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Former Theranos CEO Elizabeth Holmes leaves after a hearing at a federal court in San Jose, California, July 17, 2019.
Stephen Lam | Reuters

Nearly a decade ago, Elizabeth Holmes was proclaimed the golden girl of Silicon Valley, and briefly crowned America’s youngest female self-made billionaire.

This week, she’ll walk into a San Jose federal courthouse with a very different image: a defendant charged accused of fraud. 

Federal prosecutors in the Northern District of California have accused Holmes and Ramesh “Sunny” Balwani, former Theranos president and for a time her romantic partner, of defrauding investors and patients. They each face two counts of conspiracy to commit wire fraud and 10 counts of wire fraud. Holmes and Balwani, who will be tried separately, pleaded not guilty.

Jury selection in Holmes’ trial will begin Tuesday and is expected to take at least two days, a process that typically takes less than a day in lower-profile cases. Opening statements are scheduled for Sept. 8 and the trial is expected to last 13 weeks.

If convicted, Holmes could face 20 years in prison. Prosecutors say Holmes not only swindled investors of hundreds of millions of dollars, but she also put thousands of lives at risk.

The rise and fall of Theranos

Holmes’ saga began when she had a vision of running hundreds of laboratory tests with just a finger prick of blood. She dropped out of Stanford at age 19 to start Theranos. The idea was to make blood tests cheaper, convenient and accessible to consumers.

The company struck partnerships with Walgreens and the grocery chain Safeway. Her board of directors included luminaries such as former Secretaries of State Henry Kissinger and the late George Shultz and former Secretary of Defense James Mattis.

But Holmes’ vision turned upside down in 2015 after Wall Street Journal reporter John Carreyrou published a series of damning reports exposing the shortcomings and inaccuracies of Theranos’ technology.

Patients were given inaccurate test results relating to conditions such as HIV, cancer and miscarriages.

“She commercialized a medical product that she knew did not work, her machine only did a handful of tests that did not do them well at all,” Carreyrou said in an interview with CNBC last week.

In 2018, Holmes and Balwani were charged with “massive fraud” by the Securities and Exchange Commission. That led to Theranos being dissolved and Holmes settling with the SEC. She agreed to pay $500,000 without admitting or denying the charges. Balwani intends to fight the SEC charges.

The investors

Holmes once had some of the most powerful and wealthiest venture capitalists in America behind her healthcare start-up Theranos.

Investors such as media mogul Rupert Murdoch, former Education Secretary Betsy DeVos, the Walton family of Walmart fame, the Cox family, Patriots owner Robert Kraft and Mexican investor Carlos Slim became so enchanted with her they poured millions into Theranos.

Some of those investors are expected to testify in Holmes’ trial. All of the major investors, who doled out $700 million over the course of a decade, did not respond to CNBC’s request for a comment. Prosecutors allege the investors were swayed by exaggerations and misrepresentations of the blood-testing technology.

“When a deal turns into this, you don’t want to be on that list of investors anymore,” said Kevin O’Leary, chairman of O’Shares ETFs and a judge on CNBC’s “Money Court.”

O’Leary, who said about 20% of his investments have failed, didn’t mince words when asked about the fallout from Theranos investors.

“You can understand how embarrassing it is to get a zero like that,” O’Leary said. “Clearly means you didn’t do your due diligence which all investors know is a mistake. When there’s a really hot deal, what suffers immediately is the diligence process. You’re just questioning if you can get into the deal.”

According to the indictment, prosecutors say there were six wire transfers from unnamed investors that they allege were the result of fraudulent claims about what they were getting in return.

“It’s going to be highly scrutinized and the investors will be dragged back into the press again and shamed for it,” O’Leary said. “I can guarantee you this, it will change nothing. When this is over whatever happens, it will happen again. I guarantee nothing changes in regards to investment in Silicon Valley.”

A Silicon Valley tale

Instead of being an example of Silicon Valley’s best, Theranos turned into a black eye for start-ups.

One of Holmes’ defense strategies may be to blame the so-called “fake it ’til you make it” motto of Silicon Valley. Earlier this year, the judge ruled her defense team can lean on the hype and exaggeration of start-up founders to explain Holmes’ own actions. 

“It’s going to be a wake-up call for venture capitalists and young entrepreneurs in Silicon Valley,” Carreyrou said. “If you go too far, if you push the envelope and hype and exaggerate to the point of lying, it becomes securities fraud.”

However, if she’s found not guilty, some say it could encourage risk taking.

“It’s going to a take guilty verdict to course correct and even a guilty verdict in this case might not be enough,” Carreyrou said.

Mental health defense

Explosive new court documents unsealed just days before jury selection shed light on how Holmes’ lawyers might mount a mental health defense. In the filings, Holmes claims she was the victim of “a decade-long” abuse by Balwani, whom she met when she was 18.

The documents reveal she plans to claim he psychologically, emotionally and sexually abused her. According to one filing, Holmes accused Balwani of throwing sharp objects at her, controlling what she ate, when she slept, how she dressed and monitoring her calls and text messages. Balwani denied the claims.

The court filings also revealed Holmes plans to take the stand in her own defense, a move many legal experts say is a risky one.

“It’s an uphill battle: Balwani may have exercised influence on her, due to his age or prior successes,” said Danny Cevallos, an NBC News legal analyst. “But will she convince a jury that his influence excused her own conduct?”

Today, with her trial repeatedly delayed she’s now the mother of a newborn. Holmes, who once was a ubiquitous presence in the media, stays silent and ignores reporters’ questions every time she enters and exits the courthouse.

That will all change if she does indeed take the stand to finally tell her side of the story.

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Google’s cloud outpaces rivals in third quarter as AI battle heats up

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Google's cloud outpaces rivals in third quarter as AI battle heats up

Alphabet CEO Sundar Pichai speaks at the Munich Security Conference at the Hotel Bayerischer Hof in Munich, Germany, on February 16, 2024.

Tobias Hase | Picture Alliance | Getty Images

With Wall Street laser focused on cloud computing this week, Google outpaced its rivals in growth, a key sign for investors that the internet company is gaining traction in artificial intelligence.

Google’s cloud business, which includes infrastructure as well as software subscriptions, grew 35% year over year in the third quarter to $11.35 billion, accelerating from 29% in the prior period.

Amazon Web Services, which remains the market leader, grew 19% to $27.45 billion, meaning it’s more than twice the size of Google Cloud but expanding about half as quickly. Second-place Microsoft said revenue from Azure and other cloud services grew 33% from a year earlier.

Five of the six trillion-dollar tech companies reported results this week, with AI chipmaker Nvidia as the outlier. Amazon, Alphabet and Microsoft always report around the same time, giving investors a snapshot of how the cloud wars are playing out.

“While Alphabet has often been criticized as a Johnny-one-note 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 recommend buying the stock, wrote in a report on Oct. 31.

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.

Otto: The scale of Alphabet's cloud business, and spend on AI infrastructure, will be critical

The opposite story has been true at Amazon, which has long counted on AWS for the bulk of total profit.

AWS’ operating margin for the 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 2 percentage points.

Microsoft this week started giving investors more accurate readings of its Azure public cloud. When the company reported Azure revenue growth in the past, the number would include sales of mobility and security services and Power BI data analytics software. Microsoft, which is the lead investor in ChatGPT creator OpenAI, is getting a hefty boost from AI services.

“Demand continues to be higher than our available capacity,” Amy Hood, Microsoft’s finance chief, said on the company’s earnings call.

While Azure growth in the current quarter will moderate a bit, Hood said it should pick up in the first half of 2025 “as our capital investments create an increase in available AI capacity to serve more of the growing demand.”

Amazon is seeing a similar dynamic.

“I think pretty much everyone today has less capacity than they have demand for, and it’s really primarily chips that are the area where companies could use more supply,” Amazon CEO Andy Jassy said on his company’s earnings call.

To help ease the burden, Amazon relies to a degree on its own processors, in addition to Nvidia’s graphics processing units (GPUs). Jassy said clients are showing interest in Trainium 2, the company’s second-generation chip for training models.

“We’ve gone back to our manufacturing partners multiple times to produce much more than we’d originally planned,” he said.

Google is now on the sixth generation of its own custom tensor processing units for AI. CEO Sundar Pichai 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.

Microsoft introduced its own AI chip in the cloud, Maia, a year ago. The company has started to use Maia chips to power its own services, but it hasn’t yet made it available for customers to rent out, a spokesperson said.

Analysts at DA Davidson said in a note this week that they don’t see this as a battle Microsoft can win going up against Amazon and Google. They have a neutral rating on Microsoft.

Oracle, which generally ranks fourth among U.S. cloud infrastructure companies, is expected to report quarterly results in December. In its last report, Oracle said cloud infrastructure revenue jumped 45% to $2.2 billion, up from 42% growth in the prior quarter.

Oracle recently partnered with its three bigger cloud rivals to make its databases available on their services, a move that Chairman Larry Ellison said on the last earnings calls, “will turbocharge the growth of our database business for years to come.”

WATCH: Otto: The scale of Alphabet’s cloud business, and spend on AI infrastructure, will be critical

Otto: The scale of Alphabet's cloud business, and spend on AI infrastructure, will be critical

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Nvidia to join Dow Jones Industrial Average, replacing rival chipmaker Intel

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Nvidia to join Dow Jones Industrial Average, replacing rival chipmaker Intel

CEO of Nvidia, Jensen Huang, speaks during the launch of the supercomputer Gefion, where the new AI supercomputer has been established in collaboration with EIFO and NVIDIA at Vilhelm Lauritzen Terminal in Kastrup, Denmark October 23, 2024.

Ritzau Scanpix | Mads Claus Rasmussen | Via Reuters

Nvidia is replacing rival chipmaker Intel in the Dow Jones Industrial Average, a shakeup to the blue-chip index that reflects the boom in artificial intelligence and a major shift in the semiconductor industry.

Intel shares were down 1% in extended trading on Friday. Nvidia shares rose 1%.

The switch will take place on Nov. 8. Also, Sherwin Williams will replace Dow Inc. in the index, S&P Dow Jones said in a statement.

Nvidia shares have climbed over 170% so far in 2024 after jumping roughly 240% last year, as investors have rushed to get a piece of the AI chipmaker. Nvidia’s market cap has swelled to $3.3 trillion, second only to Apple among publicly traded companies.

Companies including Microsoft, Meta, Google and Amazon are purchasing Nvidia’s graphics processing units (GPUs), such as the H100, in massive quantities to build clusters of computers for their AI work. Nvidia’s revenue has more than doubled in each of the past five quarters, and has at least tripled in three of them. The company has sginaled that demand for its next-generation AI GPU called Blackwell is “insane.”

With the addition of Nvidia, four of the six trillion-dollar tech companies are now in the index. The two not in the Dow are Alphabet and Meta.

While Nvidia has been soaring, Intel has been slumping. Long the dominant maker of PC chips, Intel has lost market share to Advanced Micro Devices and has made very little headway in AI. Intel shares have fallen by more than half this year as the company struggles with manufacturing challenges and new competition for its central processors.

Intel said in a filing this week that the board’s audit and finance committee approved cost and capital reduction activities, including lowering head count by 16,500 employees and reducing its real estate footprint. The job cuts were originally announced in August.

The Dow contains 30 components and is weighted by the share price of the individual stocks instead of total market value. Nvidia put itself in better position to join the index in May, when the company announced a 10-for-1 stock split. While doing nothing to its market cap, the move slashed the price of each share by 90%, allowing the company to become a part of the Dow without having too heavy a weighting.

The switch is the first change to the index since February, when Amazon replaced Walgreens Boots Alliance. Over the years, the Dow has been playing catchup in gaining exposure to the largest technology companies. The stocks in the index are chosen by a committee from S&P Dow Jones Indices.

WATCH: Nvidia leaps and bounds ahead of AMD

Nvidia is leaps and bounds ahead of AMD on the AI story, says Susquehanna's Christopher Rolland

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Super Micro’s 44% plunge this week wipes out stock’s gains for the year

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Super Micro's 44% plunge this week wipes out stock's gains for the year

Charles Liang, chief executive officer of Super Micro Computer Inc., during the Computex conference in Taipei, Taiwan, on Wednesday, June 5, 2024. The trade show runs through June 7. 

Annabelle Chih | Bloomberg | Getty Images

Super Micro investors continued to rush the exits on Friday, pushing the stock down another 9% and bringing this week’s selloff to 44%, after the data center company lost its second auditor in less than two years.

The company’s shares fell as low as $26.23, wiping out all of the gains for 2024. Shares had peaked at $118.81 in March, at which point they were up more than fourfold for the year. Earlier that month, S&P Dow Jones added the stock to the S&P 500, and Wall Street was rallying around the company’s growth, driven by sales of servers packed with Nvidia’s artificial intelligence processors.

Super Micro’s spectacular collapse since March has wiped out roughly $55 billion in market cap and left the company at risk of being delisted from the Nasdaq. On Wednesday, as the stock was in the midst of its second-worst day ever, Super Micro said it will provide a “business update” regarding its latest quarter on Tuesday, which is Election Day in the U.S.

The company’s recent challenges date back to August, when Super Micro said it would not file its annual report on time with the SEC. Noted short seller Hindenburg Research then disclosed a short position in the company and wrote in a report that it identified “fresh evidence of accounting manipulation.” The Wall Street Journal later reported that the Department of Justice was in the early stages of a probe into the company.

Super Micro disclosed on Wednesday that Ernst & Young had resigned as its accounting firm just 17 months after taking over from Deloitte & Touche. The auditor said it was “unwilling to be associated with the financial statements prepared by management.”

A Super Micro spokesperson told CNBC that the company “disagrees with E&Y’s decision to resign, and we are working diligently to select new auditors.” Super Micro does not expect matters raised by Ernst & Young to “result in any restatements of its quarterly financial results for the fiscal year ended June 30, 2024, or for prior fiscal years,” the representative said.

Analysts at Argus Research on Thursday downgraded the stock in the intermediate term to a hold, citing the Hindenburg note, reports of the Justice Department investigation and the departure of Super Micro’s accounting firm, which the analysts called a “serious matter.” Argus’ fears go beyond accounting irregularities, with the firm suggesting that the company may be doing business with problematic entities.

“The DoJ’s concerns, in our view, may be mainly about related-party transactions and about SMCI products ending up in the hands of sanctioned Russian companies,” the analysts wrote.

In September, the month after announcing its filing delay, Super Micro said it had received a notification from the Nasdaq indicating that its late status meant the company wasn’t in compliance with the exchange’s listing rules. Super Micro said the Nasdaq’s rules allowed the company 60 days to file its report or submit a plan to regain compliance. Based on that timeframe, the deadline would be mid-November.

Though Super Micro hasn’t filed financials with the SEC since May, the company said in an August earnings presentation that revenue more than doubled for a third straight quarter. Analysts expect that, for the fiscal first quarter ended September, revenue jumped more than 200% to $6.45 billion, according to LSEG. That’s up from $2.1 billion a year earlier and $1.9 billion in the same fiscal quarter of 2023.

WATCH: I don’t know if Super Micro is guilty or innocent, says Jim Cramer

I don't know if Super Micro is guilty or innocent, says Jim Cramer

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