GOOGL, +0.86%
and become the third-largest U.S. public company upon Friday’s close, after its results were well received by Wall Street and Alphabet’s earlier in the week got panned.
Amazon edged out Alphabet only barely, with a closing market cap of $1.785 trillion compared with $1.777 trillion for Alphabet, according to Dow Jones Market Data.
The e-commerce giant hadn’t been valued above the Google parent company since Sept. 30, 2022, according to Dow Jones Market Data. That was also the last time Amazon was the third-largest by market cap.
Wall Street found plenty to like in Amazon’s latest report, including drastic improvement in operating income, upbeat commentary on the cloud and momentum within the retail business. Meanwhile, Alphabet’s earnings were met with a chillier reception as the company talked up heavy spending plans linked to its artificial-intelligence ambitions.
The very top of the market-cap ranks has changed up as well lately, though admittedly with less of a tie to earnings. Microsoft Corp.’s MSFT, +1.84%
closing valuation surpassed Apple Inc.’s AAPL, -0.54%
on Jan. 12 for the first time since November 2021. While the two traded around the top spot in January, Microsoft has been sitting there since Jan. 25.
Total revenue was $86.3 billion, up 13% from $76 billion a year ago. Sales minus total acquisition costs (TAC) came in at $72.3 billion, compared with $63.1 billion a year ago.
Alphabet reported fourth-quarter net income of $20.7 billion, or $1.64 a share, compared with net income of $13.6 billion, or $1.05 a share, in the year-ago quarter.
“We are pleased with the ongoing strength in Search and the growing contribution from YouTube and Cloud. Each of these is already benefiting from our AI investments and innovation. As we enter the Gemini era, the best is yet to come,” Alphabet Chief Executive Sundar Pichai said in a statement announcing the results.
Analysts surveyed by FactSet had expected on average net earnings of $1.59 a share on revenue of $85.3 billion and ex-TAC revenue of $71.2 billion.
Google’s total advertising sales climbed to $65.5 billion from $59 billion a year ago, edging analysts’ average expectations of $65.8 billion. YouTube ad sales rose to $9.2 billion from $7.96 billion a year. Google Cloud rang up $9.2 billion in sales, up from $7.3 billion.
Alphabet is also ramping up AI initiatives to improve operational efficiency and productivity for 2023 and beyond. The company is using AI in its finance organization and analytics, but Alphabet did not break out AI revenue in Tuesday’s earnings report.
Alphabet Chief Financial Officer Ruth Porat told CNBC that gen-AI will be a focus of the call with analysts now taking place.
Shares of Google have climbed 53% over the past 12 months. The S&P 500 index SPX
has risen 21% the past year.
“‘You’ve decided to rip off fans by exclusively broadcasting tomorrow’s Chiefs vs. Dolphins wild-card game on Peacock. For the first time ever, fans will be forced to choose between signing up for yet another expensive streaming service or missing out on a major playoff game.’”
That was part of a letter that Rep. Pat Ryan penned to leaders of the NFL and NBC Sports lamenting that an NFL playoff game this weekend will be available via steaming only for the first time.
“How much more profit do [NFL commissioner Roger] Goodell and NBC need to make at the expense of hard working Americans?” the New York Democrat’s letter went on to ask.
He wrote: “Congress granted the NFL an antitrust exemption in its broadcast deals with the expectation that you wouldn’t use it to screw over fans. That was clearly a mistake.”
Peacock, a streaming service operated by Comcast’s CMCSA, -0.65%
NBCUniversal, is one of several streaming platforms that now broadcast NFL games. Some of those services, like Amazon’s AMZN, -0.36%
Prime Video, have exclusive rights to certain games, meaning there is no other option to watch on network or cable television, or through a cord-cutting live TV subscription. But while there have been NFL games available only on a streaming platform before, never before has it been a playoff game.
Part of the reason that Ryan, along with many NFL fans, are upset that the Chiefs-Dolphins game is available exclusively on Peacock is that it’s been getting more expensive to watch the NFL in recent years — because, increasingly, games are not broadcast on network TV. In fact, the price to watch every NFL game this season for cord cutters was $1,603, not including the cost of internet service.
That commitment includes the cost of six streaming services and five username and password combinations. Those digital streaming services include Google’s GOOG, +0.40%
GOOGL, +0.40%
YouTube TV, NFL Sunday Ticket, Amazon Prime Video, Peacock, NFL+ and ESPN+ DIS, +1.01%.
And the NFL is reaping the rewards. A decade ago, the league made about $3 billion from its TV deals. But, through all of its broadcast deals today with both networks and streaming companies, it makes roughly $10 billion a year.
Peacock has two plans: a $5.99-per-month subscription with ads, and another option for $11.99 a month that’s ad-free. While fans who live in the local broadcast areas of where the teams play (the media markets around Kansas City and Miami, in this case) will have the ability to watch the game on local TV, the rest of the country will have to pay for Peacock.
According to the Wall Street Journal, NBC paid $110 million for Peacock’s exclusive NFL broadcast rights.
Many fans took to social media to vent their frustrations about having to buy another streaming service to watch an NFL game this weekend.
Responding to the backlash, an NFL spokesperson said in a statement: “The NFL’s media strategy has been to make our games available in as many ways as possible to meet our fans where they spend their time. As streaming video becomes commonplace, we are increasingly expanding the digital distribution of NFL content while continuing a longstanding policy that all NFL games be shown on free, over-the-air television in the markets of the participating teams.”
NBCUniversal did not respond to MarketWatch’s request for comment.
Clermont, Fla., resident Calicia Landry, 53, has been a Dolphins fan for decades. Her family had season tickets during the historic 1972 season when the Dolphins went undefeated — the first and only time that has happened in NFL history.
When asked if she will pay for Peacock to watch the game, Landry, whose town is in the Orlando, Fla., market, told MarketWatch that, despite Peacock’s cost of just $5, “it’s the principle now.”
“I bought NFL Sunday Ticket already. I already pay for television service with DirecTV T, +1.54%.
I had to have Prime to watch the Black Friday game,” she said. “It’s too much.”
2023 will go down in history for the start of a new bull market, albeit a strange one.
Despite some year-end catch-up by the rest of the S&P 500 index, megacap technology stocks, characterized by the so-called Magnificent Seven, have dominated gains for the large-cap benchmark SPX, which is up 23.8% for the year through Friday’s close.
Stock futures traded flat Tuesday, a day after the S&P 500 finished up 0.5% and moved closer to its all-time. The broad market index stands just 1.2% below its record of 4,796.56 reached in early January 2022.
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Options contracts tied to more than $5 trillion worth of stocks, exchange-traded funds and indexes are set to expire on Friday as the latest “triple witching” expiration event collides with the rebalancing of the S&P 500 and Nasdaq-100.
The result could be a high-octane, and potentially extremely volatile, session where tens of billions of contracts and shares could change hands, market strategists said.
According to figures from Rocky Fishman, founder of Asym500, options with a notional value of $5.3 trillion are set to expire, with the biggest slug expiring ahead of the open.
ASYM50
On one side, many traders will be cashing in bullish bets that are deep in the money, while some roll their positions, forcing market-makers to continue to hedge their exposure.
At the same time, managers of index-tracking funds will need to finish adjusting their holdings before the announced index changes take effect.
Already, trading volume has been trending higher all week. In the U.S. market, 17 billion shares changed hands on Thursday, according to Steve Sosnick, chief market strategist at Interactive Brokers, during a phone interview with MarketWatch. That is up from 10.6 billion on Tuesday.
“I expect to see enormous volumes tomorrow in a lot of popular names,” Sosnick said.
“Not only will this one be the largest option expiration of the year (as is typical for December), but it is currently set up to become the largest SPX option expiration in more than a decade,” Fishman said in a report shared with MarketWatch.
Brent Kochuba, founder of Spotgamma, an options-market analytics provider, went even further during a phone interview with MarketWatch: “This might be the biggest options expiration ever.”
ASYM50
As markets have rallied, traders have been scooping up bullish options contracts at a record pace, according to data from Cboe Global Markets, the biggest operator of options exchanges in the U.S.
For S&P 500-linked options, typically the most popular product, 4.8 million contracts changed hands on Thursday, according to Cboe, a new record, surpassing the previous record from Nov. 14.
Also, total call-trading volume for all U.S. equity options exceeded 30 million contracts on Wednesday, according to Goldman Sachs Group, making it one of the busiest days for trading in bullish contracts this year.
Aggressive call-buying over the past month has helped push the S&P 500 to just shy of its record closing high, options-market experts said. The S&P 500 SPX
gained 8.9% in November, its best month of 2023, and the 18th best-performing month of the past 73 years. And it has continued to climb in December, having risen 3.3% through Thursday’s close, according to FactSet data.
Earlier this week, options strategists warned that markets might run into trouble at 4,600 on the S&P 500. They warned that a “call wall” of open-interest in bullish contracts around that level could force market makers to put the breaks on the rally.
Instead, bullish traders blew through the call wall, pushing it higher to 4,700, said Kochuba.
The S&P 500 closed at 4,719.55 on Thursday, its highest close since Jan. 12, 2022, according to FactSet data. The index is now sitting within 1.75 percentage points of its record closing high of 4,796.56 on Jan. 3, 2022.
Traders’ bullishness recently helped push the Cboe Volatility Index VIX,
otherwise known as Wall Street’s “fear gauge,” to multiyear lows, according to FactSet data.
To be sure, it isn’t just S&P 500 options and contracts tied to popular stocks like Tesla Inc. TSLA, +4.91%
seeing explosive volume: Calls tied to the iShares Russell 2000 ETF IWM,
which tracks the small-cap Russell 2000, hit 1.35 million contracts, the third-highest ever, according to Goldman. Activity in options contracts linked to small-cap stock indexes has surged since late October.
Heavy call buying has pushed the put-call skew for S&P 500 options to its lowest level in a year, according to data from Goldman Sachs Group.
This shows that investors have been scrambling to buy bullish contracts, while largely shunning bearish ones, as stocks marched higher. Goldman analysts described Friday as “the last major liquidity event of the year” in a note to clients obtained by MarketWatch.
GOLDMAN SACHS
“Triple Witching” days happen once a quarter. They are thusly named because options tied to single stocks, ETFs and indexes will expire, alongside index-tracking futures contracts. Options-market experts say they are typically associated with more intraday swings and higher trading volume.
Making things even more interesting is the fact that the quarterly rebalancing of the S&P 500 and Nasdaq-100 is due to take effect after markets close on Friday.
Normally routine, this quarter’s rebalancing is drawing outsize attention following an extremely rare ad hoc rebalancing over the summer to rein in the influence of megacap stocks in the Nasdaq-100.
Earlier this month, Standard & Poor’s announced its rebalancing plans, which included reducing the weighting of two Magnificent Seven stocks, Apple Inc. AAPL, +0.08%
and Alphabet Inc. GOOG, -0.57%
GOOGL, -0.48%.
At the same time, Amazon.com Inc. AMZN, -0.95%,
which is also part of the Mag 7, will see its weighting increased. Meanwhile, three companies will join the index, including Uber Inc. UBER, +0.86%,
while shares of three other companies depart.
Kochuba believes Friday’s expiration could remove the last barrier holding stocks back from rocketing to record highs before the end of the year.
“After OpEx, markets will be able to move more freely,” Kochuba said.
Garrett DeSimone of OptionMetrics cautioned that investors shouldn’t place too much weight on options-market activity and other technical factors.
“At the end of the day, macro trumps everything,” he said during an interview with MarketWatch.
Financial conditions are now looser than in September, says economist
Financial conditions in the U.S. are looser than in September, says economist.
Getty Images
The feel-good tone gripping markets in the home stretch of 2023 may not be what the Federal Reserve had penciled in for the holidays.
The stock market in December, once again, has been knocking on the door of record levels, driven by optimism about easing inflation and potential Fed rate cuts next year.
But while the prospect of double-digit equity gains this year would be a reprieve for investors after a brutal 2022, the latest rally also points to looser financial conditions.
Ultimately, the risk of looser financial conditions is that they could backfire, particularly if they rub against the Fed’s own goal of keeping credit restrictive until inflation has been decisively tamed.
Specifically, the November rally for the S&P 500 index SPX
can be traced to the 10-year Treasury yield BX:TMUBMUSD10Y
dropping to 4.1% on Thursday from a 16-year peak of 5% in October.
Falling 10-year Treasury yields from a 5% peak in October coincides with a sharp rally in the S&P 500 at the tail end of 2023.
Oxford Economics
The Fed only exerts direct control over short-term rates, but 10-year and 30-year Treasury yields BX:TMUBMUSD30Y
are important because they are a peg for pricing auto loans, corporate debt and mortgages.
That makes long-term rates matter a lot to investors in stocks, bonds and other assets, since higher rates can lead to rising defaults, but also can crimp corporate earnings, growth and the U.S. economy.
Michael Pearce, lead U.S. economist at Oxford Economics, thinks the November rally may put Fed officials in a difficult spot ahead of next week’s Dec. 12 to 13 Federal Open Market Committee meeting — the eighth and final policy gathering of 2023.
“The decline in yields and surge in equity prices more than fully unwinds the tightening in conditions seen since the September FOMC meeting,” Pearce said in a Thursday client note.
The Fed next week isn’t expected to raise rates, but instead opt to keep its benchmark rate steady at a 22-year high in a 5.25% to 5.5% range, which was set in July. The hope is that higher rates will keep bringing inflation down to the central bank’s 2% annual target.
Ahead of the Fed’s July meeting, stocks were extending a spring rally into summer, largely driven by shares of six meg-cap technology companies and AI optimism.
Rates in September were kept unchanged, but central bankers also drove home a “higher for longer” message at that meeting, by penciling in only two rate cuts in 2024, instead of four earlier. That spooked markets and triggered a string of monthly losses in stocks.
Pearce said he expects the Fed next week to “push back against the idea that rate cuts could come onto the agenda anytime soon,” but also to “err on the side of leaving rates high for too long.”
That might mean the first rate cut comes in September, he said, later than market odds of a 52.8% chance of the first cut in March, as reflected by Thursday by the CME FedWatch Tool.
Stocks were higher Thursday, poised to snap a three-session drop. A day earlier, the S&P 500 closed 5.2% off its record high set nearly two years ago, the Dow Jones Industrial Average DJIA
was 2% away from its record close and the Nasdaq Composite Index COMP
was almost 12% below its November 2021 record, according to Dow Jones Market Data.
With yet another blowout earnings report, Nvidia Corp. has ended an earnings recession in the U.S. and helped to solidify the continuation of a drastic change to corporate profits.
Nvidia NVDA on Tuesday rode enduring demand for hardware that is essential for artificial-intelligence tasks to yet another record quarter, as revenue tripled and profit zoomed more than 1,300% higher year over year. Nvidia recorded earnings of more than $9 billion in just three months, a total it had never achieved in a full year before 2022.
It’s filing season for a string of major hedge funds, and big tech names like
Apple, Microsoft, and Nvidia were among the most-traded equities in the third quarter.
GOOGL, -0.09%,
Amazon.com Inc. AMZN, +6.83%,
Meta Platforms Inc. META, +2.91%
and Microsoft Corp. MSFT, +0.59%
all beat earnings and revenue expectations for the latest quarter, showing, among other things that the advertising market was healthy in the latest quarter and that software spending is holding up.
But one more major test looms in the week ahead. Apple Inc. AAPL, +0.80%
is due to deliver September-quarter results on Thursday and those earnings will answer a key question: Are consumers still so willing to purchase thousand-dollar iPhones in the current economy?
Results from other companies in recent weeks have painted a mixed picture of consumer spending. Visa Inc. V, -0.87%,
Mastercard Inc. MA, -0.14%
and American Express Co. AXP, -1.42%
say that spending remains resilient, but there are also signs that cracks are starting to form in categories deemed non-essential. Just look at Align Technology Inc. ALGN, +0.20%,
the maker of Invisalign orthodontic aligners, which saw its stock plunge last week after noting that people seem to be putting off dental and orthodontic visits.
Just judging by S&P 500 SPX
results so far in the aggregate, the odds would seem to be in Apple’s favor for a beat this quarter. About half of index components have already reported, and 78% have posted earnings upside, while 62% have surprised positively on the top line, according to FactSet.
Revenue will be the key item for Apple, as consensus expectations call for a small decline on the metric, which would mark the fourth consecutive year-over-year drop. It’s also worth noting that companies on the whole haven’t been topping revenue estimates by their usual margin. S&P 500 components in aggregate have reported revenue 0.8% above expectations, which compares with a five-year average of 2.0%, FactSet Senior Earnings Analyst John Butters wrote in a recent report.
Apple’s report could also highlight the impact of currency on corporate results, as the company generates more than half of its revenue internationally.
“Given the stronger U.S. dollar in recent months, are S&P 500 companies with more international revenue exposure reporting lower (year-over-year) earnings and revenues for Q3 compared to S&P 500 companies with more domestic revenue exposure?” Butters asked. “The answer is yes.”
This week in earnings
Many U.S. investors in financial-technology companies likely hadn’t heard of European payments player Worldline SA WLN, +9.06%
before last week, but a warning from the French company about deteriorating conditions in Europe helped send shares of PayPal Holdings Inc. PYPL, -2.63%
and Block Inc. SQ, -3.98%
sharply lower Wednesday, in a selloff one analyst deemed an overreaction. Those companies will look to reassure Wall Street about the health of their businesses with their own reports this week. Plus, while not a payments name, SoFi Technologies Inc. SOFI, -0.43%
will provide another read on the fintech sector. Investors will be watching to see how the end of the student-loan moratorium impacted student lending volumes.
The week ahead will also shed light on how consumers’ dining preferences have evolved in the current economy. Starbucks Corp. SBUX, -0.70%,
Dine Brands Global Inc. DIN, -0.12%,
Cheesecake Factory Inc. CAKE, -0.47%
and Sweetgreen Inc. SG, +0.59%
are among names on the docket. Plus, amid concerns about the impact of GLP-1 drugs such as Ozempic and Wegovy on eating habits, Kraft Heinz Co.’s management will be in the spotlight.
You can’t spell Advanced Micro Devices without AI (sort of): Nvidia Corp. NVDA, +0.43%
has been ruling the chip world this year thanks to its dominance with the sort of hardware needed to power the corporate AI fervor. Investors will be watching Tuesday afternoon to see how quickly Advanced Micro Devices Inc.’s AMD, +2.95%
own AI story is coming together. “The AMD narrative feels all about their data center (and, particularly, their AI story) right now,” Bernstein analyst Stacy Rasgon wrote in a note to clients. “In the near term the achievability of their 2H data-center growth (guided to 50% half-over-half) will be the question.” Rasgon expects AMD to discuss recent customer wins for its MI300X chip, though he thinks it will take time for the company to see “real volume.”
The number to watch
PayPal transaction margins: Shares of the one-time investor darling are trading at their lowest levels since May 2017, and the latest source of anguish for Wall Street is the company’s transaction margins. PayPal’s lower-margin unbranded checkout business has been growing more quickly than its higher-margin branded checkout product, a trend that’s been weighing on overall transaction margins. Barclays analyst Ramsey El-Assal expects the third quarter to mark a bottom on the metric before trends stabilize in the fourth quarter. “We do not believe the stock is crowded on the long or short side into earnings, as investors lack conviction regarding the magnitude of transaction margin headwinds in Q3,” he wrote in a recent preview. “In any case, we view Q3 as a potential clearing event.” PayPal posts results Wednesday afternoon.
The Nasdaq Composite Index fell into its 70th correction in history on Wednesday, as surging long-term Treasury yields increased borrowing costs and weighed on stocks.
The interest rate sensitive Nasdaq COMP
barreled higher in the year’s first half, in part on optimism about a potential Federal Reserve pivot away from rate hikes to fight inflation, but stocks have been under fire in recent months as the Fed dialed up its message that interest rates could will stay higher for longer.
The tech-heavy equity index fell 2.4% on Wednesday to close below the 12,922.216 threshold, marking a drop of a least 10% from its prior peak, which was set in mid-July at 14,358.02, according to Dow Jones Market Data.
That met the common definition for a correction in an asset’s value and is the Nasdaq’s 70th close in correction territory since the index’s inception in February 1971.
Robert Pavlik, senior portfolio manager at Dakota Wealth Management, said the sharp rise in long-term Treasury yields has spooked investors, especially those in highflying, high-growth technology stocks where rising rates can be particularly corrosive.
Pavlik likened the dynamic to the spending power of a lottery winner hitting a jackpot when rates are at 2% versus someone who wins when rates are closer to 10%.
He also expects the 10-year Treasury yield BX:TMUBMUSD10Y,
which rose to 4.952% Wednesday, to top out at 5.25% to 5.5% and likely complicate any recovery for the Nasdaq.
In the past 20 corrections for the Nasdaq, it took an average of three months for performance to improve, with index then gaining 14.4% on average a year later, according to Dow Jones Industrial Average.
Nasdaq corrections are usually followed by a bounce in a few months
“You’re feeling the pressure in some big-name stocks,” Pavlik said. “But this too will, at some point, end. But concerns about the Fed are still in the forefront of everybody’s minds.”
The Nasdaq was still up 22.5% on the year through Wednesday, while the Dow Jones Industrial Average DJIA
was down 0.3% and the S&P 500 index SPX
was up 9% in 2023, according to FactSet.
Microsoft Corp. and Alphabet Inc. both reported mostly strong results Tuesday, but the disparate reactions from investors showed that Wall Street only cares about artificial intelligence right now.
GOOGL, +1.69%
dropped 6% as Wall Street got the sense that AI is manifesting differently in the companies’ cloud businesses.
Microsoft surprised investors with 28% constant-currency growth in its Azure cloud-computing business, above the company’s own forecast and the projection for 25.6% growth that analysts were modeling on average. While Microsoft continues to see “optimization” challenges as customers remain conscious about their spending, the company is also benefiting from AI tailwinds in the cloud.
Companies looking to beef up their AI offerings are often looking to add AI services for their customers through additional cloud services, so they don’t have to do as much internal development themselves. In addition, AI offerings ranging from chatbots to tools that can streamline the writing of reports require ever more computing power, and both Azure and Google Cloud are starting to offer new software applications to address those needs.
Microsoft Chief Executive Satya Nadella called AI a “unique and different” factor that was helping Azure trends. “Given our leadership position, we are seeing complete new project starts, which are AI projects,” he said in response to an analyst question about the sustainability of cloud growth rates.
In addition, Microsoft, which has invested heavily in ChatGPT-creator OpenAI, offers an Azure OpenAI service that more than 18,000 organizations are now using. Some of these customers are new to Azure.
Microsoft Chief Financial Officer Amy Hood forecast that Azure revenue growth should be around 26% in constant currency in the fiscal second quarter, driven by new workload trends and with the growing contributions from AI.
Investors seem less confident that Alphabet is seeing the same tailwinds in its Google Cloud business, especially as that segment showed its slowest quarterly growth since Google began breaking out results that way back in 2019. Cloud revenue of $8.4 billion, with growth of 22%, was $250 million shy of consensus estimates on Wall Street, according to Colin Sebastian, an analyst with Baird. That overshadowed an upbeat performance in the company’s advertising business.
When one analyst asked Alphabet executives about the deceleration in the revenue growth of its cloud business, Chief Executive Sundar Pichai was vague but said that customers are being selective of where they are spending their IT budgets.
“On cloud, what I would say is overall, we have definitely started seeing customers looking to optimize spend,” Pichai said. “We leaned into it to help customers, given some other challenges they were facing, and so that was a factor.”
Alphabet is seeing “a lot of interest in AI,” but it remains to be seen whether that’s contributing materially to its financial performance just yet.
“Google Cloud missed consensus revenue expectations (although in line with Baird) on slowing growth, and we believe consistent with the view that newer Gen-AI workloads will take time to move the needle,” Sebastian wrote in a note to clients.
Insider Intelligence senior analyst Max Willens added that Google Cloud is facing tough competition, and while the business seems to have traction with AI startups that “may bear fruit in the long run, it is not currently helping Google Cloud enough to satisfy investors.”
Wall Street clearly is looking to AI to fuel better growth rates and help offset sluggish macroeconomic trends. The poster child for that dynamic is Nvidia Corp. NVDA, +1.60%,
which is expected to single-handedly drive earnings growth for the information technology sector thanks to booming demand for its AI hardware.
Given economic pressures, it’s becoming obvious that companies without much of an AI story to contribute this quarter will continue to fall out of favor with investors.
Nearly a year ago, OpenAI released ChatGPT 3 into the world, and investors got visions of dollar signs in their heads as they imagined the ways that artificial intelligence could make big money for businesses.
Wall Street’s now coming to terms with the fact that those sorts of paydays are going to take time. As investors have already seen from the past two quarters of earnings, AI has only really delivered financial benefits for a select few hardware companies so far — while spurring new costs for many others.
“The AI boom has already bifurcated into the contenders and pretenders,” said Daniel Newman, chief executive and principal analyst of Futurum Research. And while Advanced Micro Devices Inc., Intel Corp. and Arm Holdings PLC ARM, +0.38%
have stirred up interest, Nvidia Corp. NVDA, -4.68%
has established itself as far and away the greatest “contender,” with AI driving strong demand for its chips tuned for AI training.
Nvidia last quarter reported record earnings, including a 141% jump in revenue for its graphics chips used in AI infrastructure building up data centers. Nvidia, which reports near the end of earnings season on Nov. 21, posted record revenue of $13.5 billion last quarter and is expected to easily top that with $16 billion in the most recent quarter, a surge of 170% versus a year ago. Those estimates include $12.3 billion of revenue coming from data-center sales.
Other chip companies could post gains from AI as well, but to far lesser extents. Candidates include Broadcom Corp. AVGO, -2.01%
and system maker Super Micro Computer Inc. SMCI, +2.35%,
as well as Marvell Technology Inc. MRVL, -0.91%,
which last quarter told analysts that it expects to end the year at a revenue run rate of about $800 million this year from cloud/data-center chips related to AI.
“This is well above what we had outlined last quarter. Put this in perspective: This would put us at the run rate we had previously communicated for all of next year,” Marvel Chief Executive Matthew Murphy told analysts.
Much as Advanced Micro Devices Inc. AMD, -1.24%
and Intel Corp. INTC, -1.37%
want to be in the AI conversations with the graphics chips they hope will be used for AI data-center applications, they won’t see much of an impact yet from AI revenue. Plus, those companies are experiencing a slowdown in PC sales that may overshadow any small benefit from AI chips.
The AI boom in chips is clearly not providing enough of a boost to lift finances for the overall semiconductor sector, which is forecast to see earnings fall 3.3% in the third quarter and post a revenue decline of 0.6%, according to FactSet. The industry is being dragged down in part by Micron Technology Inc. MU, -0.12%,
which reported a 40% drop in revenue and a whopping fiscal fourth-quarter loss in late September for the quarter ended Aug. 31, which is included in FactSet’s third-quarter data. Even so, the company called a bottom to the memory-chip downturn.
“Most of the consumer-based tech is still struggling, [including] PCs, laptops and to a certain extent smartphones,” said Daniel Morgan, senior portfolio manager at Synovus Trust Co. Wall Street has tempered expectations related to the impact of Apple Inc.’s AAPL, -0.88%
iPhone 15 launch on the quarter, as estimates call for an overall 1% drop in September-quarter revenue. Last quarter, Apple executives forecast that both Mac and iPad sales would be down by double-digits and that revenue performance would be similar to its June quarter, when revenue fell 1.3%
In addition, when asked about AI, Apple CEO Tim Cook said the company views AI and machine learning “as core fundamental technologies that are integral to virtually every product that we build.” Those comments, though, can also apply to the bulk of tech companies, where AI is built into software as another layer to improve a product. Internet companies such as Meta Platforms Inc. META, +0.89%
and Alphabet Inc. GOOG, +0.36%
GOOGL, +0.45%
incorporate AI into their software and algorithms but don’t treat it as a specific, revenue-generating product.
Other software companies are building AI into their products as separate features or add-ons, but they are still in the early stages of seeing whether or not customers will pay more for them. Take Microsoft Corp., MSFT, -0.17%
which has showed off Copilot, an extra AI feature for customers of Microsoft 365.
“[Microsoft] can distinguish itself by providing more details around its AI revenue ramp since we don’t expect much information from Google, who really doesn’t seem to have the monetization plan for Bard and AI-assisted search (SGE) ready to articulate yet,” Melius Research analyst Ben Reitzes said in a note to clients this week. He also noted that the cost of offering AI products to consumers is steep, and requires lots of investment.
“There are sophisticated issues to contend with for Microsoft, including balancing the potential for higher revenue from Copilots with the high costs per query and much-needed investment,” Reitzes said. “The balance of AI adoption vs. cost was implied when Microsoft guided to flat operating margins year over year for fiscal 2024.”
Earlier this year, the Information reported that OpenAI, the creator of ChatGPT and recipient of a hefty investment from Microsoft, has costs of up to $700,000 a day, because the massive amounts of computing power needed to run queries. In February, OpenAI launched ChatGPT Plus, for $20 a month, a service that will give subscribers access to its AI during peak times and faster response times.
Another example is Adobe Inc. ADBE, +1.70%,
which has a few AI offerings, including a subscription service called Generative Credits, tokens that let customers turn text-based prompts into images. Another is Firefly, a generative AI service for images, and an AI option in Photoshop, currently called Photoshop Beta AI, to help users fill in images and other collaborative tools. Adobe did not provide any forecasts on potential revenue generation during its analyst day earlier this month.
Toni Sacconaghi, a Bernstein Research analyst, said AI could drive a massive increase in enterprise productivity, and companies could dramatically increase IT spending on servers in order to invest in productivity-enhancing AI. “However, we note that enterprise adoption appears to be in early stages,” he said in a recent note to clients, adding that it was feasible that spending on AI infrastructure could take money away from other IT projects in process. “We do worry that projected AI infrastructure build out may be occurring too quickly, necessitating a digestion period, which could result in a commensurate stock pullback in AI-related names.”
Overall, the information-technology sector itself is expected to see anemic revenue growth this quarter. The consensus on FactSet forecasts a meager 1.35% revenue uptick in the third quarter, with earnings growth of 4.65%. FactSet’s estimates for IT companies exclude internet companies like Meta and Alphabet, which are under the category of communications/interactive media services. That sector is expected to see sales growth of 12%, and earnings growth of 51%, thanks to a 116% boost in Meta’s net income, after it hit a low point in the year-ago quarter.
Amazon.com Inc. AMZN, -0.81%,
in the category of consumer discretionary/broadline retail, is forecast to see earnings growth of 109%, and revenue growth of 11%. Amazon’s cloud services business, AWS, is expected to also see a potential uplift from customers spending money on AI projects, according to a TD Cowen & Co. survey, in which 41% of respondents said they were “highly considering” allocating a budget for generative AI.
“This trend could bode well for Amazon’s AWS,” TD Cowen analyst John Blackledge said in a recent report, adding that he expects AWS revenue growth to reaccelerate in the second half of this year and in 2024, boosted by the move of additional workloads to the cloud, possibly including generative AI.
As companies build up their infrastructure, or their spending on cloud computing to add or improve AI capabilities, they are seeing higher costs, which is affecting margins — especially if revenue has slowed down, as it has in some sectors. Across both the broader S&P 500 SPX,
and the IT sector, earnings are lower than a year ago.
As Newman of Futurum pointed out, “AI stole the budget this year.” And that is a mixed bag for tech.
The NCAA started allowing college athletes to make money from their name, image and likeness in 2021, after decades of student-athletes saying it wasn’t fair that they didn’t receive any money while the games they played in generated millions of dollars — especially football and basketball contests. And today, many of these athletes are not just making some extra cash on the side — they’re making millions.
These NIL deals are negotiated by college athletes and their representation, and typically involve leveraging an athlete’s brand and influence through promotional means. For example, a car dealership near a university campus may ask the college’s high-profile quarterback to do a commercial for them in exchange for a monetary payment or a car. Similarly, an athlete can make money from social media, depending on how big their following is.
Football players are among the college athletes who make the most money from NIL deals, followed by men’s basketball, women’s volleyball and women’s basketball. That’s because college football and basketball have multibillion-dollar TV contracts to broadcast games, while most other sports generally have lower visibility.
With that in mind, here are the college athletes who make the most money from NIL deals according to On3’s proprietary NIL algorithm, which is based on NIL-deal data, performance, influence and exposure
10. J.J. McCarthy, $1.3 million
J.J. McCarthy of the Michigan Wolverines in action against the Georgia Bulldogs.
Getty Images
As the junior quarterback for the Michigan Wolverines football team, McCarthy is one of the six college football QBs in the top 10 of NIL earners.
McCarthy sports 276,000 followers across his social-media platforms, and has deals with Alo, Bose and Bowman.
Tie-8. Bo Nix, $1.4 million
Bo Nix of the Oregon Ducks throws a pass against the Stanford Cardinals.
Getty Images
The senior QB for the Oregon Ducks has led his team to a perfect 5-0 start this season.
Nix has 219,000 followers on social media and NIL deals with 7-Eleven, Bojangles and Celsius. Nix is considered one of the top players in the nation and has the third-best betting odds to win college football’s Heisman Trophy on DraftKings DKNG, -2.52%
sportsbook.
Tie-8. Spencer Rattler, $1.4 million
Spencer Rattler of the South Carolina Gamecocks warms up before a game against the Tennessee Volunteers.
Getty Images
The South Carolina Gamecocks senior QB has one of the more robust NIL profiles in the nation. He has deals with Mercedes-Benz MBG, -1.23%,
Leaf trading cards and Raising Canes.
Rattler also has 578,000 followers across TikTok, Instagram META, -0.71%
and X, the platform formerly known as Twitter.
7. Angel Reese, $1.7 million
Angel Reese of the LSU Lady Tigers during the 2023 NCAA Women’s Basketball Tournament championship game.
Getty Images
Reese was one of the breakout stars of the women’s March Madness basketball tournament this year. The Louisiana State University hooper led her team to the 2023 title and famously flashed a “you can’t see me” gesture in the title game.
Reese has brand deals with Airbnb, PlayStation and Intuit TurboTax INTU, -0.50%
and has appeared in ads for Amazon AMZN, +0.01%
and Pepsi Co.’s PEP, +0.59%
Starry. She also has 5.2 million followers across her social-media platforms.
During LSU’s magical title run last season, Reese set an NCAA single-season record with her 34th double-double against the Iowa Hawkeyes and was named the most outstanding player of the Final Four.
Reese is one of just two female athletes inside the top 10 in On3’s NIL valuation tracker, and the top college basketball player on the list.
6. Travis Hunter, $2.3 million
Travis Hunter of the Colorado Buffaloes signals first down after a catch against the TCU Horned Frogs.
Getty Images
Hunter was one of the college football players who transferred to the University of Colorado from Jackson State last season to follow coach Deion Sanders.
Hunter, a five-star sophomore prospect, plays on both offense and defense — as a wide receiver and a cornerback — a rarity in a high-level college program. He has 1.9 million followers on social media, a successful YouTube GOOG, -0.08%
channel, and endorsements with Celsius Energy Drink and 7-Eleven.
Hunter entered the 2023 college season as the most highly touted NFL prospect at Colorado, and Deion Sanders contends rival schools have attempted to poach him via lucrative NIL deals.
“People offered Travis Hunter a bag — about $1.5 million to try to lure him and buy him out of the transfer portal,” coach Sanders told 247Sports over the summer. “But Travis is not the kind of guy that can be bought. He isn’t built like that. Travis is a relational young man that is built on relationships and stability. And that’s what he wanted and desired. That is why he decided to ride and stay with us.”
If and when Hunter decides to declare for the NFL draft, he will likely have a multimillion-dollar contract as a rookie that could dwarf his collegiate NIL earnings.
5. Caleb Williams, $2.7 million
Caleb Williams of the USC Trojans warms up before a game against the Arizona State Sun Devils.
Getty Images
The University of Southern California QB is seen as a generational NFL prospect and the presumptive No. 1 overall pick in the 2024 NFL draft, but he isn’t the top NIL earner.
Williams has 347,000 followers on social media, and brand deals with United Airlines UAL, -1.24%,
Alo and Beats by Dre.
Once the USC junior QB declares for the draft, his rookie contract will likely be set above $37 million, per Spotrac’s estimates.
4. Arch Manning, $2.8 million
Arch Manning of the Texas Longhorns warms up prior to a game against the Alabama Crimson Tide.
Getty Images
The Texas Longhorns freshman QB is one of several top NIL earners whose family plays a role in their fame. Arch Manning is the nephew of Super Bowl champion QBs Peyton and Eli Manning, and the grandson of former NFL QB Archie Manning.
Despite being a backup quarterback with no recorded statistics, the younger Manning has 277,000 followers on social media and has a brand deal with Panini. That deal involved him autographing an extremely rare one-of-one Prizm Black card that was auctioned off for $102,500, which was later donated to charity.
Manning was a standout high school recruit, ranked No. 5 in the nation in the 2023 class, and could have an NFL future.
3. Livvy Dunne, $3.2 million
Olivia Dunne of LSU looks on during a PAC-12 meet against Utah.
Getty Images
Dunne is the only college athlete in the top 10 of NIL earners who doesn’t play basketball or football. The junior LSU gymnast is the top female NIL earner in the nation and has brand deals with Vuori clothing, Body Armor KO, +0.62%
and American Eagle Outfitters.
Dunne is the second most-followed college athlete on social media with 12.1 million followers on Instagram, TikTok and X combined.
For many years Dunne was seen as the poster child for NIL deals, and she said earlier this year that she could make as much as $500,000 from a single post.
“What I love with certain brands is getting long-term brand deals,” Dunne said on the Full Send podcast in June. “Those are probably the best because you build a relationship with the brand and they want you year after year.”
2. Shedeur Sanders, $4.8 million
Shedeur Sanders of the Colorado Buffaloes celebrates as he walks off the field following an NCAAF game against the Arizona State Sun Devils.
Getty Images
University of Colorado’s Shedeur Sanders has become a phenomenon in the sports world. The 21-year-old junior made headlines after throwing for 510 yards and four touchdowns in Colorado’s season-opening shocker against No. 17–ranked Texas Christian.
Colorado has become the center of the football world since Shedeur’s father Deion took over as coach. Coach Prime’s team is currently 4-2 — the team was 1-11 last season, good for last place in its conference.
The quarterback has more than 2.3 million followers on social media, and has already inked several deals with big brands, including with yogurt producer Oikos 0KFX, -1.13%,
Gatorade and Mercedes-Benz. He has shown fans some of his new Mercedes cars on social media, too.
Overall, Shedeur Sanders’s NIL value currently sits at $4.8 million, according to On3, up from $1.5 million at the beginning of the year — that’s the highest value in all of college football. For context, that’s nearly twice the average NFL player’s salary.
1. Bronny James, $5.9 million
Bronny James playing at his high school, Sierra Canyon.
Getty Images
James has perhaps the most famous family member of any person on this list. He is the son of NBA legend LeBron James, and is currently set to begin his freshman basketball season at USC.
The younger James has yet to play a game at his new school, but will immediately be one of the most well-known players in college athletics. James has 13.5 million social media followers, the most of any college athlete, and has brand deals with Nike NKE, +1.10%
and Beats by Dre AAPL, -0.06%,
two brands his dad is also repped by.
Bronny James suffered cardiac arrest in July during a basketball practice and had to be taken to the hospital. But he’s on the road to recovery, and hopes to play basketball this season.
“Bronny is doing extremely well,” the older James said last week. “He has begun his rehab process to get back on the floor this season with his teammates at USC. (With) the successful surgery that he had, he’s on the up-and-up. It’s definitely a whirlwind, a lot of emotions for our family this summer. But the best thing we have is each other.”
Google’s top executives have long established a reputation of saying as little as possible on most topics: Earnings calls. Product development plans. Management moves.
Legal matters are certainly on the list, as the company’s antitrust trial with the Justice Department concludes its third week. The public is barred from listening to the 10-week federal trial, and reporters often encounter a courtroom sealed to the public.
Secrecy around the nonjury trial belies the magnitude of the case, the biggest of its kind in tech, if not American business, since the DoJ tangled with Microsoft Corp. MSFT, +0.67%
in the 1990s and early 2000s. After years of investigation, the Justice Department claims Google used contracts worth billions of dollars with Apple Inc. AAPL, +0.30%
and other phone makers to elbow aside competing search engines that could lead to changes in Google’s business practices — even a breakup of thetech giant.
Google says it makes the best product, and vendors have a choice to work with other search-engine providers. In his opening statement, Google attorney John Schmidtlein said companies and consumers use Google’s popular search engine “because it delivers value to them, not because they have to.”
Asked by MarketWatch to comment further, a company spokesman declined.
GOOG, -0.96%,
Google’s parent company, has steadfastly redacted information about the contracts at issue in the case, citing confidential company information, and Google’s lawyers — as well as those at Apple — have consistently asked to seal the courtroom. Before opening statements started on Sept. 12, nearly two-thirds of Google’s motions and responses in the case were sealed, according to the New York Times.
At the same time, criticism has rained on U.S. District Judge Amit Mehta, who has deferred to requests by Google and interested parties like Apple to hold testimony behind closed doors. (On Tuesday, Mehta countered he was relying on federal attorneys to resist persistent attempts by Google and other tech companies to seal the courtroom. He later pushed lawyers to ask more questions in public and wanted to unseal closed-session testimony.)
“A judge’s job isn’t to simply accept a party’s claim that public access to a trial would cause the sky to fall,” The Freedom of the Press Foundation said in a blog post Wednesday.
A cone of silence around such a historic case that could lead to changes to Google’s business practices or a breakup of the company is not surprising, given what is at stake.
“A trial should be open to the public, but there is a balancing act in affording companies some sort of privacy,” lawyer Abiel Garcia said in an interview. “Access to documents does disclose how a company thinks. There is a tension here in how Google wants its users to be transparent about their data, but doesn’t tell you what they are doing.”
Garcia, who presented in a preliminary injunction hearing before Mehta in 2015, said the judge has done an admirable job of respecting Google’s corporate secrets while gradually encouraging more public questioning and disclosures.
With his confidence and his aphorisms, to say nothing of his coaching skills, Deion Sanders has led the University of Colorado football program to a 3-0 record and a top 20 ranking.
Just weeks into his first season at the helm in Boulder, Sanders, known as “Prime Time” when he played in the NFL — and MLB — and now called “Coach Prime,” has already made his Buffaloes the most talked-about team in college football.
Colorado was 1-11 last season, good for last place in its conference.
Last weekend’s game in Boulder, against in-state rival Colorado State, drew 9.3 million viewers, making it the most-watched late-night college football game ever on ESPN DIS, -1.55%.
It also attracted star power to Boulder, with rappers Lil Wayne and Offset, Dwayne “The Rock” Johnson, and NBA players Kyle Lowry and Kawhi Leonard on hand.
The success and the publicity are making many people in Sanders’s orbit wealthy.
Colorado’s top three NIL — or name, image and likeness — earners this season are coach Sanders’s sons Shedeur and Shilo, and Travis Hunter. All three players transferred to Colorado from Jackson State last season, an HBCU.
His top players have cashed in on newfound fame with NIL deals to the tune of millions of dollars.
Perhaps most notable among them is his son, junior quarterback Shedeur Sanders. The 21-year old made headlines after throwing for 510 yards and four touchdowns in Colorado’s season-opening shocker against No. 17–ranked Texas Christian. Since then, he’s thrown six more touchdown passes in two further victories.
The quarterback has more than 2 million followers on social media and has already inked several deals with big brands, including with yogurt producer Oikos DANOY, -0.84%,
Gatorade PEP, +0.21%
and Mercedes-Benz MBG, -0.15%
Through his stellar play, Shedeur attracted the attention of another noted quarterback, Tom Brady, who inked the dynamic collegian to an endorsement deal with his clothing company, Brandy Brand, last October.
“I think he needs to get his a— in the film room and spend as much time in there as possible,” Brady joked with the young quarterback during a recent recording of his podcast, “Let’s Go.”
Overall, Shedeur Sanders has an NIL value of approximately $5.1 million, according to On3’s proprietary NIL algorithm, up from $1.5 million at the beginning of the year — that’s the highest value in all of college football. On3’s algorithm considers NIL-deal data, performance, influence and exposure.
While Shedeur Sanders is the headliner at Colorado, he’s not alone in mining the NIL vein. Travis Hunter, a five-star sophomore prospect, has an On3 NIL valuation of $2.2 million, the fourth highest among all college football players. Hunter’s NIL value was $1.7 million at the beginning of the year.
Hunter plays wide receiver on offense and cornerback on defense, a rarity in a high-level college program. He has 1.8 million followers on social media, a successful YouTube GOOG, +0.23%
GOOGL, +0.18%
channel, and endorsements with Celsius Energy Drink and 7-Eleven.
Hunter entered this season as the most highly touted NFL prospect at Colorado, and Deion Sanders contends rival schools have attempted to poach him via lucrative NIL deals.
“People offered Travis Hunter a bag — about $1.5 million to try to lure him and buy him out of the transfer portal,” coach Sanders told 247Sports over the summer. “But Travis is not the kind of guy that can be bought. He isn’t built like that. Travis is a relational young man that is built on relationships and stability. And that’s what he wanted and desired. That is why he decided to ride and stay with us.”
Sanders’s other son on the team, Shilo, is also a top NIL earner. A senior defensive back who took an interception 80 yards and into the end zone during the Buffaloes’ win over Colorado State, Shilo’s NIL value, per On3, sits at $719,000. He has NIL deals with Porsche DRPRY, +0.10%
The NCAA started allowing college athletes to profit from their names, images and likenesses in 2021, ending a years-long crusade by student athletes. Football has been the college sport attracting the most NIL deals, followed by men’s basketball, women’s volleyball and women’s basketball, according to NIL platform Opendorse.
“NIL money, that’s a real part of college football now,” former University of Colorado and NFL football player Tyler Polumbus told CBS shortly after Sanders took the coaching job at Colorado. “I never thought that Colorado would be able to live in that world and compete in that world, but with Deion Sanders it becomes a whole new land of opportunity.”
Sanders, the coach, is getting paid, too, of course.
In addition to the $33.5 million he made while playing in the NFL (to say nothing of the nine big-league baseball seasons in which he was an active player), coach Sanders is on a five-year contract with the University of Colorado worth $29.5 million, as reported by the Mississippi Clarion Ledger, with various escalators tied to performance.
If Sanders continues to have success at Colorado, he’s likely to field even richer offers from bigger-time football schools. At Jackson State, his salary reportedly was just $300,000.
The wealth coming to Sanders and his top players, including his own offspring, is also accruing to the school and brands attached to “Coach Prime.”
The university has sold out all home games on the current schedule — a first in program history — and he’s selling tens of thousands of $67 “Prime 21” sunglasses, which won’t ship until December. He’s also helping sell merchandise at Colorado’s bookstore — it’s up 819% this fall vs. 2022 — and several varieties of Colorado-themed Prime gear are sold out at Nike’s NKE, -0.86%
online store.
Also on Sanders’s radar: trademarks. The six-time NFL All-Pro, two-time Super Bowl champion and Hall of Famer has filed for trademarks on “Coach Prime,” “Prime Effect,” “Daddy Buck” and “It’s Personal,” according to attorney Josh Gerben of Gerben Intellectual Property.
Colorado plays at the University of Oregon on Saturday afternoon. The Ducks are ranked No. 10, while Sanders’s Buffaloes, unranked in the preseason, have climbed to No. 19.
Oregon is a 21-point favorite, according to DraftKings oddsmakers, but 81% of all bets have been placed on Colorado.
Arm Holding Ltd. priced its initial public offering at the high end of its expected range late Wednesday following intense interest.
The British chip-design company priced shares at $51, raising $4.87 billion, following earlier reports that Arm would be pricing its IPO at $52 a share. A source close to the deal confirmed to MarketWatch that $52 had been the expected price, but that it was reduced to $51. That puts the chip designer at just over a $52 billion valuation. Recently, Arm had stated a targeted range of $47 to $51.
Federal prosecutors opened a landmark antitrust trial against Alphabet Inc.’s Google on Tuesday with charges the search-engine giant for years intentionally snuffed competition through exclusive contracts with wireless carriers and phone makers.
Google GOOGL, -1.15% GOOG, -1.21%
spent billions of dollars on such contracts to cement its dominant position, a clear violation of U.S. antitrust law, prosecutors said.
“This case is about the future of the internet, and whether Google’s search engine will ever face meaningful competition,” Justice Department lawyer Kenneth Dintzer told the court. He said Google pays more than $10 billion a year to Apple Inc. AAPL, -1.71%
and other companies to ensure Google is the default or only search engine available on browsers and mobile devices used by millions of consumers.
Google’s search business accounted for more than half of the $283 billion in revenue Alphabet recorded in 2022. Search in large part has fueled the company’s $1.7 trillion market valuation.
Google attorney John Schmidtlein countered that companies and consumers use Google’s popular search engine “because it delivers value to them, not because they have to.”
The legal jousting in a Washington, D.C., federal court kicked off what is expected to be a contentious multiweek trial that could be one of the biggest domestic antitrust trials since the federal government tussled with Microsoft Corp. MSFT, -1.83%
in the 1990s. Like that case, this one involves arguments over tying together multiple proprietary products.
To that end, Justice Department officials allege Google’s contracts ensure that Android devices come with Google apps and services, including Google search, preinstalled.
Google Chief Executive Sundar Pichai heads a witness list of senior executives and former employees from Google, Apple, Microsoft and Samsung Electronics Co. 005930, +1.28%.
“This feedback loop, this wheel has been turning for 12 years, and it always turns to Google’s advantage,” Dintzer said.
Conversely, Schmidtlein said Apple’s decision to make Google the default search engine in its Safari browser underscores that Google’s search engine is the product consumers prefer. “Apple repeatedly chose Google as the default because Apple believed it was the best experience for its users,” he said.
The Google case “could not be more different” from Microsoft litigation in the late 1990s and early 2000s, Schmidtlein asserted. “The evidence will show that Microsoft’s Bing search engine failed to win customers because Microsoft did not invest [and] did not innovate,” he said. “At every critical juncture, the evidence will show that they were beaten in the market.”
The second week of September, as in the NFL, marks a kickoff of sorts for the tech year.
Headlined by Apple Inc.’s AAPL, +0.72%
seminal iPhone event on the second Tuesday of the month at Apple Park, and anchored by Salesforce Inc.’s CRM, +0.33%
wildly popular Dreamforce conference up the road in San Francisco, these several days set a tempo as well as establish a road map for the industry over the next 12 months. They also open the floodgates on tech conference season, with shows stacked up over the next several weeks for Facebook parent Meta Platforms Inc. META, +3.33%,
Microsoft Corp. MSFT, +1.21%,
and Oracle Corp. ORCL, +0.32%.
Oh, and there’s that initial public offering from Arm Holdings Plc, the chip designer owned by SoftBank Group Corp. 9984, +3.86%
that is expected to value Arm at $50 billion to $54.5 billion on a fully diluted basis. Another IPO candidate, delivery startup Instacart, also plans a public offering that would value it at $7.5 billion. Both deals could jump-start what has been a somnolent tech IPO market the past few years.
For that reason alone, this jam-packed tech week might hold even more import, and consequences, than previous years. A confluence of legal tussles, macroeconomic conditions, a trade war with China, and regulatory bluster have raised the stakes.
“It’s a tale of two cities with this week’s events highlighting both the issues and opportunities in tech,” Silicon Valley analyst Maribel Lopez said in an interview, assessing the week. “Arm’s IPO showcases the strength of tech and AI at a time when the AI forum and Google-DoJ shine a light on the concern that a few companies are wielding tremendous power for the future of the world.”
GOOG, +0.47%
Google faces off with the Justice Department in a federal court in Washington, D.C.
Justice Department officials argue that Google illegally leveraged agreements with phone makers such as Apple and Samsung Electronics Co. 005930, +0.71%
and with internet browsers like Mozilla to be the default search engine for their customers, thus preventing smaller rivals from gaining access to that business.
“This is a backwards-looking case at a time of unprecedented innovation, including breakthroughs in AI, new apps and new services, all of which are creating more competition and more options for people than ever before,” Google General Counsel Kent Walker said in a statement.
The following day, Wednesday, Senate Majority Leader Chuck Schumer, D-N.Y., convenes an all-star panel of CEOs from Meta, Microsoft, Google, OpenAI and Palantir Technologies Inc. PLTR, +4.82%.
As lawmakers ruminate on how to harness AI responsibly, bipartisan legislation is in the works. Sens. Richard Blumenthal, D-Conn., and Josh Hawley, R-Mo., are among those crafting a bill.
Even Apple and Salesforce aren’t immune from recent events: Apple has endured a relatively rough patch of disappointing (for them) revenue and iPhone sales while balancing risk/reward with its huge investment in China, and Salesforce CEO Marc Benioff has threatened to relocate Dreamforce to Las Vegas after more than two decades in his hometown of San Francisco if drug use and homelessness disrupt this year’s event.
The most pressing concern, when all is said and done, is AI — which hovers like the Death Star over the tech landscape.
“The biggest concern is the forum is behind closed doors, which could lead to regulatory capture, where dominant players in the industry help influence the regulations being imposed,” Kimberlee Josephson, associate professor of business administration at Lebanon Valley College (Pa.), said in an interview. “It’s almost as if it puts them in the hot while giving them a seat at the table at the same time.”
“At the very least, it sends the signal that something is being done,” she said. “Antitrust cases are so subjective. What constitutes barriers to entry? DoJ adds a level of seriousness.”
