Alphabet to Invest a Further $5 Billion in Waymo

Alphabet reported a 15% year-on-year rise in revenues to 84.7 billion US dollars for the second quarter of 2024 in constant currencies. It also announced that it would invest a further 5 billion dollars in its self-driving developer Waymo. 

Sundar Pichai, CEO of Alphabet, said: "In Other Bets, I'm really pleased with the progress Waymo is making, a real leader in space and getting rave reviews from users. Waymo served more than two million trips to date and driven more than 20 million fully autonomous miles on public roads. Waymo is now delivering well over 50,000 weekly paid public rides, primarily in San Francisco and Phoenix. And in June, we removed the wait list in San Francisco, so anyone can take a ride. Fully autonomous testing is underway in other Bay Area locations without a human in the driver seat." Source: Alphabet collateral

Energy Business Offsets Automotive Slowdown for Tesla

Tesla said its vehicle volume growth rate may be notably lower in 2024 than the growth rate achieved in 2023, as its teams work on the launch of a "next generation vehicle and other products." It added that the growth in its energy generation and storage business should outpace the automotive business.

Energy generation and storage revenue doubled year-on-year to more than 3 billion US dollars in the second quarter of 2024, while automotive revenues fell 7% to 19.9 billion dollars.

Tesla said "though the timing of robotaxi deployment depends on technological advancement and regulatory approval, we are working vigorously on this opportunity given the outsized potential value." Tesla invested 600 million dollars in AI infrastructure in the second quarter. 

In the second quarter, Tesla rolled out a version of its FSD (Supervised) automation system that primarily relies on eye tracking software to monitor driver attentiveness. The company also said it increased the robustness of its next gen FSD (Supervised) model with substantially more parameters.

Source: Tesla collateral 

Netflix Talks Up Growth Opportunities

Netflix increased its forecast for revenue growth for 2024 slightly from 13% to 15% to 14% to 15%, after reporting revenue growth of 22% on a currency neutral basis for the second quarter to almost 9.6 billion US dollars. Streaming paid memberships rose 17% to almost 278 million worldwide. 

Citing figures from Nielsen, Netflix claimed that, together with YouTube, it accounts for 50% of all streaming to the TV in the US. However, it also stressed it has plenty of scope to grow: "Across streaming, pay TV, film, games and branded advertising, it’s a 600 billion dollar + market, and today Netflix accounts for just ~6% of that revenue." 

Having launched more than 100 games so far, Netflix says it has 80-plus games in development. It is particularly excited about "interactive narrative games", based on its own intellectual property. Source: Netflix collateral

Slump in India Drags Down Ericsson

 

Ericsson reported a 7% decline in sales year on year for the second quarter of 2024 on an organic basis to 59.8 billion Swedish krona (5.6 billion US dollars). Börje Ekholm, CEO, said: “We expect market conditions to remain challenging this year, as the pace of India investments slow, however our sales will benefit during the second half from contract deliveries in North America.”  Source: Ericsson report

Baidu Hails Improving Self Driving Economics

Baidu reported that its self-driving taxi service Apollo Go provided about 826,000 rides to the public in the first quarter of 2024, marking a 25% year-over-year increase. In the first quarter, the rides provided by fully driverless vehicles accounted for over 55% of total rides in Wuhan, which is up from 45% in the fourth quarter of 2023. "This figure continues to rise, exceeding 70% in April, with expectations of sustained rapid growth ahead and reaching 100% in the coming quarters," added Robin Li,  CEO of Baidu.

Baidu claimed that in Wuhan "Apollo Go is gradually becoming an integral part of the city's transportation network." In the past year, Apollo Go's fully driverless fleet in Wuhan has grown threefold, reaching about 300 vehicles today. It plans to increase that number to 1,000 vehicles by the end of 2024.

As it has won the trust of local government, Apollo Go has more than doubled its operational area in Wuhan from a quarter ago, and is now serving a population of over seven million in the city. Its vehicles started to operate 24/7 in Wuhan in early March.

To significantly reduce hardware depreciation costs, Baidu plans to deploy RT6, its sixth generation robotaxi, in its Wuhan Apollo Go operation this year. Adopting a battery swapping solution, the mass production price for RT6 excluding battery is below 30,000 US dollars, according to Baidu. "With the scaling of driverless operations and continuous improvement of cost structure, we believe Apollo Go will achieve operational unit economics breakeven in Wuhan in the near future," added Li.

Baidu is also making its autonomous driving solution, which is solely reliant on vision, available to other automakers.  "This allows us to make advanced autonomous driving attainable across a broad spectrum of passenger vehicles from high-end to economy models priced as low as 150,000 yuan, and it serves as another proof of our technology leadership," Li explained. Baidu said that its ASD technology can now effectively navigate complex, urban environments across more than 100 cities in China and it has plans to expand in to hundreds of cities in the coming months.  Source: Baidu earnings call

IDC Predicts Slowdown in Global Telecoms Market

Worldwide spending on telecom and pay TV services reached 1.5 trillion US dollars in 2023, an increase of 2.1% over 2022, according to International Data Corporation, which expects the market to grow by 1.4% in 2024. Source: IDC press release

Autonomous Driving Start-Up Raises One Billion Dollars

Artificial intelligence start-up Wayve, which is working with various vehicle makers on autonomous driving, said it has raised 1.05 billion US dollars in a series C funding round led by SoftBank Group with contributions from new investor NVIDIA and existing investor Microsoft. The London-based company has now raised 1.3 billion dollars across three rounds. 

Wayve's immediate plans include launching its first product featuring L2+ ADAS (level 2 advanced driver assistance systems).  Its automated driving technology is built with "end-to-end deep learning" and doesn't require high-definition maps, potentially making it more cost-effective and scalable than rival solutions. The start-up believes the ADAS market will be worth more than 100 billion dollars even before full autonomy is reached.

Wayve claims its "technology excels where others have struggled: mastering driving in complex urban environments with camera-only navigation and adapting to cities unseen during training just like how you and I drive."

In a blog post, CEO Alex Kendall wrote: "Since our inception, we have held a core belief that end-to-end AI (see AV2.0 graphic below) will make autonomy possible. This has been a deeply contrarian approach against the rest of the market, and we are excited to see our progress and this funding as a massive endorsement of our vision." The AV1.0 graphic below shows Wayve's view of how other companies are developing autonomous vehicle technologies, although Kendall noted that Tesla has pivoted to end-to-end AI with v12 of its full self driving system.

Comparing "embodied AI" with generative AI, Kendall said that the data collected from vehicles' video, radar and LiDAR systems already amount to several times the petabytes of all the language data in the world. "Every year, millions of vehicles are built with the necessary sensing and compute for training and deploying embodied AI," he added. "These vehicles are already being driven today doing useful work, meaning that data collection can be achieved with low operational cost, unlike with other robotics applications. These vehicles are being operated around the world and experience open-set, unconstrained environments, rich with the long tail of edge cases." Source: Wayve blog post

AT&T Opens Up 5G Priority Lane

AT&T has launched a new product - called AT&T Turbo - which enables customers to pay to prioritise their data traffic (over that of non-Turbo customers) during busy times on the network. Costing seven US dollar a month, Turbo can be activated (and cancelled) at any time by AT&T customers with a 5G-capable smartphone.

However, AT&T cautions that the "performance, experience, and speed [are] not guaranteed and may be affected by other factors such as network congestion, coverage, your device, and third-party limitations." AT&T hasn't said how significant the performance boost provided by Turbo might be.  Source: AT&T web site

Apple Heralds Enterprise Demand for Vision Pro

With iPhone sales in decline, Apple tried to talk up the prospects of its spatial computing hardware - the Vision Pro. CEO Tim Cook said that "more than half of the Fortune 100 companies have already bought Apple Vision Pro units and are exploring innovative ways to use it to do things that weren't possible before, and this is just the beginning." He elaborated to say that the headset is being employed "for many different things in enterprise, and that varies from field service to training to healthcare related things like preparing a doctor for pre-op surgery or advanced imaging..... our focus is on -- is growing that ecosystem and getting more apps and more and more enterprises engaged. And the event that we had recently, I can't overstate the enthusiasm in the room. It was extraordinary. And so we're off to a good start, I think, with the enterprise." Source: Transcript of Apple earnings call

Euro Telcos' Top Lines Under Pressure

 

Despite inflation, the revenues of the big five telcos in Europe has been flatlining for much of this decade. Even Deutsche Telekom, the out performer of the group, is no longer growing reported revenues. In 2023, its revenues from the US (DT's primary growth engine for the past 10 years) declined by 4%, partly due to exchange rate effects and partly because of a decline in device revenue.

Amazon Flags "Unbelievable" Growth Opportunities

Amazon flagged that it plans to "meaningfully increase" capital investment in 2024, primarily to support growth in AWS, including generative AI. Amazon defines capital investment as a combination of capex plus equipment finance leases.  In 2023, overall capital investments were 48.4 billion US dollars. In the first quarter of 2024, Amazon invested 14 billion dollars, which CFO Brian Olsavsky said is likely to be the "low quarter for the year."

AWS increased revenue 16% year-on-year (excluding the impact from the leap year) in the first quarter to 25 billion dollars.  "I think there are really unbelievable growth opportunities in front of us," said Amazon CEO Andy Jassy. "85-plus percent of the global IT spend is on premises. And if you believe that equation is going to flip, which we do, it means we have a lot of growth in front of us, and that's before the generative AI opportunity, which I don't know if any of us have seen a possibility like this in technology in a really long time, for sure, since the cloud, perhaps since the Internet." 

Jassy contended that generative AI workloads are largely going to be built from scratch on the cloud. He said that AWS is already seeing a multibillion-dollar revenue run rate in AI, claiming that tens of thousands of companies are building large language models on top of Amazon Bedrock.  "Those models consume an incredible amount of data with a lot of tokens, and they're significant to actually go train.... and I expect an increasing amount of those to be built on AWS over time because our operational performance and security, as well as our chips, both what we offer from NVIDIA. But if you take Anthropic, as an example, they're training their future models on our custom silicon on Trainium."

As companies bring their large language models into production, AWS will "see significant run rates," Jassy noted. "You spend much more in inference than you do in training because you train only periodically, but you're spinning out predictions and inferences all the time. ... many companies, their models and these generative AI applications are going to have their most sensitive assets and data. And it's going to matter a lot to them what kind of security they get around those applications." Source: transcript of Amazon earnings call

AT&T Talks up Fibre, Talks down FWA

AT&T reiterated its forecast of 3% growth in wireless service revenues and 7% growth in broadband revenues in 2024, despite a fall of 0.4% in group revenues in the first quarter of 2024 to 30 billion US dollars (even with a favourable impact from foreign exchange rates in Mexico). The US telco blamed the fall on lower "mobility equipment" revenues and lower business wireline revenues. 

AT&T also reiterated that it plans to make capital investments of between 21 billion and 22 billion dollars in 2024, down from 23.6 billion in 2023. However, the 2023 figure included 5.7 billion of cash payments for vendor financing (debt repayments). 

"We continue to invest in key growth areas, given the compelling returns on these investments," said Pascal Desroches, CFO of AT&T. "In mobility, we are focused on modernising our network through our Open RAN initiative. And with fibre, we remain on track to pass 30 million-plus consumer and business locations by the end of 2025....As we've stated before, the better-than-expected returns we're seeing on our fibre investment potentially expands the opportunity to go beyond our initial target by roughly 10 million to 15 million additional locations." 

Explaining AT&T's preference for delivering fibre broadband over fixed wireless access (FWA) to residential properties, CEO John Stankey added: "Wireless networks aren't particularly the best place to take the single-family home that streams hours and hours of video a day and try to serve them with a kind of $50 a month product or service." Source: AT&T collateral

Alphabet Forecasts 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