Apple to announce new iPhones, Apple Watch and AirPods on Tuesday
Microsoft Chief Executive Officer (CEO) Satya Narayana Nadella speaks at a live Microsoft event in the Manhattan borough of New York City, October 26, 2016.
Lucas Jackson | Reuters
Microsoft‘s Build developer conference kicks off on Tuesday, giving the company the opportunity to showcase its latest artificial intelligence projects, following high-profile events this month hosted by OpenAI and Google.
One area where Microsoft has a distinct advantage over others in the AI race is in its ownership of Windows, which gives the company a massive PC userbase.
Microsoft CEO Satya Nadella said in January that 2024 will mark the year when AI will become the “first-class part of every PC.”
The company already offers its Copilot chatbot assistant in the Bing search engine and, for a fee, in Office productivity software. Now, PC users will get to hear more about how AI will be embedded in Windows and what they can do with it on new AI PCs.
Build comes days after Google I/O, where the search giant unveiled its most powerful AI model yet and showed how its Gemini AI will work on computers and phones. Prior to Google’s event, OpenAI announced its new GPT-4o model. Microsoft is OpenAI’s lead investor, and its Copilot technology is based on OpenAI’s models..
For Microsoft, the challenge is twofold: keeping a prominent position in AI and bolstering PC sales, which have been in the doldrums for the past two years following an upgrade cycle during the pandemic.
In a recent note on Dell to investors, Morgan Stanley analyst Erik Woodring wrote that he remains “bullish on the PC market recovery” due to commentary from customers and recent “upward revisions to notebook” original design manufacturer (ODM) builds.
Technology industry researcher Gartner estimated that PC shipments increased 0.9% in the quarter after a multi-year slump. Demand for PCs was “slightly better than expected,” Microsoft CFO Amy Hood said on the company’s quarterly earnings call last month.
New AI tools from Microsoft could offer another reason for enterprise and consumer customers to upgrade their aging computers, whether they’re made by HP, Dell or Lenovo.
“While Copilot for Windows does not directly drive monetization it should, we believe, drive up usage of Windows, stickiness of Windows, customers to higher priced more powerful PCs (and therefore more revenue to Microsoft per device), and likely search revenue,” Bernstein analysts wrote in a note to investors on April 26, the day after Microsoft reported earnings.
While Microsoft will provide the software to handle some of the AI tasks sent to the internet, its computers will be powered by chips from AMD, Intel and Qualcomm for offline AI jobs. That could include, for example, using your voice to ask Copilot to summarize a transcription without a connection.
What’s an AI PC?
The key hardware addition to an AI PC is what’s called a neural processing unit. NPUs go beyond the capabilities of traditional central processing units (CPUs) and are designed to specifically handle artificial intelligence tasks. Traditionally, they’ve been used by companies like Apple to improve photos and videos or for speech recognition.
Microsoft hasn’t said what AI PCs will be capable of yet without an internet connection. But Google’s PIxel 8 Pro phone, which doesn’t have a full computer processor, can summarize and transcribe recordings, recommend text message responses and more using its Gemini Nano AI.
Computers with Intel’s latest Lunar Lake chips with a dedicated NPU are expected to arrive in late 2024. Qualcomm’s Snapdragon X Elite chip with an NPU will be available in the middle of this year, while AMD’s latest Ryzen Pro is expected sometime during the quarter.
Intel says the chips allow for things like “real-time language translation, automation inferencing, and enhanced gaming environments.”
Apple has been using NPUs for years and recently highlighted them in its new M4 chip for the iPad Pro. The M4 chip is expected to launch in the next round of Macs sometime this year.
Windows on Arm
Qualcomm, unlike Intel and AMD, offers chips powered by Arm-based architecture. One of Microsoft’s sessions will talk about “the Next Generation of Windows on Arm,” which will likely cover how Windows runs on Qualcomm chips and how that’s different from Intel and AMD versions of Windows.
Intel still controls 78% of the PC chip market, followed by AMD at 13%, according to recent data from Canalys.
In the past, Qualcomm has promoted Snapdragon Arm-based computers by touting their longer battery life, thinner designs and other benefits like cellular connections. But earlier versions of Qualcomm’s chips were limited in what they offered consumers. In 2018, for example, the company’s Snapdragon 835 chip couldn’t run most Windows applications.
Microsoft has since improved Windows to handle traditional apps on Arm, but questions remain. The company even has an FAQ page dedicated to computers running on ARM hardware.
AI everywhere else
Microsoft will also be hosting sessions like “AI Everywhere” covering how to “accelerate generative AI models” on devices that run in the cloud.
An “Azure AI Studio” session will look at how developers can create their own Copilot chatbots, which may be similar to what Google and OpenAI are doing with Gemini and ChatGPT. Imagine, for example, a company creating a chatbot that can help employees select health benefits.
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OpenAI dissolves team focused on long-term AI risks, less than one year after announcing it
Boaz Weinstein, founder and chief investment officer of Saba Capital Management, during the Bloomberg Invest event in New York, US, on Wednesday, June 7, 2023.
Jeenah Moon | Bloomberg | Getty Images
Boaz Weinstein, the hedge fund investor on the winning side of JPMorgan Chase’s $6.2 billion, “London Whale” trading loss in 2011, is now taking on index fund giant BlackRock.
On Friday, Weinstein‘s Saba Capital detailed in a presentation seen by CNBC its plans to push for change at 10 closed-end BlackRock funds that trade at a significant discount to the value of their underlying assets compared to their peers. Saba says the underperformance is a direct result of BlackRock’s management.
The hedge fund wants board control at three BlackRock funds and a minority slate at seven others. It also seeks to oust BlackRock as the manager of six of those ten funds.
“In the last three years, nine of the ten funds that we’re even talking about have lost money for investors,” Weinstein said on CNBC’s “Squawk Box” earlier this week.
At the heart of Saba’s “Hey BlackRock” campaign is an argument around governance. Saba says in its presentation that BlackRock runs those closed-end funds the “exact opposite” way it expects companies to run themselves.
BlackRock “is talking out of both sides of its mouth” by doing this, Saba says. That’s cost retail investors $1.4 billion in discounts, by Saba’s math, on top of the management fees it charges.
BlackRock, Saba says in the deck, “considers itself a leader in governance, but is crushing shareholder rights.” At certain BlackRock funds, for example, if an investor doesn’t submit their vote in a shareholder meeting, their shares will automatically go to support BlackRock. Saba is suing to change that.
A BlackRock spokesperson called that assertion “very misleading” and said those funds “simply require that most shareholders vote affirmatively in favor.”
The index fund manager’s rebuttal, “Defend Your Fund,” describes Saba as an activist hedge fund seeking to “enrich itself.”
The problem and the solution
Closed-end funds have a finite number of shares. Investors who want to sell their positions have to find an interested buyer, which means they may not be able to sell at a price that reflects the value of a fund’s holdings.
In open-ended funds, by contrast, an investor can redeem its shares with the manager in exchange for cash. That’s how many index funds are structured, like those that track the S&P 500.
Saba says it has a solution. BlackRock should buy back shares from investors at the price they’re worth, not where they currently trade.
“Investors who want to come out come out, and those who want to stay will stay for a hundred years, if they want,” Weinstein told CNBC earlier this week.
Weinstein, who founded Saba in 2009, made a fortune two years later, when he noticed that a relatively obscure credit derivatives index was behaving abnormally. Saba began buying up the underlying derivatives that, unbeknownst to him, were being sold by JPMorgan’s Bruno Iksil. For a time, Saba took tremendous losses on the position, until Iksil’s bet turned sour on him, costing JPMorgan billions and netting Saba huge profits.
Saba said in its investor deck that the changes at BlackRock could take the form of a tender offer or a restructuring. The presentation noted that BlackRock previously cast its shares in support of a tender at another closed-end fund where an activist was pushing for similar change.
At the worst-performing funds relative to their peer group, Saba is seeking shareholder approval to fire the manager. In total, BlackRock wants new management at six funds, including the BlackRock California Municipal Income Trust (BFZ), the BlackRock Innovation and Growth Term Trust (BIGZ) and the BlackRock Health Sciences Term Trust (BMEZ).
“BlackRock is failing as a manager by delivering subpar performance compared to relevant benchmarks and worst-in-class corporate governance,” the deck says.
If Saba were to win shareholder approval to fire BlackRock as manager at the six funds, the newly constituted boards would then run a review process over at least six months. Saba says that in addition to offering liquidity to investors, its board nominees would push for reduced fees and for other unspecified governance fixes.
A BlackRock spokesperson told CNBC that the firm has historically taken steps to improve returns at closed-end funds when necessary.
“BlackRock’s closed-end funds welcome constructive engagement with thoughtful shareholders who act in good faith with the shared goal of enhancing long-term value for all,” the spokesperson said.
Weinstein said Saba has run similar campaigns at roughly 60 closed-end funds in the past decade but has only taken over a fund’s management twice. The hedge fund sued BlackRock last year to remove that so-called “vote-stripping provision” at certain funds and filed another lawsuit earlier this year.
BlackRock has pitched shareholders via mailings and advertisements. “Your dependable, income-paying investment,” BlackRock has told investors, is under threat from Saba.
Saba plans to host a webinar for shareholders on Monday but says BlackRock has refused to provide the shareholder list for several of the funds. The BlackRock spokesperson said that it has “always acted in accordance with all applicable laws” when providing shareholder information, and that it “never blocked Saba’s access to shareholders.”
“What we want is for shareholders, which we are the largest of but not in any way the majority, to make that $1.4 billion, which can be done at the press of a button,” Weinstein told CNBC earlier this week.
WATCH: CNBC’s full interview with Saba Capital’s Boaz Weinstein
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