge fund was still in its original office in the San Francisco Bay area.
Six years later, Ellison is testifying against the 31-year-old Bankman-Fried, who faces seven federal charges, including wire fraud, securities fraud and money laundering, all tied to the collapse of FTX and Alameda late last year. If convicted in the trial, which began last week, Bankman-Fried could spend his life in prison. He has pleaded not guilty.
Ellison said Bankman-Fried directed FTX and Alameda employees to use the disappearing message setting on Signal and told them to be very careful about what they put in writing because of potential legal exposure. In addition to a companywide meeting about the Signal policy, Bankman-Fried also told employees that they should only write things on Slack that they’re comfortable seeing on the front page of The New York Times.
Caroline Ellison, former CEO of Alameda Research, center, arrives at court in New York on Oct. 10, 2023.
Yuki Iwamura | Bloomberg | Getty Images
Backing up to the summer and fall of 2022, Ellison provided more detail about her interactions with Bankman-Fried as his crypto firms’ financial problems were becoming more apparent. Ellison said they talked about bringing in more money for FTX one of two ways: by acquiring BlockFi or by selling equity.
In August 2022, Ellison said, Bankman-Fried blamed her for Alameda’s finances even though she’d been warning about FTX’s expanding portfolio of venture investments and the need to repay FTX customer accounts. She said Bankman-Fried told her she should have hedged and, “speaking loudly and strongly,” said it was her fault.
On the stand, Ellison took some blame, admitting she should have done things differently, “but Sam was the one who chose to make all the investments that put us in a leveraged position,” she said.
Ellison, who’d started dating Bankman-Fried in the summer of 2021, said that by the fall of 2022 they’d been broken up for several months. She said she would try to avoid one-on-one contact with Bankman-Fried, though they were still talking on Signal and were together in group meetings. She said she still provided him the same regular updates on Alameda and its balance sheet.
Ellison said she kept a Google Doc that had a subcategory labeled “things Sam is freaking out about.” It included “raising from MBS,” as well as “getting regulators to crack down on Binance,” a rival exchange that was also an early investor in FTX. Bankman-Fried wanted to see Binance feel some pain because he saw that as the best way for FTX to increase market share, Ellison said.
Another worry on the list was “bad pr in the next six months,” which Bankman-Fried feared would interfere with FTX’s efforts to obtain a license for futures trading in the U.S., she said.
Smartphones with displays capable of repairing themselves could start appearing on the market by 2028, according to analyst firm CCS Insight.
In its roundup of top tech predictions for 2024 and beyond, CCS Insight said that it expects smartphone makers to begin producing phones with “self-healing” displays within five years. The way this could work is by incorporating a “nano coating” on the surface of the display that, if scratched, creates a new material that reacts when exposed to air and fills in the imperfection.
“This is not in the realms of science fiction, it can be done,” Wood told CNBC on a call earlier this week. “I think the biggest challenge with this is setting expectations correctly.”
Companies have been talking about smartphone display technology that can be self-repaired for several years now.
LG, the South Korean consumer electronics giant, was touting self-healing technology in its smartphones as far back as 2013. The company released a smartphone called the G Flex which featured a vertically curved screen and a “self-healing” coating on the back cover. It didn’t explain how exactly the technology worked at the time.
“There’s some new technologies that people are working on right now that looks as though this could become something that people have another go with. We’re not talking about smashed screens miraculously coming back. This is all just little cosmetic scratches,” Wood told CNBC.
A few other phone makers have touted self-healing materials in smartphones. In 2017, Motorola filed a patent for a screen made from a “shape memory polymer” which, when cracked, repairs itself. The idea is that, when heat is applied to the material, it heals over the cracks.
Meanwhile, Apple also previously secured a patent for a folding iPhone with a display cover that would fix itself when damaged.
Still, the technology is yet to be found in a commercially successful handset. And there are a few barriers to launching such phones at a mass scale.
For one, companies require lots of investment in research and development to ensure they can identify new innovations in smartphone screens. Cash is also required to market and sell the phones in big volumes — and ensure consumers are actually properly informed about what level of damage in the phones can be fixed without any manual intervention.
Wood jokingly said he fears that tech tear-down enthusiasts like the popular YouTuber JerryRigsEverything will take a knife to test their self-healing capabilities. This, he says, isn’t the point of self-healing devices. Rather, it’s about technology that can make minimal repairs to the surface of its own accord.
Phone makers are getting more and more inventive when it comes to display technology. At the Mobile World Congress in Barcelona, Motorola released a rollable concept smartphone that extends vertically when pushed upward.
Samsung is pretty far along in the journey toward commercial smartphones with more advanced displays, with its folding Galaxy Z Fold 5 and Z Flip 5 phones now capable of folding hundreds of thousands of times over their lifetime.
Separately, CCS Insight also predicted that Taiwanese tech giant HTC will bow out of the virtual reality industry by 2026.
HTC was a pioneer in the smartphone market, responsible for several models which broke the mould in terms of design, performance and functionality. The company’s HTC Hero, HTC Legend, HTC Desire and HTC One were among some of the leading Android phones.
But in 2017, HTC more or less exited the smartphone market and sold its handset business to Google, which has since gone on to aggressively expand its drive into consumer hardware with its Pixel range of devices and Nest smart home products.
HTC has largely staked its future on the merging of virtual and physical worlds. In January, the company launched its Vive XR Elite device, a lightweight headset focused on gaming, fitness and productivity, at a $1,099 price point.
CCS Insight thinks that the firm will quit the VR space due to dwindling revenues and growing competition from Meta, Sony, and, more recently, Apple.
“HTC was one of the pioneers of VR, they’ve done a lot there,” CCS Insight’s Wood said. “But they have kind of struggled to compete, because they haven’t gone for the race to the bottom on price, whereas Meta, with Quest, have been prepared to take very aggressive pricing — almost just above cost pricing — to drive adoption.”
HTC “may get a little bit of an uptick with Apple coming into the space as it’s kind of renewed interest in the category,” Wood continued. “But, ultimately, we think it’s hard for them to stay in it. So we’re predicting that by 2026, they’ll exit the market, and they’ll sell their IP [intellectual property] to some of the other players who are bigger in the space.”
CCS Insight also predicted that Apple will seek to gain more direct control over the second-hand smartphone market to avoid the growing popularity of second-hand devices denting sales of new iPhones.
Apple may do this by encouraging customers to trade in their phones with the company directly, rather than relying on third-party marketplaces like PCS Wireless; or by incentivizing carriers to give in their old phones to get credits to offset the cost of buying a new iPhone, the firm’s analysts said.
Apple could also start focusing on a “verified” system for grading refurbished iPhones, in order to encourage quality secondhand devices, according to CCS Insight — reinforcing the move in the technology industry toward more “circular” products that can be repaired and resold to avoid electronic waste.
CCS Insight estimates iPhone accounts for around 80% of the organized secondary smartphone market.
Caroline Ellison, the former head of Sam Bankman-Fried’s crypto hedge fund and the government’s star witness in the criminal fraud case against the FTX founder, testified Tuesday that she and her ex-boss defrauded customers, investors and lenders.
“Yes, we did,” Ellison said, when Danielle Sassoon, assistant U.S. attorney, asked if she committed a crime. “I mean Sam and I and others.”
From a courthouse in downtown Manhattan, Ellison then listed her crimes: “fraud, conspiracy to commit fraud and money laundering.”
Ellison, who ran Alameda Research, pleaded guilty in December to two counts of wire fraud, two counts of conspiracy to commit wire fraud, conspiracy to commit commodities fraud, conspiracy to commit securities fraud and conspiracy to commit money laundering. Part of the 28-year-old’s plea deal with the government has involved cooperating with the prosecution’s case against Bankman-Fried.
Ellison’s testimony started at 12:37 p.m. and lasted less than 10 minutes before the court broke for lunch. It resumed at about 2 p.m.
Donning a red dress with a loose gray blazer and glasses, Ellison provided a brief background of how she got to know Bankman-Fried. They met when she was an intern at Jane Street, a proprietary trading firm in New York. They later worked together at Alameda and dated for a couple of years, she said.
Ellison was one of Bankman-Fried’s earliest recruits to Alameda in 2017. Bankman-Fried had reportedly convinced the Stanford graduate to ditch her job at Jane Capital to join Alameda as a trader when the hedge fund was still in its original office in the San Francisco Bay area.
When asked by Sassoon to identify the defendant, Ellison stood up and, for almost 30 seconds, looked around the room. She turned her head all the way to the left to the jury box and back to the right again multiple times before finally identifying Bankman-Fried as sitting “over there and wearing a suit.” The two hadn’t made eye contact when Ellison walked by earlier. Bankman-Fried, who was known for his floppy hair and beach shorts, got a fresh haircut prior to the trial, reportedly from a fellow inmate at the jail in Brooklyn where he has been held since August.
Ellison said Bankman-Fried was the original CEO and owner of Alameda.
“Sam directed me to commit these crimes,” she said. He “directed us to take customer money to pay loans.”
Bankman-Fried, 31, faces seven federal charges, including wire fraud, securities fraud and money laundering, all tied to the collapse of FTX and Alameda late last year. If convicted in the trial that began a week ago, Bankman-Fried could spend his life in prison. He has pleaded not guilty.
Central to the case against Bankman-Fried is the billions of dollars that flowed from customer accounts at FTX to Alameda, which had a massive hole in its balance sheet after the crypto markets turned in 2022.
Ellison said Alameda took several billion dollars from FTX customers and that Bankman-Fried had not only set up a system to steal the funds, but also directed Ellison and others to use customer funds to repay loans in the ballpark of $10 billion.
“We ultimately took around $14 billion, some of which we were able to pay back,” she said. “I sent balance sheets to lenders at the direction of Sam that incorrectly stated Alameda’s assets and liabilities.”
She said the numbers were adjusted to make Alameda look less risky as an investment.
Following lunch recess, Ellison was asked about her relationship with Bankman-Fried. She said that while they started sleeping together from time to time in 2018, not long after she began at Alameda, they began dating in the summer of 2021. The relationship was on-again, off-again until the spring of 2022, when they broke up for good.
Ellison said she quickly discovered after being hired that Alameda was in much worse shape than she’d anticipated. The firm had suffered large losses, lenders had pulled out and many employees had quit.
Regarding the comingling of funds, Ellison said Bankman-Fried was still CEO of Alameda when the practice of funneling money from FTX to the hedge fund began. Ellison said she was under the impression that it was FTX customer money because the sums exceeded the exchange’s profits and the amount of capital it hard raised.
In mid-2021, when FTX bought equity in the company back from rival exchange and early investor Binance, the company used $1 billion in FTX customer money for the transaction, Ellison testified. That followed an in-person conversation between Ellison, Bankman-Fried and Sam Trabucco, Alameda’s co-CEO.
“We don’t really have money for this,” Ellison recalled saying. “We’ll have to borrow from FTX to do it.”
Bankman-Fried told her that was OK because it was important and “we have to get it done,” she said.
X CEO Elon Musk leaves a U.S. Senate bipartisan Artificial Intelligence Insight Forum at the U.S. Capitol in Washington, D.C., on Sept. 13, 2023.
Mandel Ngan | Afp | Getty Images
A European regulator has issued Elon Musk a stern warning about the spread of illegal content and disinformation on X, formerly known as Twitter, amid the Israel-Hamas conflict. Failure to comply with the European regulations around illegal content could result in fines worth 6% of a company’s annual revenue.
Thierry Breton, the European commissioner for the internal market, said in a letter addressed to Musk on Tuesday that his office has “indications” that groups are spreading misinformation and “violent and terrorist” content on X, and urged the billionaire to respond within a 24-hour period.
The letter comes after numerous researchers, news organizations and other groups have documented a rise of misleading, false and questionable content on X, creating confusion about the current conflict.
Breton shared his letter via an X post, tagging Musk’s handle and including a hashtag that refers to the Digital Services Act, the newly enacted legislation by the European Commission — the executive arm of the European Union — that requires platforms with more than 45 million monthly active users in the EU to monitor for and take down illegal content as well as detail their protocols for doing so.
He reminded Musk in the letter that the DSA “sets very precise obligations regarding content moderation,” and that X needs “to be very transparent and clear on what content is permitted under your terms and consistently and diligently enforce your own policies.”
EU Commissioner for Internal Market Thierry Breton speaks during an interview with Reuters in Tokyo, Japan July 3, 2023.
Issei Kato | Reuters
The commissioner said that recent “changes in public interest policies” caused confusion in “many European users.” Breton seemed to be referring to a change that X made over the weekend to its public interest policy that influences whether the company decides to leave certain posts available for everyone to see despite the messages violating policy rules.
“Public media and civil society organisations widely report instances of fake and manipulated images and facts circulating on your platform in the EU, such as repurposed old images of unrelated armed conflicts or military footage that actually originated from video games,” the letter said. “This appears to be manifestly false or misleading information.”
Breton said that he wants Musk to ensure that X’s “systems are effective” and “report on the crisis measures taken to my team.”
He added that he expects X “to be in contact with the relevant law enforcement authorities and Europol, and ensure that you respond promptly to their requests.”
“I remind you that following the opening of a potential investigation and a finding of non-compliance, penalties can be imposed,” Breton wrote.
X did not immediately respond to CNBC’s request for comment.
Zscaler could benefit from the growth of an emerging form of cybersecurity, according to Barclays. The firm upgraded the cloud security stock to overweight from equal weight and upgraded its price target to $190 from $176. Barclays’ forecast implies nearly 24% upside from Friday’s $153.30 close. Analyst Saket Kalia said the company’s growing Zscaler for Workloads platform as well as a growth opportunity in the secure access service edge (SASE) cybersecurity segment underpinned the upgrade. “[G]iven these trends, we raise our FY24 billings estimate and extend our model out to FY26E with 20% billings growth and healthy EBIT/FCF margin expansion – with our increased confidence in long-term market growth, we’re now able to shift our valuation from sales to FCF [free cash flow],” Kalia said. The analyst added that growth in SASE cybersecurity could grow to become the same size or larger than regular network security protocols in three years, which could help propel Zscaler going forward. “We believe ZS will continue to gain share in SASE given its first-mover advantage (particularly in secure web gateway and zero trust network access), expansive data center footprint, and established presence with large enterprise customers,” Kalia said. Zscaler has been on a tear this year, rallying more than 46%. ZS YTD mountain Zscaler in 2023 — CNBC’s Michael Bloom contributed to this report.
A worker sorts out parcels in the outbound dock at the Amazon fulfillment center in Eastvale, California, on Aug. 31, 2021.
Watchara Phomicinda | MediaNews Group | The Riverside Press-Enterprise via Getty Images
It was late in the day on Oct. 27, 2021, when Fred Ruckel received the dreaded automated email from Amazon.
Amazon’s software had detected that Ruckel’s popular cat toy, called the Ripple Rug, was being sold somewhere else for a cheaper price. His product would no longer be shown in Amazon’s all-important buy box, an area of the listing where shoppers click “Add to Cart.” Ruckel is the sole seller of the Ripple Rug on Amazon, so the move all but ensured his product would disappear from the website, costing him thousands of dollars per day.
“Below is a list of product(s) in your catalog that are not currently eligible to be the Featured Offer because they are not priced competitively compared to prices for those products from retailers outside Amazon,” according to the email, which was viewed by CNBC.
Unbeknownst to him, Chewy was running a discount promotion, and dropped the price of his product by a few dollars to $39.99 – less than the $43 offer on Amazon. The algorithm had flagged it as a lower offer, even though the item on Chewy cost $48.54 after shipping and taxes. Ruckel had to make a choice: Lower the price on Amazon or ask Chewy to raise the price of his product. He opted for the latter.
Fred Ruckel’s company Snuggly Cat makes Ripple Rug, an interactive play mat for cats.
Fred Ruckel
Nearly three years later, Ruckel’s experience hits at the core of a sweeping antitrust lawsuit filed last week by the Federal Trade Commission against Amazon. The agency accused Amazon of wielding its monopoly power to squeeze merchants and thwart rivals. For consumers, that’s led to artificially inflated prices and a degraded shopping experience, the agency alleges.
In the 172-page suit, the FTC said Amazon relies on an “anti-discounting strategy” and a “massive web-crawling apparatus that constantly tracks online prices” to stifle competition. The agency said Amazon punishes third-party sellers who offer cheaper products elsewhere by threatening to disqualify them from appearing in the buy box if it detects a lower price. Losing the buy box is an “existential threat” to sellers’ businesses, the complaint alleges.
The end result of these tactics, the FTC argues, is elevated prices across the web. The company steadily hikes the fees it charges sellers and prevents them from discounting on other sites, so sellers often inflate their prices off of Amazon, creating an “artificial price floor everywhere,” according to the complaint.
The FTC is seeking to hold Amazon liable for allegedly violating anti-monopoly law, though it has not yet outlined the specific remedies it believes would best resolve its concerns. In antitrust cases, remedies are often determined only after a court finds the defendant liable.
In a blog post, Amazon general counsel David Zapolsky said third-party sellers set their own prices on the marketplace. The company also invests in tools to help sellers offer “competitive prices,” he said.
“Even with those tools, some of the businesses selling on Amazon might still choose to set prices that aren’t competitive,” Zapolsky said. “Just like any store owner who wouldn’t want to promote a bad deal to their customers, we don’t highlight or promote offers that are not competitively priced.”
Zapolsky argued the FTC’s lawsuit could force it to stop highlighting low prices, “a perverse result that would be directly opposed to the goals of antitrust law.”
On Amazon’s own forum for merchants, called Seller Central, several users cheered on the FTC and said they hoped it would result in changes to the company’s business practices. Amazon’s tense relationship with merchants has been well-chronicled over the years, with sellers expressing a range of grievances over issues like rising fees, an arcane suspensions process, and heightened competition on the marketplace from all sides, including the e-commerce giant.
“I think it’s great, Amazon deserves it,” one person commented, adding, “More should be coming on the way.” Amazon in recent years made the forum anonymous, but users must have a seller account in order to post.
Another post included a screenshot of a message Amazon sent to sellers the day after the FTC filed its complaint, which said, “As your partners, we know that this news may generate questions for you and our business together. This lawsuit does not change anything about our relationship with you or how we operate today.”
One user called it “BS verbiage,” adding, “Businesses that sell in their store are indeed customers. And which of us has gotten good customer service?”
Another user described their experience in the last 12 months of selling on Amazon as “being up all night at an effing casino but I’m stuck, the drugs are starting to wear off, but I’m trying to break even on the mortgage payment I’m using to play. That’s how it is selling on Amazon right now to me.”
The seller went on to describe the experience as a “race to the bottom.”
“It’s long overdue,” another commenter wrote. “When they close me down, I’m applying for a job with the FTC.”
Still, others commented that the FTC’s complaint is misguided. “Selling on Amazon is a life-changing opportunity and the amount of sellers that throw stones at the platform is astounding,” one user wrote.
Even sellers who may be sympathetic to the idea of regulating Amazon have concerns, specifically that the FTC’s highlighted issues aren’t necessarily ones that would make the seller and consumer experience better.
Scott Needham, who sells on Amazon and runs a product-finder tool for other Amazon sellers, said he was “surprised by some of the points that the FTC selected.”
“I have over the years been very critical of Amazon,” Needham told CNBC. “I’ve lost a lot of sleep because of some of the things that they have done. And the issues that they brought up, while they are interesting, they haven’t created me a lot of pain.”
Needham said he was particularly puzzled by the inclusion of the claims that Amazon is coercive in the way it encourages sellers to use its fulfillment service, known as Fulfillment by Amazon, or FBA.
Needham said many sellers “love FBA” because of its compelling value in terms of the price and promise to deliver two-day shipping. For many, using FBA doesn’t feel like a requirement, but they believe using it will make their businesses “easier and more effective.”
“I think that the power that Amazon wields over sellers is considerable and absolutely worth looking into,” Needham said. “But I’m not sure if this would actually change that.”
Scott Moller, an Amazon seller and co-founder of an agency that helps merchants run their storefronts, said the e-commerce giant has removed some of the challenges that used to be part of running an online business. With FBA, he said, he can ship an item into one of Amazon’s warehouses for $7.49 per package, while shipping it himself through a traditional carrier would cost him about $12.
“I don’t have to have my own warehouse,” said Moller, who sells grilling accessories on Amazon under the brand Grill Sergeant. “I can use their staff, their storage, and I can instantly also take the data of advertising, so I can target ads.”
He also disputed the FTC’s claim that Amazon has become littered with ads in search results, causing shoppers to wade through potentially less-relevant products of lesser quality.
“We can tailor our ads to hit exactly the consumers we want,” Moller said. “It’s a perfect marriage of a transaction, and that’s one of the beauties of what their marketplace offers.”
Needham said he feels he would have been more supportive of the case if it were filed a few years ago, pre-pandemic.
At that time, he said, “I would have felt, yes Amazon is a monopoly… But actually after Covid, into 2023, ecommerce has had a lot of big changes.” He added, “The competition is just not what it was in 2019.”
Competitors like Shopify and Walmart are increasingly viable alternatives for many categories of sellers, Needham said, not to mention rapidly growing Chinese e=commerce companies like Temu.
As a result, Needham said he’s seen some significant changes from Amazon. Among those is a greater ability for Amazon sellers to communicate with buyers, offering select customers certain promotions. Shopify, for example, gives sellers much more control over how they communicate with customers, Needham said, adding that although Amazon still controls the communication process, at least there is one.
“I wish it was a clear-cut case,” Needham said. “I have a vested interest in the marketplace doing really well, as a seller and as a service provider. And… this case, it doesn’t make the marketplace better for sellers.”
Many sellers have zeroed in on Amazon’s pricing policies and rising fees as rightful areas of concern in the FTC’s lawsuit.
Molson Hart, whose company Viahart sells toys on Amazon, has been a longtime critic of Amazon’s pricing policies. Hart complained of how Amazon’s seller fees impact pricing in a 2019 Medium post and later that year testified about his experience before a House committee.
Hart said Amazon sales comprise about 90% of his business, meaning any hit those sales take on Amazon has a considerable impact.
He recalled “24 anxious hours” in September 2022 when a third-party seller of his popular construction toy Brain Flakes listed the toy for a lower price on Target than it was offered on Amazon.
Molson Hart, CEO of Viahart, an educational toy company that sells on Amazon.
Courtesy: Molson Hart
“When our product was suppressed on Amazon, we lost $4,000 worth of sales. And you face some negative effects after that,” Hart said. “It’s harder to find your product in search. When your product disappears from Amazon, it sort of damages it in search, as far as I can tell.”
Even Needham, who was not fully convinced about the direction of the FTC’s case, said he sees some issues with the buy box. He said that sellers often find it frustrating if another platform listing their product, such as Walmart, offers a promotion that decreases the price more than that of the Amazon listing, and if that happens, Amazon will often “suppress the listing” rather than “chasing down the price.”
Opponents of the lawsuit, such as Moller, argue that Amazon aggressively polices prices because it only wants to show the best deals on its site.
“If Amazon discovers Walmart is selling my tool for $10 less, they’re going to say you need to match it,” Moller told CNBC. “The consumer is going to start on Amazon, then look elsewhere. Amazon wants to be a trusted marketplace, so to me, it’s a pro that they do this.”
Still, Needham said he’s noticed instances where Amazon will highlight its own listing in the buy box rather than those of competing sellers, even when Amazon’s price is slightly higher and other sellers have the Prime badge.
“That is a very clear case of this is not what’s best for the consumer,” Needham said. “The consumer doesn’t know that they could be saving more money by buying from somewhere else on the Amazon platform.”
Needham said the pricing issue has forced him to scale back one of his businesses on Amazon that resells branded goods. In some cases, he said, he’d have to price the same products Amazon sells at about 10% lower than the e-commerce giant in order to effectively compete, which also creates an “opportunity cost.”
Hart isn’t very interested in seeing Amazon broken up, but he said that if the lawsuit “ultimately results in Amazon ending their pricing policy, I think that that would be a good thing.”
Ruckel, the pet toy maker, said he stopped selling on Amazon in January, fed up by not only what he called “anticompetitive price fixing,” but also the “tremendous fees” the company charges. He said he was driven over the edge by a recently-announced policy requiring sellers to pay a “remeasure fee” if a customer returns a package in a bigger box than what it was shipped in, or the box isn’t the same size as the item dimensions listed on the product page.
Pulling the plug on Amazon wasn’t an easy decision, Ruckel said, estimating he’s lost $300,000 in sales in the time since he walked away from the platform. But he continues to sell on other platforms including Chewy, Etsy and his own website.
Despite the financial hit he expects to take this year, Ruckel said he feels he made the right decision.
“It’s not good for your mental health to sell on Amazon,” he said. “You’re walking on eggshells every minute of the day.”
For Apple, making a product “carbon neutral” means that it changed its operations — including manufacturing, packaging and shipping — to reduce the greenhouse gas emissions associated with making and selling its watches. It was able to drive emissions associated with a single watch down from 36.7 kg to 8.1 kg with these actions.
In order to call its watches “carbon neutral” without being able to eliminate all of the emissions associated with making the watches, Apple bought carbon credits to compensate for the remaining 8.1 kg of emissions, or about 22% of the total footprint of making a watch.
Carbon credits are certificates that individuals, businesses and corporations can purchase that represent a certain amount of greenhouse gases reduced, avoided, or removed from the atmosphere. They are a way for consumers to compensate for their greenhouse gas emissions while also providing a financing mechanism to support sustainable development projects, according to a description from the United Nations.
Depending on who you talk to, dubbing a product “carbon neutral” when the accounting requires buying carbon credits is either Apple acting responsibly and doing the best it can to contribute to climate mitigation strategies that are available right now, or an irresponsible misrepresentation of what “carbon neutral” should mean.
The distance between those two analyses is substantial and virtually irreconcilable. It’s also a poignant indication of the distance between where climate mitigation ambitions and climate mitigation realities are right now.
The relative effectiveness of nature-based carbon credits is contentious because some forestry carbon credits have been shown to be nullified when, for example, the forests set aside for carbon credits burn in wildfire season. But Apple and other stakeholders in the debate argue that not all carbon credits are created, monitored and stewarded with the same diligence. Apple says the quality of the carbon credits it is investing in are reputable, and that buying carbon credits for the emissions it cannot reduce is better than doing nothing.
“If you want to be highest ambition, taking that 22% and buying high-quality, high-integrity carbon credits is the highest ambition,” Elizabeth Sturcken, managing director of the nonprofit climate advocacy organization Environmental Defense Fund, or EDF, told CNBC in a phone conversation at the end of September.
Barbara Haya, director of the Berkeley Carbon Trading Project at the Goldman School of Public Policy at University of California at Berkeley, said Apple deserves to be celebrated for the significant emissions reductions it achieved in changing its operations, but Haya also said she wishes Apple had avoided the term “carbon neutral” in its communications about its work.
She argues consumers would be better served by Apple publicly bragging about its 78% emissions reductions instead of trying to tell consumers that their product is actually “carbon neutral.” Even if the carbon credits Apple buys are of the highest quality, carbon credits are, by their very nature, an accounting strategy. There are 22% of emissions that Apple could not abate, and Haya commends Apple on that transparency.
“If you buy an Apple Watch, your emissions are not zero,” Haya told CNBC, a fact that Apple acknowledges. The way to have no environmental impact is to not generate those emissions in the first place.
“Fossil fuels are permanently in the ground if you don’t draw them out and burn them,” Haya told CNBC.
The Apple Watch Ultra 2 with the new Alpine Loop watch band is one of the company’s first “carbon neutral” products.
The most important work Apple did in launching its “carbon neutral” watch is to drive down the emissions that are associated with making its watch, according to everyone CNBC talked to for this story.
Here are some specific examples of how Apple has worked to reduce actual emissions associated with making its “carbon neutral” watch:
30% of the materials used in making the carbon neutral watch are recycled or renewable (not including packaging or in-box accessories)
100% of the suppliers that Apple buys parts and components from for the “carbon neutral” watch have agreed to Apple’s Supplier Clean Energy Program, which means suppliers have to power the production of their Apple parts with renewable energy and invest in new renewable energy projectsin the areas in which they operate. To be part of the program, qualified suppliers are not permitted to take credit for the renewable energy that already exists on the electric grid in which they operate, but must instead purchase new renewable energy on the grid in which they operate for the production of Apple-related products — a requirement called “additionality.” Apple is transparent and specific about the sources of clean electricity its suppliers use in its environmental progress report: In 2022, 2% of suppliers were using onsite renewable electricity, 24% were buying renewable energy certificates, 66% were making renewable power purchases, and 9% were making direct investments in renewable energy projects.
100% of the electricity used in manufacturing of the watch is matched with 100% clean electricity, which means that Apple and its manufacturers have invested in enough renewable energy to cover the electricity footprint of what is used to make the Apple “carbon neutral” watch. In some cases, if the manufacturer has not yet reached 100% renewable energy, Apple will fill the gap by making enough investment in renewable energy projects to cover the total electricity footprint of what is used to make the “carbon neutral” watch. This kind of corporate clean electricity procurement math is its own complicated accounting framework, but is standard and has significantly improved the pace of renewable energy getting on the grid.
More than half of the shipping of products by weight is scheduled to be done with methods other than by airplane. Traveling by plane is currently one of the most carbon intensive methods of transportation.
The packaging for the watch is made with 100% recycled or “responsibly sourced” wood fibers.
Apple is also matching the expected electricity that customers use to charge their carbon neutral watches with investments in clean energy projects. Also, Apple advises users of when the energy on the grid they are using is the most clean so they can opt to charge their device when the electric grid is being charged with the most renewable energy.
Apple ought to be respected for these accomplishments, Sturcken at EDF told CNBC.
Sturcken has been at EDF for almost 27 years, leading partnerships with companies such as Airbnb, FedEx, Lyft, UPS and Walmart to reduce the emissions of their supply chains. EDF does not take money from the companies it works with, and Sturcken has not worked with Apple on its “carbon neutral” watch. Broadly speaking, though, Sturcken said, Apple is doing good work in its sustainability efforts. “They’re a leader,” Sturcken said. “They have a whole team. They get it. They’re focusing on the right things, in general.”
Any aluminum Apple Watch Series 9 with the new Sport Loop watch band is considered “carbon neutral.”
To compensate for the 22% of unabated residual emissions, Apple invests in what it deems to be high-quality carbon credits that restore grasslands, wetlands and forests.
Apple does this via its Restore Fund, an initiative that Apple launched with Conservation International and Goldman Sachs in 2021 that invests in protecting and restoring working native forests, grasslands and wetlands. Current projects are in Brazil and Paraguay and will restore 150,000 acres of forests and protect another 100,000 acres of forests, grasslands and wetlands.
The criticism of these kinds of forestry projects is that their climate mitigation impact is less permanent than the climate impact of releasing greenhouse gas emissions into the atmosphere to begin with.
“Apple relies on credits from carbon dioxide removal projects that restore forest, wetlands, and grasslands. Due to natural or human-induced disturbances such as forest fires, land degradation or land-use change, carbon storage in forestry and land-use projects is likely to only be temporary, and therefore in no way comparable with not having emitted greenhouse gases in the first place,” Reena Skribbe, a sustainable development expert at the nonprofit organization NewClimate Institute, told CNBC.
“The environmental integrity of carbon credits from carbon dioxide removals cannot be assured, thus carbon credits cannot be seen as a substitute to emission reductions,” Skribbe told CNBC.
Apple says the carbon credits it is investing in are carefully monitored, measured and tracked.
“We’re here to do the right work, not that easy work,” Sarah Chandler, Apple’s vice president of environment and supply chain innovation, told CNBC. “There are certainly wonderful nature-based carbon removal projects, and there are ones that are not as wonderful. And it is important to draw distinctions between the two and be very clear about the projects.”
What makes this debate more nuanced is that carbon credits can combat deforestation, and stopping deforestation is mission critical to meeting global climate goals, Sturcken told CNBC.
“Stopping deforestation is blaringly urgent right now,” Sturcken said. Planting new trees is helpful, “but more urgent than anything is stopping deforestation, because it takes so long for new trees to grow. And if we don’t do that, in the near term, we have a much harder road to get to a climate-stable future. So anything we can do to incentivize in a robust and high integrity way, that kind of investment by companies we should be doing.”
So, too, says Michael Ackerman, CEO of EcoForests Asset Management, a company that coordinated forestry investment in Latin America. He said carbon markets are right now “the wild, wild west,” as other disruptive industries such as bitcoin and social media have been. And from his perspective, combating deforestation should be an ultimate priority.
“Protecting one tree in one place does not stop another tree from being chopped down elsewhere,” Ackerman told CNBC. “However, protecting and managing swaths of forests prevents those sections of forests from being degraded and improves global carbon sequestration, enhances biodiversity, and mitigates the risk of wildfires.”
Any one of the aluminum Apple Watch Series 9 or SE with the new Sport Loop is considered “carbon neutral” by Apple.
Photo courtesy Apple
Forestry protection programs in low-income countries are particularly meaningful.
“Forest projects in areas such as South America, Southeast Asia, and Africa have greater impact on communities than projects in North America would. Communities in these countries tend to be impoverished and have high levels of unemployment,” Ackerman told CNBC. “Successful managed forest projects will provide economic stimulus to neighboring communities, by way of job creation and social assistance.”
But the forest-preservation registries are not effectively ensuring the quality of the carbon offsets, Haya told CNBC.
“My perspective is coming from a deep study of carbon offset quality over the last 20 years,” Haya told CNBC. “If the offset market was reliable, I might be saying something very different to you right now. But the background is that there’s excessive over-crediting throughout the offset market over so many project types over the last 20 years.”
Haya said she wishes Apple’s marketing team had stuck with advertising the very respectable 78% emissions reductions they have achieved and left out the “carbon neutral” verbiage altogether.
In fact, it may eventually become a legal vulnerability to call a product “carbon neutral.”
“The evidence against the impact of carbon credits is now so overwhelmingly clear that companies and crediting intermediaries — whose business models depend on these carbon credit markets — are reluctantly starting to move away from carbon neutrality labels,” Thomas Day, who analyzes carbon market mechanisms at the NewClimate Institute, told CNBC.
“An exodus from carbon neutrality claims has started, and companies that stay behind are increasingly exposed to legal peril and heightened consumer awareness that this is a dishonest approach,” Day told CNBC.
For now, Apple is holding fast.
“We do believe that there are ways to make good investments in nature-based carbon removal. And we believe that it is important to start doing that work today,” Chandler told CNBC.
Freedom Holding CEO Timur Turlov speaks during a press interview in Moscow, Russia, Oct. 10, 2019.
Maxim Shemetov | Reuters
Freedom Holding, a Nasdaq-traded Kazakh financial firm that’s been the target of prominent short sellers, is being investigated by federal prosecutors and Securities and Exchange Commission counsel over compliance issues, insider stock moves, and an offshore affiliate tied to sanctioned individuals, CNBC has learned.
The SEC’s Boston regional office has been probing Freedom for months, according to documents seen by CNBC and people familiar with the matter. The company, headquartered in Almaty, Kazakhstan, has a $5 billion market cap and is controlled and majority-owned by 35-year-old billionaire CEO Timur Turlov, a former Russian citizen.
The U.S. Attorney’s Office for Massachusetts is also making preliminary inquiries into Freedom, documents seen by CNBC show. Such inquiries often occur after a civil probe unearths evidence of possible crimes.
Freedom shares fell as much as 9.3% Friday morning after CNBC’s report.
The overlapping SEC and DOJ probes are scrutinizing the firm’s internal controls and offshore operations, as well as Turlov’s claims that Freedom can get its largely Russian client base access to hot U.S. IPOs, according to the documents and sources.
Turlov and Freedom are aware of the SEC probe, which has been going on for months, a person familiar with the matter told CNBC. The Justice Department’s involvement with these issues is more recent, documents show. Probes of this kind can take years and may not lead to criminal or civil charges. So far, there have been no formal charges or allegations of wrongdoing.
Turlov didn’t respond to CNBC’s interview request, but in an interview that was published by a Kazakh outlet Thursday, he acknowledged that “almost all global regulators came to us this summer.”
Freedom declined to comment.
An SEC spokesperson told CNBC that it doesn’t comment on the existence or nonexistence of an investigation.
A Justice Department spokesperson declined to comment.
The SEC has been aware of potential securities violations at Freedom since at least 2022. Some of the issues that caught investigators’attention —including allegations related to sanctions violations, IPO access and stock trading — were alsoraised in an August report from short seller Hindenburg Research, which claimed that Freedom “still does business in the Russian market, and that the company has openly flouted sanctions along with anti-money laundering (AML) and know-your-customer (KYC) rules.”
The SEC intensified its scrutiny after the Hindenburg report and an analysis published in April by short seller Citron Research, sources familiar with the matter told CNBC.
Freedom’s website describes the company as a provider of investment banking and brokerage services to Central Asia and Eastern Europe. Its website lists two addresses in the U.S., one in New York and the other at a Las Vegas co-working and virtual office space.
The company leases a 15,250-square-foot office in the Trump Building in New York’s Financial District, according to filings. The two floors house Freedom’s existing U.S. operations, including a brokerage firm registered with the Financial Industry Regulatory Authority. Freedom says in filings it has nearly 3,700 employees and 370,000 brokerage customers.
The Trump Building at 40 Wall St. in New York.
Jin Lee | Bloomberg | Getty Images
Turlov founded Freedom in 2010, and by 2013 he had expanded the business from Moscow to the EU. The company said it divested its Russian businessin February, almost a year after Russia launched its invasion of Ukraine. Turlov, a former citizen of Saint Kitts and Nevis in the Caribbean as well as Russia, owns 71% of Freedom shares, worth roughly $3.6 billion.
The Hindenburg report, in part, alleged that Freedom helped sanctioned individuals gain access to the U.S. financial system through a Belizean holding company, also owned by Turlov, that helped funnel and obfuscate transactions. In SEC filings, Freedom acknowledged it does business with sanctioned individuals through the Belize affiliate, but denies those individuals have access to U.S., U.K. or EU financial systems through Freedom.
The Belizean entity, incorporated in 2014, is now named Freedom Securities Trading Belize, or FST Belize.
“FST Belize, we have the same sanctions compliance as in the entire holding,” Turlov said in an August interview with a publication in Kazakhstan. “There is no reason for sanctions, if there is no involvement of U.S. representatives in the operation.”
FST Belizeholds Kazakh licenses that let it operate a securities trading platform and process international payments and money transfers, according to the company. In 2021, the Kazakh government added the subsidiary to a list of companies “with signs of illegal activity.”
In response, Freedom said it “fully complies” with local laws and regulations wherever it operates.
Anotherpoint of inquiry by U.S. authorities is the trading activity of Freedom stock, which was uplisted to the Nasdaq in 2019 under the ticker FRHC after previously trading over the counter.
Historically, negative reports from established short sellers will hurt a company’s stock. Freedom shares dipped about 8% the two trading days that followed Hindenburg’s report. They quickly rebounded, including a 25% jump on Aug. 18, with no apparent explanation.
Hindenburg alleged that Freedom and Turlov protected the company’s stock from wild swings by ensuring that clients held the shares in their brokerage accounts, reducing the risk of volatility.
At least five law firms have said they’re investigating claims on behalf of investors for potential violations of securities law since the Hindenburg report.
Citron compared Freedom to Sam Bankman-Fried’s failed and allegedly fraudulent trading firm, Alameda Research. The investment firm said Turlov’s ties to Russia and its continued brokerage operations in the country made the company a prime candidate for an SEC investigation.
Freedom Holding’s main offices are in Esentai Tower, the tallest building in Kazakhstan’s financial hub, the city of Almaty. Other tenants in the Skidmore, Owings & Merrill-designed building include the Ritz-Carlton Almaty and Ernst & Young’s Kazakhstan operations.
Andrey Rudakov | Bloomberg | Getty Images
Freedom has faced prior regulatory challenges.
In July, the company’s European subsidiary paid a 50,000 euro fine to the Cypriot securities regulator over failures in its money laundering and anti-terrorist financing controls.
And last year, Freedom’s former U.S. auditor, WSRP, was replaced by Deloitte Kazakhstan, after the U.S. audit regulator found that three of Freedom’s auditors at WSRP failed to follow proper standards of review. Freedom’s auditors were sanctioned and barred for what the regulatorsaid was a failure to assess the true nature of the company’s relationship with its Belize entity.
Those auditors are eligible to reapply for reinstatement. But WSRP stepped down as Freedom’s auditor. Deloitte Kazakhstan helped Freedom restate the prior auditor’s erroneous filings to the SEC and regain compliance with exchange rules, filings show.
Deloitte’s Kazakh office is just a few blocks away from Freedom’s headquarters, on the outskirts of Kazakhstan’s largest city and financial hub. Freedom is the only SEC-registered U.S. company that Deloitte Kazakhstan audits, according to Public Company Accounting Oversight Board records.
A view from Almaty’s Esentai Tower, where Freedom’s head offices are. The offices of Deloitte Kazakhstan, Freedom’s latest auditor, can be seen in the distance, near the building with a green illuminated sign.
Wwd | Penske Media | Getty Images
“First thing to consider is that the company has been audited by the largest big-4 auditor, Deloitte,” Turlov said, in his response to Hindenburg’s report.
Deloitte and Roman Sattarov, the Deloitte partner overseeing Freedom’s audit, didn’t respond to CNBC’s request for comment.
Freedom is still trying to expand in the U.S. In February, the company agreed to pay $400 million, primarily in stock, for middle-market investment bank Maxim Group. Maxim has worked on IPOs for many smaller companies and has been part of bigger deals, such as PIMCO Access Income Fund’s $866 million offering in 2022.
Turlov isn’t letting the U.S. probes keep him away. He traveledto New York last month.
“This week talking to our US office, partners and regulators,” he wrote in a Sept. 25 post on X, the social media platform formerly known as Twitter.
A spokesperson for Turlov said he was “definitely not meeting with regulators.”
In Turlov’s interview published Thursday in Kazakhstan, he didn’t say which U.S. regulators approached the company, but said it all stemmed from Hindenburg’s report, which he called “misinformation.”
A woman crossing a normally busy stretch of downtown San Francisco suffered serious injuries Monday night after a hit-and-run driver struck her, throwing her into the path of an oncoming driverless Cruise car, which then ran her over, according to video recorded by the autonomous vehicle that Cruise showed to the NBC Bay Area Investigative Unit.
Courtesy NBC Bay Area
A San Francisco woman was seriously injured after a hit-and-run driver struck her Monday evening, hurling her underneath the autonomous Cruise vehicle.
Police responded around 9:30 pm to a hit-and-run incident at the intersection of Fifth and Market Streets, San Francisco police told CNBC. The force of the impact hurled the pedestrian in front of a Cruise vehicle, which applied the brakes “aggressively” and remained in place at the request of police, a Cruise spokesperson and San Francisco police said.
Police rendered aid at the scene before medics transported the woman to the hospital, the police said.
“Our heartfelt concern and focus is the wellbeing of the person who was injured and we are actively working with police to help identify the responsible driver,” a Cruise spokesperson told CNBC. The Cruise vehicle did not have a passenger in it.
Police haven’t found witnesses as of Tuesday morning, NBC Bay Area reported, but Cruise vehicles have numerous cameras inside and outside the vehicle and captured much of the incident. CNBC reviewed footage from the incident, which shows both the Cruise vehicle and the hit-and-run car driving along Fifth Street.
A woman crossing a normally busy stretch of downtown San Francisco suffered serious injuries Monday night after a hit-and-run driver struck her, throwing her into the path of an oncoming driverless Cruise car, which then ran her over, according to video recorded by the autonomous vehicle that Cruise showed to the NBC Bay Area Investigative Unit.
Courtesy NBC Bay Area
The hit-and-run driver struck the pedestrian as both cars were crossing Market Street. The pedestrian did not appear to be using a marked crosswalk. The woman was thrown across the hit-and-run vehicle into the right lane where the Cruise vehicle was driving. The Cruise vehicle came to an immediate stopafter the impact. NBC Bay Area reported that the woman was trapped underneath the left rear axle of the vehicle and that San Francisco Fire was forced to use the “jaws of life” to extricate her.
First responders told NBC Bay Area that the woman suffered multiple traumatic injuries and was transported to Zuckerberg San Francisco General Hospital. San Francisco police said the pedestrian’s status is unknown.
U.S. President Joe Biden makes a statement to the news media ahead of a cabinet meeting at the White House in Washington, U.S.
Leah Millis | Reuters
The Biden administration warned Beijing of its plans to update rules that curb shipments of AI chips and chipmaking tools to China as soon as early October, a U.S. official said, a policy decision aimed at stabilizing relations between the superpowers.
The Commerce Department, which oversees export controls, is working on an update of export restrictions first released last year. The update seeks to limit access to more chipmaking tools in line with new Dutch and Japanese rules, other sources said, and to close some loopholes in export restrictions on artificial intelligence (AI) chips.
“The PRC has been expecting an update around the one year anniversary, based on conversations with administration officials,” the U.S. official said, using the abbreviation for People’s Republic of China. The original rules were published Oct. 7, 2022.
U.S. officials provided the information to Chinese counterparts in recent weeks, the official said, which Reuters is reporting for the first time. The official declined to disclose details on the particular conversations.
Providing China with a heads up about the rules is part of a broader bid by the Biden administration to stabilize relations with Beijing. The outreach comes after a decision by the U.S. to shoot down a Chinese spy balloon sharply escalated tensions in February.
The Biden administration has also sent a series of high-level officials to China, including Commerce Secretary Gina Raimondo in August. Additionally, National Security Advisor Jake Sullivan held talks with Chinese Foreign Minister Wang Yi in September.
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The restrictions released last October sought to prevent U.S. technology from being used to strengthen the Chinese military by cutting off its access to advanced AI chips and curbing its ability to import the most sophisticated chipmaking tools from the United States.
The Department of Commerce declined comment, while a spokesperson for the Chinese embassy in Washington had “nothing to offer,” when asked for comment on the warning.
“China firmly opposes the U.S.’s overstretching of the national security concept and abuse of export control measures to wantonly hobble Chinese enterprises,” said spokesperson Liu Pengyu.
Former White House official Peter Harrell stressed that he did not know if the administration had warned China about the new rules, but said, if they did, it would represent “a bit of an inflection point” for the administration as it tries to avoid sending misunderstood signals.
Treasury Secretary Janet Yellen also gave Chinese officials a warning in July about restrictions on U.S. investment in China released in August.
The Biden administration is hoping to clinch Chinese President Xi Jinping’s attendance at the Asia-Pacific Economic Cooperation (APEC) summit in San Francisco in November, too, an effort which also has weighed on the timing of the upcoming export rules’ release.
Officials have sought to avoid publishing them in the immediate lead-up to the summit, which they saw as potentially jeopardizing Xi’s attendance, sources said. Any rules not ready for publication by early October would likely be held until after the summit to avoid antagonizing China, they noted.
“The Administration narrowed in on or near the one-year anniversary for a number of reasons – including to establish a clear cadence,” the official said.
But, the official added, the technical work needed to finalize the restrictions was not yet complete. “As of this moment, final plans are not in place,” the official said on Friday.
Biden and Xi have not met in person since a G20 summit on Indonesia’s resort island of Bali in November last year after Xi shunned the G20 meeting in India last month.
The United States, the Netherlands and Japan, which together control the world’s top chipmaking equipment, agreed to coordinate efforts earlier this year.
The upcoming U.S. rules could hit ASML, the world’s leading chip equipment maker and Netherlands’ largest company, because its systems contain U.S. parts and components, as Reuters exclusively reported in June.
A spokeswoman for ASML declined comment.
It is not unusual for the U.S. to modify proposals before clearing regulations, so the restrictions, like the timing, could change.
Microsoft CEO Satya Nadella arrives at federal court on October 2, 2023 in Washington, DC. Nadella is testifying in the antitrust trial to determine if Alphabet Inc.’s Google maintains a monopoly in the online search business, which is expected to last into November.
Drew Angerer | Getty Images
When it comes to online search, it’s Google’s web and everyone else is playing in it, according to rival Microsoft.
That was the essence of Microsoft CEO Satya Nadella’s testimony in federal court on Monday as part of the government’s antitrust trial against Google. Nadella told the court that Google’s dominant market share in online search means that publishers and advertisers shape their content to Google’s requirements, making it harder for competitors like Microsoft’s Bing to gain a foothold.
“Everybody talks about the open web, but there is really the Google web,” Nadella said from the stand in Washington, D.C., District Court. Nadella was referring to the way publishers often cater their content and advertising to Google’s products, like by optimizing their pages for how Google ranks search results.
Nadella was questioned by lawyers for the Department of Justice and a coalition of state attorneys general who are suing Google for allegedly violating antitrust laws by illegally maintaining a monopoly in the general search market. The government argues that Google locked up distribution channels for general search engines through exclusive deals with browser and phone makers to be the default choice on various devices. Perhaps the most famous of those deals is the multibillion-dollar agreement between Google and Apple to make Google search the default on Apple products like the iPhone.
The government has tried to make the case that Google’s dominance, aided by these exclusive deals, creates a flywheel effect, where greater exposure to users leads to more data to make Google’s search results better and attracts more advertisers to the product. That, in turn, generates more revenue that can be used to fund these massive distribution deals.
Meanwhile, the government argues, it becomes even harder for rivals to breakthrough to consumers, and as a result, they miss out on the opportunity for greater benefits or innovations in search.
Nadella affirmed that argument in his testimony Monday, describing the obstacles a general search competitor like Bing faces to gain more market share from Google.
Google declined to comment on Nadella’s testimony.
Microsoft was prepared to take on billions of dollars in short-term losses for Bing to pay Apple enough to make its search engine the default on Apple products, Nadella testified. Not only would Microsoft have to replace the revenue Apple currently receives from Google for default placement, which Bernstein has estimated could be as much as $19 billion this year, Nadella said it would also need to cover the risk Apple would take on by switching the default.
Nadella has “focused every year of my tenure as CEO to see if Apple would be open” to accepting a default offer from Microsoft and they’ve had “a series of dialogues on it.”
The Microsoft CEO said he recognized the reputational risk of switching the default but pointed to an example from Apple’s own history as to why he believed it could be overcome. When Apple first launched its maps app, it was widely panned as inaccurate or incomplete. But after a period of “turbulence,” Nadella said, it’s become popular, in large part due to the fact that Apple makes it the default on its phones.
Williams & Connolly’s John Schmidtlein, representing Google, referenced a document during cross-examination that said Bing’s share on Windows was roughly 24%. Schmidtlein asked why Nadella thought that percentage would convince Apple to switch its Safari default to Bing, given Bing was able to have “100% distribution” on Microsoft Windows.
Nadella said the most important thing was showing that Bing could hold on to users with defaults, despite Google’s dominance. He said that argument “was the only reason they kept engaging,” referring to Apple.
If Apple were to strike a deal with Microsoft, it may choose to use Bing’s technology while branding it as its own Apple search engine, he said.
Schmidtlein also walked Nadella through past attempts Microsoft has made to make Bing the default on various mobile devices, which were met with public criticism or resulted in many consumers switching to Google anyway. For example, he brought up a 2010 Washington Post article that criticized the decision to make Bing the default search engine on a new Android phone offered by Verizon at the time.
But Nadella said that kind of feedback actually informed his later conversations with Apple while seeking to make Bing the default on its devices, because he was clear-eyed about the challenges both companies would initially need to navigate should such a deal occur.
Throughout his testimony, Nadella discussed why Microsoft has chosen to stay in search despite the difficulties, describing how the company is remaining persistent and continuing to wait for the right opportunity to shake up the market.
The tech company wants to “make search more competitive,” Nadella said, by running it like a “public utility.”
The idea that users have complete choice to switch their defaults is “complete bogus,” Nadella said, adding that changing default settings on mobile platforms is difficult because “they’re all locked up.”
Becoming the default isn’t just about getting an influx of new users. It also involves getting more signals from users about what they’re searching and clicking on. That sort of information can help inform decisions at the search engine to make the results more useful and tailored to users’ needs.
Even though Microsoft remains, as Nadella put it, a “very, very low-share player,” in the general search market, he said the company still believes there’s an opportunity to innovate in what he sees as the “largest software category out there.” He said that when he became CEO in 2014 he focused on making Bing profitable to continue making investments, which it now is.
While maintaining its low-share position, Nadella said he awaits a “paradigm shift” that could create a window of opportunity for Bing, like the one created for Google by the concessions resulting from Microsoft’s own antitrust challenge from the government at the turn of the century.
In the meantime, Nadella estimated that Microsoft has invested about $100 billion in Bing over the past 20 years.
“It’s a hard game to make any breakthroughs, but no one can accuse us of not being persistent,” Nadella said.
Building a new rival from the ground up is very difficult because it involves both fixed costs and costs that scale up as you gain market share, Nadella said. In Silicon Valley, internet search is considered one of the biggest “no fly zones,” he added.
The one place Bing has seen some success is in desktop search, in large part because it’s able to set Bing as the default on its Edge browser, which many PC manufacturers choose to preinstall to receive a discount on licensing Microsoft’s software.
Even there, however, many users opt to use Google’s Chrome browser and its search engine on Windows devices. Nadella said Google’s position on Windows desktops shows how open Microsoft’s own ecosystem is. He admitted, though, that Google is still the most commonly queried word on Bing.
Still, questioning by Google’s lawyer seemed to drive at the idea that Microsoft did not sufficiently invest in mobile search, pointing to emails where executives estimated Google had many more people working on mobile search than Microsoft did. Nadella said he focused resources where they could gain the most traction, like on desktop, and greater distribution would help justify greater expenditure.
Later asked by a government lawyer why Google would pay so much if it were the case that it would retain more Safari search queries even if Bing were the default, Nadella said he’d “love an opportunity” for Google not to have to pay.
“Maybe on behalf of the Google shareholders,” he added.
The state AGs are also seeking to show that Google leveraged its search ad tools to disadvantage rivals like Bing by failing to make them sufficiently interoperable with other products. Microsoft has sought to make it so advertisers can move their campaigns seamlessly between Google and Bing’s search ad tools, but Google hasn’t been receptive, Nadella said.
Though Nadella said he doesn’t remember exactly where everything stands in their discussions, he summarized it as, “We keep asking for them to add some features that we want and I think they ask us to go pound sand.” He said the integration issues with Google’s Search Ads 360 “keeps coming up in escalations” to him.
Through advertiser roundtables, Nadella said he’s found that many believe there’s an opportunity cost they have to weigh between investing time and money into Bing versus Google’s platform, given it’s not as easy as it could be to transfer campaigns, and Google has the bigger audience.
As artificial intelligence becomes increasingly prevalent in search, Nadella said he worries that Google will leverage its position to block off even more avenues to rivals. Microsoft has begun integrating ChatGPT into its Bing search results through its partnership with OpenAI and is a leading player in the space, alongside Google. But despite the early progress, Nadella says he worried about being cut off from key datasets that could be used to train the technology.
“I worry a lot, even in spite of my enthusiasm, that there is a new angle with AI,” Nadella said. “I worry a lot that this vicious cycle I’m trapped in can become even more vicious.”
That’s because Google could seek to make it so that content in its search engine and on its video platform YouTube are exclusively used to train its own AI large language models (LLMs).
Competing with Google’s core economic advantage will “become even harder in the AI age,” Nadella said.
He said he’s wondered if AI will make it “even worse of a nightmare to make progress in search because there’s a new avenue to lock up — the thing that basically feeds the power of these LLMs, which is content.”
Apple CEO Tim Cook greets customers purchasing Apple’s new iPhone 15 during a launch event at the Fifth Avenue Apple Store in New York City on Sept. 22, 2023.
Alexi Rosenfeld | Getty Images
Apple said on Saturday that it will issue a software update that would address customer complaints about the latest iPhone 15 models, released just over a week ago, running hot.
Apple said that the new iPhone models were running hot because of a combination of bugs in iOS 17, bugs in apps, and a temporary set-up period.
An Apple spokesperson told CNBC:
“We have identified a few conditions which can cause iPhone to run warmer than expected. The device may feel warmer during the first few days after setting up or restoring the device because of increased background activity. We have also found a bug in iOS 17 that is impacting some users and will be addressed in a software update. Another issue involves some recent updates to third-party apps that are causing them to overload the system. We’re working with these app developers on fixes that are in the process of rolling out.”
After Apple released the new iPhone 15 models earlier this month, user complaints on Apple’s forums, Reddit, and social media suggest that all four models can get hotter than expected during use. CNBC’s review of the new iPhone Pros also noted the iPhone 15 Pro Max got hot.
“I just got the iPhone 15 Pro today and it’s so hot i can’t even hold it for very long!” wrote one commenter on Apple’s forums.
Apple’s new high-end models, the $999 iPhone 15 Pro and $1,199 iPhone 15 Pro Max have a redesigned titanium enclosure with an aluminum frame to make them easier to repair. The problem with the new models overheating was not related to the titanium chassis design, Apple said.
Instead, Apple points to bugs with specific apps and a bug in iOS that can be fixed with software updates. Apple said that a forthcoming iOS 17 update to address the issue won’t reduce the performance of the devices.
Apple’s website says that users may notice phones feeling warmer when they’re set up from a backup, when they’re wirelessly charging, using graphics-heavy apps or games, or streaming high-quality video. Apple says that it’s normal for devices to be warm when they’re being heavily used, and if iPhones don’t display a temperature warning, they’re safe to use.
People wait in line to enter an Apple Store in New York, as the iPhone 15 is introduced, September 22, 2023.
Scott Mlyn | CNBC
So far, the new iPhones appear to be selling well, with ship times for the devices sometimes stretching out for weeks, and long lines appearing in front of Apple stores on launch day.
“Interestingly, lead times for the 15 Pro Max, 15 Plus and 15 are tracking more elevated relative to their predecessors (e.g., iPhone 14 Series), and the 15 Pro Max is boasting the highest lead time we have seen historically across all SKUs since we have been tracking lead time data,” JPMorgan analysts wrote in a note last week.
But one notable Apple supply chain analyst, Ming-Chi Kuo, said last week in a blog post that the iPhone 15’s heat problem could hurt sales.
Apple has faced high-profile launch issues in the past but they haven’t seriously impacted the company’s long-term outlook.
The iPhone 4, launched in 2010, had a design flaw that could lead to calls being dropped. Apple offered free cases to ameliorate the problem. In 2012, shortly after the launch of the iPhone 5, Apple CEO Tim Cook apologized for Apple Maps being buggy and unreliable. The iPhone 6 released in 2014 was criticized for bending under pressure.
Andrew Bosworth, Chief Technology Officer of Facebook, speaks during Meta Connect event at Meta headquarters in Menlo Park, California on September 27, 2023.
Josh Edelson | AFP | Getty Images
At Meta’s annual Connect conference this week focused on virtual reality and the metaverse, one word was on everyone’s lips: Apple.
Meta CEO Mark Zuckerberg was enthusiastic in debuting his company’s Quest 3 VR headset, which starts at $499 and will begin shipping in October. His company touted the growth of its VR app store — Quest Store — which has generated $2 billion in sales since its debut in 2019, up from the $1.5 billion the company announced last year during the conference.
The big difference this year from the event in 2022 is that attendees have a much clearer picture of Apple’s upcoming entry into the VR market.
The iPhone maker in June announced its Vision Pro mixed-reality headset at an eyepopping price of $3,499 when it goes on sale next year. While it’s Apple’s first major foray into VR, the company’s longtime dominance in premium consumer devices and its winning reputation in hardware has created a buzz that was missing from Meta’s prior industry events.
VR and mixed reality are expected to remain niche markets for years to come, but conversations with nearly a dozen attendees who gathered at Meta’s Menlo Park, California, headquarters this week show the tone is changing for developers and VR companies regarding the potential for an expanding industry.
“There’s curiosity for sure with Apple entering the market,” said Tom Symonds, CEO of the UK-based VR firm Immerse. “Apple has always been able to marry the hardware and the software in a seamless way.”
Prior to Apple’s Vision Pro announcement, the VR industry was going through a bit of an identity crisis, with venture capitalists pulling back their investments alongside the drop-off in Web3 and related crypto projects. Meanwhile, Meta has been losing billions of dollars a quarter building its vision of a metaverse, and Zuckerberg has shown no interest in slowing down, frustrating many Wall Street investors who see only mounting costs.
Apple CEO Tim Cook stands next to the new Apple Vision Pro headset.
Even though Apple’s product won’t go on sale for months and it’s unclear how many people will want it or be able to buy it, the company’s entry has given a sense of legitimacy to some of Meta’s efforts.
In addition to showing off its latest headset this week, Meta debuted the newest version of its Ray-Ban smart glasses, developed with EssilorLuxottica. The new glasses, which will cost $299 when they’re available to purchase on Oct. 17, use Meta’s artificial intelligence software via a smartphone so people can identify landmarks or translate signs when looking at various objects.
It would have been a “big loss of confidence” if Meta stopped investing heavily to push the VR market forward, said Aneesh Kulkarni, chief technology officer of the VR training firm Strivr.
“Meta is pushing the bar, and who has the money to push the bar?” Kulkarni said.
He added that while $2 billion of app store sales “may not sound like a lot compared to the Apple store,” it’s a big and important number. Apple has a giant marketplace — $1.1 trillion in developer billings and sales in 2022 — because of the popularity of iPhone and iPad apps.
Josette Seitz, a mixed-reality developer for the social impact company Baltu Technologies, said Apple could have an advantage courting businesses that already use its products, like those that employ iPads to help conduct maintenance and other related services. A company that currently supplies field workers with iPads for inspections or similar tasks could conceivably make the easy transition to the more immersive Vision Pro because of the devices’ interoperability, she said.
At its high price point, the Vision Pro will likely be more of a product for businesses, Seitz said. Regardless, it’s important to have more entrants in the market.
“There shouldn’t just be one company,” she said. “We can’t have this be a monopoly system.”
Gaspar Ferreiro, a developer with the VR firm Coal Car Studios, called the Vision Pro’s price “insane” and said Apple is taking a “big gamble.”
“Enterprises will absolutely take the gamble,” Ferreiro said, noting some businesses will splurge on Apple devices because of the company’s reputation and prestige.
Meta still faces its own challenges. The company has struggled to bring VR into the mainstream despite a yearslong head start, and Ferreiro isn’t sure that the Quest 3’s improvements over the Quest 2, which is $200 cheaper, will be enough to win new customers who aren’t industry insiders or developers.
“The general consumer is probably going to be faced with a conundrum, do I spend another $200 on this other device?” Ferreiro said.
One of the Quest 3’s biggest improvements over the previous version is its so-called “passthrough” feature, which converts a person’s field of vision into a digital format, thus allowing computer visuals to be overlaid on to the physical world. Looking at physical surroundings using the Quest 2 proved to be a blurry experience that lacked color, but with the Quest 3 it’s much clearer and should be more enjoyable to use.
For developers, Ferreiro said, that translates into the ability to create more compelling content and visually attractive experiences that integrate the physical and digital worlds.
Jeffrey Morin, CEO of the Litesport VR fitness service, said the Quest 3 is priced “just outside of my comfort zone for, like, me buying my kid a Christmas gift.”
But he agrees that improved passthrough is very valuable and was crucial for the company’s upcoming mixed-reality app it created for Xponential Fitness that will let users work out with real personal trainers who can be virtually beamed into their living rooms.
As far as working with Apple, Morin said Litesport will look for ways to develop for the Vision Pro as it evolves and the price potentially drops to between $1,000 to $1,500 in the future. Initially, the price is too high and the Vision Pro will require users to wear a battery pack, creating an added nuisance during a workout.
The advantage Apple offers is a base of customers who “are going to be way more likely to pay for a subscription,” providing a recurring source of revenue, he said. Based on Morin’s experience thus far, most current Quest users are gamers who are more accustomed to making one-time app purchases.
Morin said that even though Apple’s product isn’t out yet, he noticed an increase in the number of people using Litesports’ VR fitness apps once it was announced, underscoring the VR community’s overall excitement.
“They fired up their headsets and they’re, like, let me see what’s out there again,” Morin said.
Ultimately, Apple’s move into VR is proof that it’s not just an ambitious Facebook side project.
“It’s not like Mark’s little toy anymore,” Morin said. “Now it’s everyone’s.”
Brian Armstrong, chief executive officer of Coinbase Global Inc., speaks during the Messari Mainnet summit in New York, on Thursday, Sept. 21, 2023.
Michael Nagle | Bloomberg | Getty Images
Coinbase CEO Brian Armstrong is unhappy with JPMorgan Chase’s decision to block crypto-related transactions at its U.K. digital banking subsidiary, Chase UK.
Chase UK earlier this week put out a notice to customers saying it will no longer allow its customers to purchase cryptocurrencies using its debit cards or through bank transfers, citing concerns over the risk of fraud to users from digital tokens.
The bank, which has operated as a standalone entity in the U.K. since 2021, said it was taking the step because “fraudsters are increasingly using crypto assets to steal large sums of money from people.”
“Once in a while we see a bank in the world that decides they want to de-platform this whole industry,” Armstrong said in an interview with CNBC’s “Squawk Box” on Thursday.
“I don’t think that’s OK. I don’t think that’s the rule of things in our society. I think the government should decide what is allowed and what’s not.”
The move from Chase UK has not happened in a vacuum. Other British lenders have taken similar steps to bar crypto transactions, citing the risk of fraud.
Examples include NatWest, which placed limits on the amount of cash that can be sent to crypto exchanges, and HSBC, which banned crypto purchases altogether.
In its note to customers Tuesday, Chase UK said that it was blocking the use of crypto by its customers due to concerns over a rise in fraud.
Data from Action Fraud, the U.K. fraud reporting agency, shows that U.K. consumer losses to crypto fraud increased by over 40% in the last year, surpassing £300 million for the first time.
Bitcoin, ether, XRP and other cryptocurrencies are not legal currency.
Originally created as an alternative, online form of money meant to bypass the need for bank accounts and other financial middlemen, they have increasingly been embraced by mainstream financial institutions such as PayPal, Visa, and Mastercard.
The people transacting in bitcoin and other digital currencies don’t disclose their real identity, making it harder for banks to trace them for suspicious payments versus digital fiat currency transactions.
Nevertheless, crypto’s proponents say that the industry has matured a great deal in the wake of the collapse of FTX and numerous other scandals. They say it can become part of everyday payments and trading in a way that is legitimate.
For its part, the U.K. has been working to develop legislation that would regulate retail trading in crypto assets.
The Financial Services and Markets Bill is one example of legislation that already includes some provisions on cryptocurrency. That specific law aims to bring crypto assets into the regulatory fold. But it is not a comprehensive law addressing crypto through tailored laws.
Jurisdictions around the world from Dubai to Singapore have been trying to position themselves as crypto-friendly places to encourage firms to set up shop there.
The U.S., meanwhile, has taken a hard line on cryptocurrency firms with its regulators stepping up enforcement action against companies.
Armstrong suggested that the U.K. government should take heed of Chase UK’s move to ban crypto payments — though he acknowledged the country’s ambition to become a “Web3 and crypto hub.”
“The government in the U.K. through [U.K. PM] Rishi Sunak and Andrew Griffith the city minister in London have it made clear they want to make the U.K. a Web3 and crypto hub,” Armstrong said.
“They are trying to attract businesses there. I was disappointed to see Chase UK’s stance on that. I hope that was a misunderstanding that will be clarified in the coming weeks.”
Shares of AMD rose 5% Thursday, a day after Microsoft’s technology chief said the chipmaker is bolstering its position in artificial intelligence, where Nvidia dominates.
So far this year, Nvidia shares have almost tripled while AMD is up about 60%. Since the launch in late 2022 of OpenAI’s ChatGPT chatbot, the tech industry has been swarming to new large language models, which require hefty processing power.
Nvidia’s graphics processing units are handling so much of those workloads that the company is forecasting 170% year-over-year revenue growth in the current quarter. AMD announced in June that during the third quarter, it would start sampling its MI300X chip with clients. Those GPUs were designed specifically for AI models.
“They’re making increasingly compelling GPU offerings that I think are going to become more and more important to the marketplace in the coming years,” Kevin Scott, Microsoft’s chief technology officer, said at the Code Conference in Dana Point, California, on Wednesday.
Microsoft and AMD are longtime partners, and it’s in Microsoft’s interest to have more high-powered chips on the market from a broader set of vendors. For years, Microsoft has offered some AMD GPUs to its Azure cloud customers, in addition to powering some of its computers and its Xbox consoles with AMD chips.
In May, AMD said Microsoft had started offering a cloud networking service to clients, drawing on the chipmaker’s Pensando products.
At Code, The Verge’s Nilay Patel asked Scott how easy it would be to adopt AMD’s GPUs at scale and move away from Nvidia. Scott declined to answer directly, saying that developers using the AI programming tools shouldn’t need to think about the hardware under the hood.
Scott did note that “competition is certainly a very good thing.”
Bloomberg reported in May that AMD was working with Microsoft on a custom AI chip, but Scott declined to say if that’s actually happening. Microsoft’s cloud rivals Amazon and Google have developed homegrown silicon.
The days of easy money are over as entrepreneurs face a funding winter amid a slowing global economy — and start-ups in India are not exempt.
According to a local report, venture funding came in at $2.19 billion from January to March, dropping from the $11.34 billion invested in the same quarter last year.
However, there are sectors that have “demonstrated resilience amid challenging times,” said Pooja Chhabria, LinkedIn APAC’s head of editorial.
“The rise of edtech also underscores the continued demand for upskilling among professionals and students, especially with rapid changes due to technologies such as AI.”
This is reflected in the “LinkedIn Top Start-ups 2023″ list for India — which is dominated by fintech-related firms but also includes two new edtech entrants.
There are 14 new entrants this year, which is “a reflection of a booming entrepreneurial ecosystem and a spirit for innovation,” Chhabria added.
In compiling the list, LinkedIn drew on in-house data, measuring start-ups based on four aspects: employment growth, jobseeker interest, engagement, and ability to attract talent from LinkedIn’s top companies.
To be eligible, companies had to be headquartered in India and have 50 or more employees. LinkedIn said it also lowered its age criteria from seven years or younger, to five years and below to “feature more companies in their earlier, venture stages of growth.”
Here’s the full list of India’s top start-ups for 2022, according to LinkedIn:
Most common skills: Machining, aerospace engineering, manufacturing operations
Skyroot Aerospace was founded four years ago by engineers and former scientists from the Indian Space Research Organization. In 2022, it became the first private Indian company to launch a rocket into space. Skyroot Aerospace told Reuters that it’s expecting at least two launches in 2024, following the success of India’s Chandrayaan-3 mission.
Audio series platform Pocket FM offers audio entertainment across multiple genres and Indian languages in its library with more than 100,000 hours of content. According to the company, it serves around 80 million listeners globally.
Most common skills: Communication, business management, advertising
Founded in 2018, this fintech start-up helps users compare insurance plans, understand policies and buy insurance through its online platform. According to LinkedIn, Ditto Insurance is looking to hire “hundreds of freshers” in the coming year.
Most common skills:Development tools, business management, data science
BluSmart offers electric ride-hailing services in Delhi NCR and Bengaluru with its 4,500-strong electric car fleet. Founded in 2019, the start-up said it will be using its latest cash injection of $42 million toexpand this fleet to 10,000 cars by the end of this year and invest in more charging stationsacross India.
An uncaptioned image posted on the company’s website appears to show Starshield technology in orbit.
SpaceX
The Pentagon has awarded Elon Musk’s SpaceX its first confirmed contract for the Starshield network it’s developing, a military-specific version of the company’s Starlink satellite internet system, the defense agency said Wednesday.
A Space Force spokesperson confirmed that SpaceX on Sept. 1 was awarded a one-year contract for Starshield with a maximum value of $70 million. The award came alongside 18 other companies through a program run by the Space Force’s commercial satellite communications office.
“The SpaceX contract provides for Starshield end-to-end service (via the Starlink constellation), user terminals, ancillary equipment, network management and other related services,” Space Force spokesperson Ann Stefanek told CNBC.
SpaceX did not immediately respond to CNBC’s request for comment on the Starshield contract.
The company unveiled Starshield last year as a new business line. The Pentagon is already a high-value buyer of the company’s rocket launches and had shown increasing interest in its Starlink satellite internet.
SpaceX has given few details about the intended scope and capabilities of Starshield. It markets the service as the center of an “end-to-end,” dedicated offering for national security with capabilities distinct from its Starlink consumer and enterprise network.
SpaceX’s award for Starshield follows its June win of a Pentagon contract to buy an undefined number of Starlink ground terminals for use in Ukraine.
The initial phase of the Starshield contract obligates $15 million to SpaceX by Sept. 30, to provide services that support 54 military “mission partners” across Department of Defense branches, the spokesperson said.
Signage outside a Chase bank branch in San Francisco, California, on Monday, July 12, 2021.
David Paul Morris | Bloomberg | Getty Images
Chase UK, the British challenger bank brand of JPMorgan, has blocked customers in the U.K. from purchasing crypto assets.
The company said in a statement Tuesday that, starting Oct. 16, Chase UK customers would “no longer be able to make crypto transactions via debit card or by outgoing bank transfer.”
“Customers will receive a declined transaction notification if they do attempt to make a crypto-related transaction,” the bank said in an email to clients.
“This has been done to protect our customers and keep their money safe.”
The company said it was taking the step because “fraudsters are increasingly using crypto assets to steal large sums of money from people.”
Chase UK cited data from Action Fraud, Britain’s fraud reporting agency, that showed U.K consumer losses to crypto fraud increased by over 40% in the last year, surpassing £300 million for the first time.
Crypto scams accounted for more than 40% of all reported crimes in England and Wales last year, according to the Office for National Statistics, Chase UK said in the customer email.
Chase UK is the latest bank in the country to take steps to limit the ability of their customers to purchase cryptocurrencies.
NatWest imposed limits on its customers which meant they could only send a maximum of £1,000 per day and £5,000 over a 30-day period to crypto exchanges, in an effort to tackle the rise in fraud attempts involving crypto.
HSBC and Nationwide have announced similar restrictions on crypto-linked purchases.
“We’re committed to helping keep our customers’ money safe and secure,” a Chase spokesperson told CNBC via email Tuesday.
“We’ve seen an increase in the number of crypto scams targeting U.K. consumers, so we have taken the decision to prevent the purchase of crypto assets on a Chase debit card or by transferring money to a crypto site from a Chase account.”
