Alphabet Flags 50% Rise in Capex

Alphabet, owner of Google, indicated it will spend 48 billon US dollars on capex in 2024, up from 32.3 billion dollars in 2023. CFO Ruth Porat said that its reported capex in the first quarter of 12 billion dollars was "once again driven overwhelmingly by investment in our technical infrastructure, with the largest component for servers, followed by data centres. The significant year-on-year growth in capex in recent quarters reflects our confidence in the opportunities offered by AI across our business."

Alphabet also noted that YouTube surpassed 100 million Music and Premium subscribers globally, including trialers, while YouTube TV now has more than eight million paid subscribers. It also confirmed that "Waymo’s fully autonomous service continues to grow ridership in San Francisco and Phoenix, with high customer satisfaction; and we started offering paid rides in Los Angeles, and testing rider-only trips in Austin." source: Alphabet collateral

Verizon Continues FWA Growth

Reporting revenue growth of 0.2% to almost 33 billion US dollars in the first quarter, Verizon said that it added 151,000 fixed wireless access (FWA) business customers and 203,000 FWA consumer customers. But wireless equipment revenues fell almost 7%.

Overall, broadband net adds were 389,000, including 53,000 Fios (fibre) Internet net adds. In total, Verizon completed the  quarter with more than 11.1 million broadband subscribers, including over 3.4 million on FWA. "We've now added more than three million broadband subscribers in the last two years alone," noted CEO Hans Vestberg. Source: Verizon collateral

Meta Ramps Up AI Investment

Meta forecast that its full-year 2024 capital expenditures will be in the range of 35-40 billion US dollars, up from 28 billion dollars in 2023, and up from its previous forecast range of 30-37 billion dollars. As it plans to further accelerate its infrastructure investments to support its AI roadmap, Meta also intends to increase capex in 2025.

Mark Zuckerberg, Meta's CEO, said his company "should invest significantly more over the coming years to build even more advanced models and the largest scale AI services in the world." He predicted that AI-enabled glasses will be "a really important platform for the future."

The outlook for smart glasses "has improved quite a bit because previously we thought that that would need to wait until we have these full holographic displays to be a large market. And now we're a lot more focused on the glasses that we're delivering in partnership with Ray-Ban," Zuckerberg added, noting that those glasses "continue to do well and are sold out in many styles and colours." This product, which resembles conventional glasses, lack a built-in display, but are equipped with a camera, microphones and speakers to enable a wearer to query an AI system running in the cloud.

"If we want everyone to be able to use wearable AI, I think eyewear is a bit different from phones or watches in that people are going to want very different designs," Zuckerberg opined. "So I think our approach of partnering with leading eyewear brands will help us serve more of the market." Source: Meta collateral

Orange Sees Strong Growth in Africa

Orange reported a 2.1% year-on-year rise in revenues on a comparable basis for the first quarter of 2024 to 9.58 billion euros. The company said Africa & Middle East was the main contributor to this growth, with revenues rising11.1% (or +185 million euros) led by a robust performance in voice and double-digit increases in its four growth engines (+15.7% in mobile data, +20.6% in fixed broadband, +23.5% at Orange Money and +14.1% in B2B across all activities).

Revenues in France increased 0.8% (+35 million euros) thanks to growth in retail services, while sales in other European markets declined 2% (-35 million euros). Source: Orange statement

Tesla Steps Up Capital Spending

Tesla increased its capital spending by 34% year-on-year in the first quarter of 2024 to 2.8 billion US dollars. "While many are pulling back on their investments, we are investing in future growth – including our AI infrastructure, production capacity, our Supercharger and service networks and new products infrastructure," the company said.

Tesla reiterated its belief that a scalable and profitable autonomous vehicle business can be realised through a vision-only architecture with end-to-end neural networks, trained on billions of miles of real-world data. "Since the launch of FSD (Supervised) V12 earlier this year, it has become clear that this architecture long pursued by Tesla is the right solution for scalable autonomy," the company said, while reporting its first quarter results.

Tesla has rolled out FSD (Supervised), which now costs 99 US dollars a month, with a 30-day free trial to eligible cars in U.S. and Canada. It claims the system can change lanes, select forks to follow routes, navigate around vehicles and objects and make turns, as well as park the vehicle. "We are currently working on ride-hailing functionality that will be available in the future," Tesla added.  Source: Tesla collateral

India and US Cutbacks Drag Down Ericsson

Ericsson's networks business reported a 19% organic fall in revenue to 33.7 billion Swedish krona (3.07 billion US dollars) year-on-year for the first quarter of 2024. It blamed reduced operator investment across a number of geographies, but said the sales decline was most pronounced in South East Asia, Oceania and India, with a decrease of 42%. "This was primarily due to a reduction in capex investments in India, after record-high investment levels in 2023, as well as a year-on-year decrease in sales in the Philippines and Malaysia due to timing of project milestones in Q1 2023," Ericsson added. 

Ericsson's network sales in North America declined by 23% year-on-year, reflecting a lower level of 5G capex. But sales increased in Middle East and Africa, driven by a second wave of 5G investments across several markets. IPR licensing revenues also increased. Source: Ericsson statement

Nvidia Heralds Advent of AI Factories

Chip designer and software provider Nvidia reported a 126% increase in revenue for the year ending January 28th to 60.9 billion US dollars.  Data centre revenue for the fiscal 2024 year was 47.5 billion dollars, more than tripling from the prior year. "The world has reached the tipping point of new computing era," Nvidia said. "The 1 trillion dollar installed base of data centre infrastructure is rapidly transitioning from general purpose to accelerated computing. ...At the same time, companies have started to build the next generation of modern data centres, what we refer to as AI factories, purpose built to refine raw data and produce valuable intelligence in the era of generative AI." 

In the fourth quarter, data centre revenue was up 409% year-over-year, driven by the NVIDIA Hopper GPU computing platform, along with InfiniBand end-to-end networking, the company added.

Nvidia said the supply of Hopper architecture products is improving, but it expects its next-generation products to be "supply constrained" as demand far exceeds supply. Fourth quarter data centre growth was driven by both training and inference of generative AI and large language models across a broad set of industries, use cases and regions, Nvidia noted. Source: Nvidia collateral

Apple Points to New Growth Opportunities

Apple said it is now serving an installed base of more than 2.2 billion active devices. For the quarter ending December 30, 2023, it reported services revenue of 23 billion US dollars, up 11% year-over-year, despite there being one less week in the quarter.  Apple said it achieved all-time revenue records across advertising, cloud services, payment services and video, as well as December quarter records in App Store and AppleCare. 

Apple also said its paid subscriptions, which now number more than one billion, showed strong double-digit growth in the quarter.

Speaking the day before the launch of it new Vision Pro headset, Tim Cook, CEO of Apple, said: "We are incredibly excited about the enterprise opportunities with Vision Pro.... Walmart has a very cool merchandising app. There are firms that are doing collaboration -- design collaboration apps. There are field service applications. Really all over the map, there are applications that are for control centre, command centre kind of things. SAP has really gotten behind it and, of course, SAP is in so many of companies." Source: Apple earnings call transcript via Seeking Alpha

Amazon Talks Up Gen AI Opportunity

Amazon believes demand for generative AI (gen AI) is a major opportunity for its cloud business AWS. It has identified three distinct layers in the gen AI stack, "each of which is gigantic and [in] each of which we're deeply investing."

At the bottom layer, customers, who are building their own models, run training and inference on specialised chips. Amazon says customers using its AI chips include Anthropic, Airbnb, Hugging Face, Qualtrics, Ricoh and Snap.

In the middle layer, companies seek to leverage an existing large language model, and customise it with their own data, as a managed service. Amazon said that thousands of customers are already using its new Bedrock proposition in this layer.

The top layer of the stack is the application layer. Amazon has launched Amazon Q, a gen AI application that is intended to be an expert on AWS, and can write, debug and test code, and can also query customers’ various data repositories and answer questions, summarise the data, conduct a coherent conversation, and take action. Source: Amazon earnings transcript

Strong Sales of Meta Smart Glasses

The Ray-Ban Meta smart glasses are off to a very strong start, in terms of both sales and engagement, Mark Zuckerberg, CEO of Meta, told financial analysts.  "Our partner EssilorLuxottica is already planning on making more than we'd both expected due to high demand. Engagement and retention are also significantly higher than the first version of the glasses. The experience is just a lot better with Meta AI in there, as well as a higher resolution camera, better audio, and more. We also have an exciting roadmap of software improvements ahead, starting with rolling out multimodal AI and then some other really exciting new AI features later in the year."

Zuckerberg went on to argue that people are going to "want new categories of devices that let you frictionlessly engage with AIs frequently throughout the day without having to take out your phone and press a button and point it at what you want it to see. I think that smart glasses are going to be a compelling form factor for this."

He admitted that Meta had initially assumed that smart glasses would need to have full displays, support holograms and deliver a sense of presence to become a mainstream product. But "now it seems quite possible that smart glasses that have AI assistants built in will be the killer app, and that the holograms and sense of presence will come later." 

At the same time, Meta reported that its new virtual reality headset, the Quest 3, has got off to "a strong start". Zuckerberg said he expects the Quest 3 to continue to be the most popular mixed reality device (despite the launch of Apple's Vision Pro headset). Source: Meta Q4 earnings call transcript

Regulations Still Require Remote Monitoring of Driverless Cars

Although Baidu has trumpeted “fully driverless vehicles” in China, the Financial Times reported that a visit to the group’s autonomous driving centre in Beijing in June found each robotaxi was remotely monitored by a human sitting in an arcade-like driving station ready to intervene. The monitoring is required by regulators, according to the newspaper, which quoted consultancy Bain as predicting that the current scale of commercial trials means China is tracking towards a “tipping point” of around 2027 for the key technologies to be commercially viable at a large scale. 

Bain expects a similar timeframe for completing the legal framework for liability and insurance and improving the accompanying road and telecoms infrastructure. The Financial Times said the ability of companies to tap into cities’ networks of roadside cameras, traffic lights and other inner-city infrastructure, as well as widespread 5G coverage and digital mapping, is already underpinning industry confidence in China. 

However, a global survey of autonomous vehicle executives by McKinsey found that expectations for commercially-viable robotaxis in the Asia-Pacific region have been extended by a year to 2029 since the previous survey in 2021. (see graphic). 

The Financial Times reported that Waymo, part of the Alphabet group, refused to provide a specific number for how many people remotely monitor each of its self driving cars, which are being piloted in several US cities. However, the US group stressed that its fully autonomous cars were “responsible for making every driving decision on the road and do not rely on a human driver, either in the car or remotely”. 

Sources: Financial Times article and McKinsey report

Alphabet Puts a Spotlight on Subscription Growth

Alphabet generated 15 billion US dollars from subscriptions in 2023, up fivefold since 2019. It said the growth was driven by demand for YouTube Premium and Music, YouTube TV and Google One.

Alphabet's 2023 revenues of 307 billion dollars were up 9% versus 2022, with fourth quarter revenues up 13% year-on-year in both reported and constant currency.

Google Cloud reported a 26% increase in revenues for the fourth quarter to 9.2 billion dollars. It now offers an "AI Hypercomputer" - a supercomputing architecture composed of TPUs (Google’s application-specific integrated circuit for deep learning and machine learning) and GPUs (graphical processing units), AI software and multi-slice and multi-host technology.  Anthropic, Character.ai, Essential AI, and Mistral AI are among the companies building and serving AI models on the architecture. Source: Alphabet earnings transcript

Tesla Anticipates Slower Growth in 2024

Tesla warned that its "vehicle volume growth rate" may be notably lower in 2024 than in 2023, as it works on the launch of a "next-generation vehicle" at its Gigafactory Texas. Tesla said the growth rate of deployments and revenue in its energy storage business should outpace the automotive business in 2024.

In 2023, Tesla delivered 1.8 million vehicles, 38% more than in 2022, including more than 1.2 million Model Ys, making it the best-selling vehicle, of any kind, globally.  Energy storage deployments reached 14.7 GWh in 2023, more than double those in 2022.

In late December, Tesla started rolling out version 12 of its FSD (full self driving) Beta system, which is trained on data collected from more than a million vehicles. The company says the system uses AI to "influence vehicle controls (steering wheel, pedals, indicators, etc.) instead of hard-coding every driving behaviour." It also demonstrated the 2nd generation of its general purpose Optimus humanoid robot, which uses Tesla-designed actuators and sensors and improved AI capabilities. Source: Tesla statement