Tech Brew Ride Home - Mon. 11/04 – Apple Buying And Investing In Things

Episode Date: November 4, 2024

Apple is investing more in Satellite technology, and also acquires Pixelmator. What does this all mean for them? Is the high end Vision Pro getting abandoned? What does it mean that Google Cloud is now growing faster than AWS? And how Coreweave and other “neocloud” startups are financing their crazy growth in a totally new way. Here’s what you missed today in the world of Tech. Sponsors: Miro.com MackWeldon.com promocode BRIAN Links: Apple expands iPhone satellite services deal, commits $1.1bn to expand capacity (9to5Mac) Apple is acquiring the popular image editing app Pixelmator (The Verge) Apple Finally Finds Its Gaming Console With the New Mac Mini (Bloomberg) Apple Vision Pro rumored to get M5 in 2025, but lower cost model is delayed (Apple Insider) X updates block feature, letting blocked users see your public posts (TechCrunch) Google’s cloud outpaces rivals in third quarter as AI battle heats up (CNBC) Early Apple M4 Pro and M4 Max benchmarks hint at a massive performance boost (Neowin) Wall Street frenzy creates $11bn debt market for AI groups buying Nvidia chips (Financial Times) Learn more about your ad choices. Visit megaphone.fm/adchoices

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 Tech meme right home for Monday, November 4th, 2024. I'm Brian McCullough today. Apple is investing more in satellite technology and also acquires pixel mature. What does this all mean for them? Is the high-end Vision

Pro getting abandoned? What does it mean that Google Cloud is now growing faster than AWS and how Corweave and other Neo-Cloud startups are financing their crazy growth in a totally new way? Here's what you miss today in the world of tech. So we need to talk a bit of Apple MNA and some investing. First up, satellite services provider Global Star says Apple committed $1.1 billion to expand satellite service capacity and $400 million to buy a 20% equity stake. Quoting 9 to 5 Mac. The news has sent Global Star stock soaring and it hints towards Apple's growing plans for iPhone satellite features. With iOS 18, for instance, iPhone users are now able to send text messages to friends and family over satellite when outside of cellular or Wi-Fi range. Apple continues to

commit significant financial resources to providing satellite features while offering the feature for free to end users. However, it has repeatedly signaled that it intends to charge fees to iPhone users at some point. Satellite connectivity for emergency SOS first launched with the iPhone 14 in 2022. At the time, Apple said that satellite would be free for two years. That means customers would have had to start paying around now in late 2024. However, Apple extended the free period until 2025. Apple has yet to confirm how much it intends to charge for the satellite features. It's a hairy subject, as much of the current offering relies on using satellite during life-threatening emergencies, which feels rather punitive for Apple to charge for it. It is possible a company will continue to offer emergency

SOS for free while charging for other features, like the ability to share location in FindMai or the new iOS 18 capability to send text messages over satellite recreationally. Others have speculated satellite service may be rolled into the Apple One bundle or be offered through mobile carrier add-ons, end quote. Interesting that Apple keeps expanding its interest in satellite connectivity without anyone really understanding what the endgame is. Will they charge for this eventually? Could they be trying for their own Starlink-like service somewhere down the road? Ditch your carrier, go with Apple as your service provider. Unclear. And then, popular photo editing company Pixel Mature says Friday that it signed an agreement to be acquired by Apple pending regulatory approval, quote, to reach an even

wider audience, quoting the verge. No details about the deal were revealed, except that it is still pending subject to regulatory approval of Apple buying the Lithuanian company. That can be tricky, though, while Microsoft successfully swallowed up Activision Blizzard, deals that melted under regulatory pressure include Nvidia and Arm, Amazon and IRobot, and more recently Adobe and Figma. After Apple acquired the popular weather app Dark Sky in 2020, it shut down the app in 2022 and integrated its tech with the first-party weather app. Still other software packages acquired by Apple like Final Cut and Logic Pro remain available many years after they were bought.

Over the years, PixelMator Pro has become a viable and far cheaper alternative to Adobe Photoshop as it's available for a one-time payment of $4999. It offers a robust suite of tools for editing and retouching photos, creating designs, drawing, and more. The app's most recent update reworked its masking process and added the ability to hide-in images background with AI, end quote. In a statement, PixelMaitour said there will be no material changes to its apps or operations at this time. Emphasis mine.

Mark German notes that this comes along 10 years to the day since Apple made its last update to Aperture. Quote, for those unfamiliar, PixelMaitour is essentially the modern high-end photo editing app that Apple would have created if it had the resources and desire to do so. From the features to the icons, to the app interface, to the website, PixelMaitour has the feel of a company that's already owned by Apple. PixelMatour has assured users that its products won't change in the near future, but here's my guess for further out.

The software becomes something like Photos Pro and gets offered as a subscription on the App Store alongside new iPad programs like Final Cut Pro and Logic Pro. That means Apple will once again have both consumer and higher-end iterations of its video, music and photo editing apps with photos, garage band, and iMovie serving as the free downscale versions. Given Apple's push to boost services revenue, I think you can rule out it giving away PixelMator features for free in its current Photos app, end quote. One more Apple story real quick, and I can do this one just by reading the tweet. It comes from Ming Chi Quo, quote,

As I understand it, production of the cheaper Vision Pro has been delayed beyond 2027 for a while now, This means Apple's only new head-mounted display device in 2025 will be the Vision Pro with an upgraded M5 processor. I think what really drove Apple to delay the cheaper Vision Pro is that simply reducing the price wouldn't help create successful use cases. It's similar to the HomePod situation. Even after launching the cheaper HomePod Mini, Apple's smart speakers failed to become mainstream products, end quote. As 9 to 5 Mac says, quote, seemingly Apple believes that a $2,000 headset wouldn't necessarily expect. the reach of VisionOS, end quote. And quoting Apple Insider. Quote does not say whether this news comes from his industry sources or is once again solely his extrapolation from his experience covering Apple.

However, his projection about plans being revamped for the lower cost Apple Vision Pro is backed up by a Bloomberg report. That report claims that Apple is seriously considering developing a cheaper Apple Vision headset that offloads most, if not all of the computing duties to the user's iPhone. such a device might look more like existing AR smart glasses, end quote. Well, if devs were hesitant to develop for the Vision Platform, this will make them even more hesitant, right, which makes it even less likely to succeed. Negative loop there. What if Apple saw the demo of Meta's Orion looked at their timeline for how the Vision

Pro was going to move down market in terms of cost and realized Meta might get there before them? Are they pivoting towards going more toward the Orion Vision first and fill out the Spex Second, unclear. X has started rolling out that update that was seemingly driving a lot of people to blue sky and other places. After this update, users will be able to see public posts and following and followers lists of users who block them. Blocked users still can't engage or DM, but quoting TechCrunch. The social network said its logic behind this change was that the block feature can be used to share and hide harmful or private information about someone,

and its new iteration would result in more transparency. This mostly falls flat, given that X allows users to make their accounts private and share information. X's take on the block feature goes against how it's been implemented conventionally, and when the company announced its intention to revamp it, many argued that the change would encourage stalking and make it easy for people to harass users. Software engineer and tech diversity advocate Tracy Chow has built an app that lets users automate blocking, saying that even though users can get around the block by creating other accounts, friction matters. making it easy for the creeper to creep is not a good thing, she said in a post on X last month, end quote.

I wanted to note this important tipping point in a particular horse race. In Q3, Google Cloud revenue grew 35% year-on-year to $11.35 billion, and it had a 17% operating margin, thereby outpacing AWS's 19% year-on-year revenue growth to $27.45 billion, and 38% operating margin. quoting CNBC. AWS, which remains the market leader, is more than twice the size of Google Cloud, but expanding about half as quickly. While Alphabet has often been criticized as a Johnny OneNote for its dependence on digital advertising, the rapid growth of Google Cloud has begun to diversify the company's revenue analysts at Argus Research, who recommended buying the stock wrote in a report on October 31st.

For a long time, cloud was a money sink for Google, but that's no longer the case. Google reported a 17% cloud operating margin in the third quarter after first turning a profit last year. It was a real beat to expectations there. Melissa Otto, head of technology, media and telecommunications sector research at Visible Alpha, said on CNBC this week. She said she isn't sure if the company can sustain that level of profitability. The opposite story has been true at Amazon, which has long counted on AWS for the bulk of total profit. AWS's operating margin for the third quarter was 38%, which analysts at Bernstein described as a whopping number. Executives have been careful with hiring and have discontinued less popular AWS services. Also, at the beginning of 2024, Amazon extended the useful life of its servers from five years to six,

a change that boosted the operating margin by 200 basis points or to percentage points. Google is now on the sixth generation of its own custom tensor processing units for AI. CEO Sundar Pachai told analysts that he'd been spending time with the, TPU team. I couldn't be more excited at the forward-looking roadmap, but all of it allows us to both plan ahead in the future and really drive an optimized architecture for it, he said, end quote. And another interesting milestone, Apple's new M4 Max chip has scored 4,060 in single-core test, making it the first production CPU to cross 4,000 on the GeekBench test. Quoting Neo-Win. According to GeekBench, the Apple M4 Pro processor,

aka Mac 167, has scored 3,925 in single-core, and 22,669 in multi-core tests. The alleged chip has 14 cores and is clocked at 4.51 gigahertz with 48 gigabytes of RAM, which matches the M4 Pro specification. Assuming this information is correct, the M4 Pro can smoothly outperform Mac Studio with the M2 Ultra. Despite boasting 24 cores, the Apple M2 Ultra has scored 2,77 in single-core, and 21,471 in multi-core tests. When it comes to Apple M4Max, the figures get even better. As GeekBench suggests, the M4 Mac processor, aka Mac 165,

has scored 4,060 in single-core tests, making it the first production CPU to achieve over 4,000 in GeekBench 6. As for the multi-core test, the chip sits at 26,675, which is, again, a significant leap compared to the M2 Ultra. The tested chip set features 16 cores, and 128 gigabytes of RAM. For now, we should take this information with a pinch of salt as they're not official yet and might be fake. We could have a better judgment once we get our hands on the M4 Mac devices in November.

However, the specifications do seem to align with Apple's promises and claims during the announcement, end quote. Finally today, here are recent headlines from GPU provider and NeoCloud Startup CoreWeave from just the last month. They told investors they have signed contracts worth $17 billion, including around $10 billion from Microsoft for 2023 and it expects revenue to grow $4x to $8 billion in 2025. And they announced a new $650 million credit line and raised $12.7 billion from equity and debt investors in the past 18 months. And that's what I want to touch on here, how Blackstone, Pimco, Carlisle, BlackRock, and others have loaned that $11 billion plus to

Corweave, Caruso, and other neocloud companies, thereby creating a lucrative new debt market. Quoting the Financial Times, Wall Street's largest financial institutions have loaned more than $11 billion to a niche group of tech companies based on their possession of the world's hottest commodity, Nvidia's artificial intelligence chips. Blackstone, Pimco, Carlisle, and BlackRock are among those that have created a lucrative new debt market over the past year by lending to neocloud companies which provide cloud computing to tech groups building AI products. Neocloud groups such as Corweave, Caruso, and Lambda Labs have acquired tens of thousands of Nvidia's high-performance computer chips known as GPUs that are crucial for developing generative AI

models. Those Nvidia chips are also now being used as collateral for huge loans. The frenzy dealmaking has shown a light on a rampant GPU economy in Silicon Valley that is increasingly being supported by deep-pocketed financiers in New York. However, its rapid growth has raised concerns about the potential for more risky lending, circular financing, and Nvidia's chokehold on the AI market. The $3 trillion tech group's allocation of chips to Neo-Cloud groups has given confidence to Wall Street lenders to lend billions of dollars to the companies that are then used to buy more Nvidia chips. Invidia is itself an investor in neocloud companies that, in turn, are among its largest customers. Critics have questioned the

ongoing value of the collateralized chips as new advanced versions come to market, or if the current high spending on AI begins to retract. The lenders all coming in push the story that you can borrow against these chips and add to the frenzy that you need to get in now, said Nate Koppakar, a shortseller at hedge fund or so partners, but chips are a depreciating, not appreciating, asset, end quote. New Jersey-based Corweave, the largest neocloud company, began amassing chips when it launched in 2017 to mine cryptocurrency, but pivoted to AI two years later. The company now claims to be the largest private operator of Nvidia GPUs in North America with more than 45,000 chips. Corweave's initial success with securing GPU capacity from Nvidia at exactly the

moment when ChatGBT and AI hit its Cambrian explosion, said an executive at one of its largest investors. Backed by venture capitalists and Nvidia, its valuation has soared from $2 billion to $19 billion in the past 18 months. The company is planning an initial public offering in the first half of 2025 that could value it even higher, said several people close to the company. debts are secured against Corweave's stock of Nvidia GPUs and the capital is used to buy thousands more. It plans to have 28 data centers across the U.S. and Asia by the end of 2024 nine times its footprint at the start of last year. The financing means Corweave is extremely highly leveraged when it announced its first $2.3 billion debt financing in August

2023, which included about $1 billion of loans from Blackstone. It had annual revenues of just $25 million and negative EBITDA of roughly $8,000. said to people close to the company. Revenues have since surged to about $2 billion this year, one of the people said. Neoclouds are highly dependent on their relationship with Nvidia. For example, Corweave was able to get access to tens of thousands of H-100 chips as a preferred partner of the chip giant, but its future growth is reliant on having the same access to Nvidia's newer Blackwell chips. Invita has denied it gives preferential access to its chips to any customer, including those that it invests in. We don't help anybody jump the QVILA.

Q, Mohamed Sedek, head of Nvidia's venture capital unit and ventures told the FT last year. It's a good thing from a lender's perspective, said one of the bankers on the debt deals. They have control the whole way up the supply chain. That's a good thing as NVIDIA won't let things get too bad, end quote. But the price of GPU's trading in some markets has crashed in recent months. An hour of GPU compute now trades at about $2 down from $8 earlier this year. Some tech giants are developing their own AI chips, while rival. such as AMD have also been racing to release their own high-performance GPUs to challenge

Nvidia's supremacy. A year ago, having access to GPUs was like having a golden ticket to Willy Wonka's factory, said a senior executive at one of the large lenders to Corweave. That's no longer the case, end quote. Nothing more for you today. Talk to you tomorrow.