Tech Brew Ride Home - Fri. 07/31 – Nvidia In Talks To Buy Arm?

Starting point is 00:00:00 On April 4th, 2023, around 2 in the morning, a man was found stabbed multiple times on a sidewalk in downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, the Killing of Bob Lee, beginning April 16. Welcome to the TechMeme ride home for Friday, July 31st, 2020. I'm Brian McCullough today. Sources say Nvidia is in talks to buy arm. Music videos are coming to Facebook in a major way. The iPhone is delayed a tiny bit. A rundown of the earnings reports. TLDR, Apple made a ton of money when people thought they wouldn't, but Alphabet shrunk for the first time ever.

Starting point is 00:00:55 And of course, the weekend long read suggestions. Here's what you miss today in the world of tech. I think we speculated on this as a possibility, right? Sources are telling the financial times that NVIDIA is in talks to buy arm from SoftBank in a cash and stock deal, quoting the Financial Times. The talks began in recent months after Nvidia approached SoftBank, which had been pursuing a series of other asset sales about a potential acquisition of the UK's most valuable tech company.

Starting point is 00:01:28 There's no guarantee that the discussions will result in a sale, the people cautioned, adding there were a number of issues pertaining to a deal that would need to be resolved. The exact details of price and structure were not given, but these people confirmed. The proposed deal included both cash and stock that valued arm at above the $32 billion price that SoftBank paid for the business in 2016. Using stock would allow Nvidia to take advantage of the 151% rally in its share price during the past year. Invidia's market value has risen to $261 billion in that time, overtaking its much older rival Intel. Buying Arm would further consolidate NVIDIA's position at the center of the semiconductor industry

Starting point is 00:02:07 at just the moment when the British chip designer's technology is finding broader applications beyond mobile devices in data centers and personal computers, including Apple's Macs. Arm would transform NVIDIA's product lineup, which until now has largely focused on the high end of the chips market. Its powerful graphics processors, which are designed to handle focused data-intensive tasks, are typically sold to PC gamers, scientific researchers, and developers of artificial intelligence, and self-driving cars, as well as cryptocurrency miners. The deal could alarm arms other big licensees, including Apple, Broadcom and Qualcomm, which may fear a unique asset being taken

Starting point is 00:02:46 over by a potential competitor, such as Nvidia, end quote. Sources are telling Bloomberg that Facebook has made deals with Sony, Universal Music group and Warner Music for the rights to show music videos on the Facebook platform and has even approached artists about purchasing the exclusive rights to air videos. Quote, music videos are one of the most popular genres on Alphabet's YouTube, and Facebook has long sought the legal rights to allow its billions of users to watch and share them on its platform. Facebook had previously inked deals with rights holders in order to use the audio, useful

Starting point is 00:03:26 when people upload clips that include background music, for example, but didn't have permission to show the official videos. Now Facebook has approached some artists and music companies about acquiring exclusive rights to some music videos, even if just temporarily, the people said. In some cases, Facebook has said it would be willing to pay the video production costs and that it would promote the video on its service to increase viewership, they said. A Facebook spokesperson declined to comment, end quote. So I guess an effort to undercut YouTube, but also maybe a swipe at TikTok too, right? We'll get to the earnings in a second. but one important detail from Apple's earnings report yesterday, Apple had to confirm that new iPhone models will arrive a few weeks later than they have in recent years.

Starting point is 00:04:17 Quoting Axios, the move means some revenue that typically comes at the end of September won't come until the final quarter of the year, but also reassures investors and customers that the delay won't be longer. Qualcomm had said yesterday that its results would be impacted by a key customer having a delayed global launch, for its 5G flagship, so it's fair to infer that at least some new iPhones will support 5G as expected, end quote. So don't expect your iPhone in September, but Apple does have priors for brief delays like this. In 2017, the iPhone 8 was announced in September, but didn't ship until November. And same with the 10R, which didn't ship until October. So not the end of the world, but worth noting. All right, the big day of earnings yesterday. As I said, I'm going to try to just graze the top level and then circle back for the broader narrative as opposed to digging deeply into all of the numbers. The biggest news comes from Apple with revenue up 11%. Apple beat on expectations,

Starting point is 00:05:27 selling more iPhones than analysts predicted, and services hit an all-time record of $13.16 billion. dollars. And Apple announced a four-for-one stock split. That all sent Apple's stock price up enough this morning that briefly Apple became the most valuable company in the world again. It's session high market cap of $1.762 billion briefly eclipsed Saudi Aramco oil companies, $1.759 billion market cap, and so Apple's King of the Hill again, at least momentarily. Nine to five Mac summed up the Apple's earnings story the best, I thought, quote. The assumption was that disrupted supply chains, store closures, and an economic downturn would all hit sales of Apple products. It turned out they were half right, but also very wrong. Analysts thought Apple's revenue would be down year-on-year.

Starting point is 00:06:20 Philip Elmer DeWitt's round-up showed that the average estimate for the professional analyst was $51.91 billion in revenue, or around $2 billion down on the previous year. The result, of course, was very different. Apple announced record Q3 revenue of $59.7 billion. Analysts were right that the pandemic would affect Apple's revenue, but totally wrong about the nature of that impact. Far from people spending less money on Apple's Q3, people spent very much more. The reason, as CFO Luca Mastry mentioned in the call, is that working and studying from home meant people bought Macs and iPads to facilitate that. It's clear to us our products are very relevant to our customers' lives and the pandemic has them more relevant than ever before,

Starting point is 00:07:04 Bastry said. Working from home, online learning, both trends are helpful, end quote. CEO Tim Cook echoed this in an interview with Bloomberg, quote, Cook said the pandemic likely boosted iPad and Mac sales due to lockdown rules and an increase in remote learning. This appears to be quite the understatement. Mac sales were up 21% year on year and iPad sales were up a massive 31%. end quote. With Amazon, the story was still making bank, just more bank. Q2 revenue was up 40% year over year, and net income was a whopping $5.2 billion, more than double Q1's profits. So remember the days when people used to snark about how Amazon never really made any profit, or only allowed

Starting point is 00:07:50 itself to make a sliver of profit, those days are definitively over. One small note that for the first time, 2015, AWS wasn't Amazon's fastest growing segment, as growth at AWS slowed from 33% to 29%. The story at Facebook is also still making bank, revenue up 11%, but net income was up 98% year over year, and there's a real pandemic effect to report with Facebook. Daily active users and monthly active users were both up 12%. CEO Mark Zuckerberg warned that that level of engagement might not last after the pandemic wanes. Oh, and P.S., Facebook was able to report that ad revenue grew despite the much-ballyhood ad boycott. But the other big narrative of the day was Alphabet, which saw its first revenue decline in history, down 2% on the quarter. Net income

Starting point is 00:08:47 dropped to around $7 billion from around $10 billion, though cloud revenue was up 43%. Let me let the financial times sum up the alphabet situation. Basically, the pandemic hit them hard. Quote, despite the unprecedented falloff in its core business, however, Google executives said conditions had improved as the quarter progressed and offered cautious optimism for a return to growth in the current period. Sundar Pichai, Chief Executive said Google had seen, quote, the early signs of stabilization as users returned to commercial activity online, end quote. Ruth Parrott, Chief Financial Officer, added that the search advertising business had ended the quarter with revenue roughly flat compared to the previous year and had also seen a, quote,

Starting point is 00:09:30 modest improvement in July. The advertising business is closely tied to the broader economy, she added, and fragile conditions left the outlook uncertain in the months ahead. Google's advertising is heavily dependent on small and medium-sized businesses, which have been the hardest hit in the downturn. The advertising decline was partially offset by a 6% increase at YouTube, where some improvement in demand for brand advertising lifted revenue to 3.8. billion dollars, end quote. Time for the weekend long read suggestions. And I continue to be fascinated by GPT3 and how fascinated people themselves are by it.

Starting point is 00:10:10 So I loved this piece from Daly Nouse where they interviewed a bunch of actual philosophers on what they think of GPT3 and the whole implications therein. They also got GPT3 to respond to the philosophers, literally respond. on because that's what GPT3 can do. For example, here is David Chalmers, Professor of Philosophy at New York University discussing the technology. Quote, GPT3 is instantly one of the most interesting and important AI systems ever produced. This is not just because of its impressive conversational and writing abilities. It was certainly disconcerting to have GPT3 produce a plausible-looking interview with me. GPT3 seems to be closer to passing the Turing test than any other system

Starting point is 00:10:55 to date, although closer does not mean close. But this much is basically an ultra-polished extension of GPT-2, which was already producing impressive conversations, stories, and poetry. More remarkably, GPT-3 is showing hints of general intelligence. Previous AI systems have performed well in specialized domains, such as game-playing, but cross-domain general intelligence has seemed far off. What fascinates me about GPT-3 is that it suggests a potential mindless path to artificial general intelligence, or AGI.I. GPT3's training is mindless. It is just analyzing statistics of language. But to do this really well, some capacities of general intelligence are needed, and GPT3 develops glimmers of them. It has many

Starting point is 00:11:39 limitations, and its work is full of glitches and mistakes, but the point is not so much GPT3, but where it is going. Given the progress from GBT2 to GBT3, who knows what we can expect from GPT4 and beyond, end quote. Next, Kislae Verma has an interesting essay up, arguing that when companies have too many smaller teams slicing problems too thinly, they face high coordination costs as teams end up becoming too dependent on each other. In a highly collaborative setup, the correct way of looking at an organization is like a factory floor. Theory of constraints tells us that the only way to increase output in this situation is to broaden

Starting point is 00:12:21 the bottlenecks and widen the entire flow of work from conception to final delivery to the customer. But when we look at each step individually and out of context of the rest of the pipeline, delivery takes on very different meanings. It just means out of my door. Any attempts to improve output with such a perspective will only create local maxima, which means nothing for the final output. It may even be detrimental. This is where we end up with too many small teams which are only looking at their little slice of work. That is what they are incentivized to do. If the outputs of our teams are arranged sequentially. They are not autonomous in delivery,

Starting point is 00:13:00 no matter how independent they might be in their day-to-day work, end quote. Now a quick bit of rando data that you can take or leave since it's only one data point, but I thought it was worth noting. The Indeed Hiring Lab has some data up suggesting that, well, let me just quote, quote, at the beginning of the crisis, tech job postings initially fared better than overall postings. That may be because lots of tech work doesn't require much face-to-face interaction. What's more, some tech companies already had remote work policies in place, making it easy to scale up work from home. However, as the pandemic progresses, tech postings are now performing worse than the overall job market. Tech postings started to fall behind in mid-May,

Starting point is 00:13:45 and since then, the gap has grown steadily. On July 24th, the overall job posting trend was 21% below its 2019 level, but tech jobs were harder hit, settling at 36% below last year's level for weeks and showing no signs of bouncing back, end quote. Graphs and charts galore in the piece. As for workers in the rest of the economy, 1-0 says that the gig economy is failing in COVID times, increasingly replaced by the hustle economy, as unemployed teachers, dancers and the like, are turning to Patreon, Twitch-only fans, and the like to, you know, try to make a living. Quote, the digital subscription platform Patreon, once home mainly to YouTubers and podcast hosts, has also become an ad hoc safety net for thousands of teachers, cashiers, line cooks,

Starting point is 00:14:39 and hairstylists who lost work with the onset of stay-at-home orders. It wasn't just Patreon either, which added more than 100,000 new users between mid-March and July. Only fans reported daily six-figure signups on its popular cam site, and Etsy logged 115,000 new sellers in the first three months of the year, more than double the past two years user growth. Teachable, which lets people make and sell online courses, signed on 14,000 new creators between March and July, and in July reported its first quarterly revenue over $10 million, end quote. And finally, I think I've raised the alert about... this before, but in-car cameras and AI systems are coming to our cars, but I'm talking about cameras and AI systems aimed inward, aimed at the drivers and the passengers, not outwards in order to drive for us. The idea here is to keep us safer while we still have human drivers by

Starting point is 00:15:38 alerting the humans when they're not so alert. But aside from waking drowsy drivers, there's tons of stuff a ton of companies want to do. with this new data source, quote, over the next two years, companies like Serentz, Effectiva, Expeirai, and Iris, planned to roll out a motion and object-detecting systems for cars in partnership with many of the world's largest automakers, according to company documents and interviews with executives. Their plans are bolstered by a European Union law, mandating that all new cars be equipped with at least rudimentary driver monitoring by mid-2020, and a similar bill recently

Starting point is 00:16:15 introduced in the U.S. Senate. To the public and to legislators, automakers market the systems as safety features. If a car can detect that a driver is angry or looking at their phone immediately before a crash, these companies reasoned the onboard AI may be able to offer a warning the next time it senses similar behavior. Or if it can determine how a child is positioned in the backseat, the car might deploy airbags more effectively in the event of a collision. But safety is only one attraction of in-cabin monitoring. The system also holds huge potential for harvesting the kind of behavioral data that Google, Facebook, and other surveillance capitalists have exploited to target ads and influence purchasing habits. Automakers and advertisers have come to a vast realization that as cars become more autonomous and embedded with screens, quote, many passengers in your vehicle are kind of a captive audience in an entertainment context.

Starting point is 00:17:08 Gabby Zidreveld, Effectiva's chief marketing officer told motherboard, end quote. That's all for today. As I say, I'm going to try to get the descript thing going this weekend so we can test that out next week. No weekend bonus episode this weekend, but we've got one in the pipeline. Enjoy the first dog days of August, everybody. Talk to you on Monday.

Tech Brew Ride Home - Fri. 07/31 – Nvidia In Talks To Buy Arm?

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