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Microsoft CEO Satya Nadella speaks at the company’s Ignite Spotlight event in Seoul on Nov. 15, 2022.

SeongJoon Cho | Bloomberg | Getty Images

Microsoft announced a new multiyear, multibillion-dollar investment with ChatGPT-maker OpenAI on Monday.

Microsoft declined to provide a specific dollar amount, but Semafor reported earlier this month that Microsoft was in talks to invest as much as $10 billion.

The deal marks the third phase of the partnership between the two companies, following Microsoft’s previous investments in 2019 and 2021. Microsoft said the renewed partnership will accelerate breakthroughs in AI and help both companies commercialize advanced technologies in the future.

“We formed our partnership with OpenAI around a shared ambition to responsibly advance cutting-edge AI research and democratize AI as a new technology platform,” Microsoft CEO Satya Nadella said in the release.

OpenAI works closely with Microsoft’s cloud service Azure. In July 2019, Microsoft backed OpenAI with $1 billion, and the investment made Microsoft the “exclusive” provider of cloud computing services to OpenAI. Microsoft said Monday that Azure will continue to serve as OpenAI’s exclusive provider.

Microsoft’s investment will also help the two companies engage in supercomputing at scale, and create new AI-powered experiences, the release said.

OpenAI is ranked by AI researchers as one of the top three AI labs worldwide, and the company has developed game-playing AI software that can beat humans at video games like Dota 2. However, it’s arguably received more attention for its AI text generator GPT-3 and its quirky AI image generator Dall-E.

ChatGPT automatically generates text based on written prompts in a fashion that’s much more advanced and creative than the chatbots of Silicon Valley’s past. The software debuted in late November and quickly turned into a viral sensation as tech executives and venture capitalists gushed about it on Twitter, even comparing it to Apple’s debut of the iPhone in 2007. 

The technology also caught the attention of Google executives, who said in a recent all-hands meeting that while it has similar AI capabilities, Google’s reputation could suffer if it moves too fast on AI-chat technology.

OpenAI’s founders included Sam Altman, Tesla and SpaceX CEO Elon Musk, Greg Brockman, Ilya Sutskever, Wojciech Zaremba and John Schulman. The group pledged to invest over $1 billion into the venture when it launched. Musk resigned from the board in February 2018 but remained a donor.

–CNBC’s Jonathan Vanian and Jennifer Elias contributed to this report

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Apple’s expected to post its first revenue decline since 2019 on Thursday

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Apple's expected to post its first revenue decline since 2019 on Thursday

Apple CEO Tim Cook speaks at an Apple special event at Apple Park in Cupertino, California on September 7, 2022. – Apple is expected to unveil the new iPhone 14. (Photo by Brittany Hosea-Small / AFP) (Photo by BRITTANY HOSEA-SMALL/AFP via Getty Images)

Brittany Hosea-small | Afp | Getty Images

Analysts expect Apple to post its first year-over-year revenue decline since 2019’s March quarter when it reports earnings on Thursday. There are a few contributing factors.

The company couldn’t build enough of its high-end iPhones when its primary assembly facility in China was shut down for weeks during Covid lockdowns. Customers in many regions noticed as early as November that Apple couldn’t promise Christmas delivery of a new iPhone.

Apple gave a rare warning to investors that month explaining that production issues would result in lower shipments than “previously anticipated.” It was a data point that caused many analysts watching the stock to cut their estimates.

“We believe the peak impact of the disruptions was felt in early to mid November as wait times hit an extreme level (link) as the wait time in the US for the 14 Pro and 14 Pro Max reached 34 days while wait time in China at the high-end hit 36 days,” UBS analyst David Vogt wrote in January.

Analysts polled by Refinitiv expect Apple to report just over $121 billion in revenue in the December quarter, which would be a slight decline from the company’s $123.9 billion from a year ago.

But the problems aren’t Apple-specific. The PC and smartphone markets are slumping as consumers and businesses digest sales from the pandemic and cut costs to prepare for a possible recession.

The smartphone market saw an 18% decline in shipments in the fourth quarter, according to IDC, the worst decline ever recorded by the market research firm. The PC market fell 28% in the fourth quarter, according to the company. But many investors believe that Apple is outperforming its competitors even in a contracting market.

“While the state of consumer demand remains a near-term concern, we believe the underlying drivers of Apple’s model – a growing installed base and spend per user – remain intact, and that the strength/stability of Apple’s ecosystem remains undervalued,” Morgan Stanley analyst Erik Woodring wrote in a note earlier this month.

Here’s what Wall Street is expecting, according to Refinitiv consensus estimates:

  • Revenue: $121.19 billion
  • Earnings per share: $1.94 per share
  • iPhone revenue: $68.29 billion
  • iPad revenue: $7.76 billion
  • Mac revenue: $9.63 billion
  • Other products revenue: $15.26 billion
  • Services revenue: $20.67 billion

Apple’s March quarter guidance

Apple hasn’t given guidance since 2020, citing uncertainty first caused by the pandemic. However, the company usually provides a few data points that can give analysts a sense of how it’s doing.

Investors want to know whether the shortage of iPhone 14 Pro models in the December quarter will drive demand in the March quarter now that supply has improved.

Analysts expect just over $98 billion in sales in the March quarter, according to consensus estimates, signifying slight year-over-year growth.

“While we believe it’s well understood that Apple’s March quarter revenue should decline at a less-than-seasonal rate due to the pushout of iPhone demand from the December quarter to the March quarter,” Morgan Stanley’s Woodring wrote in a note last week, “the consumer electronics spending backdrop remains challenging, with tablets, PCs and more discretionary products (i.e. wearables) all facing continued demand headwinds.”

But if consumer confidence erodes in the face of higher interest rates and shrinking savings around the world, then Apple could suggest to investors that the company’s March quarter will be slow.

“While we don’t expect the resumption of detailed guidance typical of Apple earnings prior to Covid, we expect the commentary to be cautious regarding Product demand across the board,” UBS’s Vogt wrote.

If management commentary is soft, investors looking for a silver lining might want to look at Apple’s services business, which is profitable and has been growing strongly for years. However, several data points in the fourth quarter, including Apple’s own App Store payouts, suggest a significant slowdown in App Store growth, although analysts are split on its severity.

The App Store is one of the largest components of services, but it’s only a part of the business, which includes online subscriptions, warranties and search licensing fees. Apple shares could push higher if services such as Apple TV+ and Apple Music look like they’re generating a higher percentage of Apple’s revenue, D.A. Davidson analyst Tom Forte wrote in January.

Services are expected to total $20.67 billion in the December quarter, according to Refinitiv estimates, representing a 5.9% growth rate.

Analysts will also watch to see if the strong dollar continues to hurt Apple, given that so much of its sales are overseas. During the December quarter, the British pound, the Canadian dollar and the Japanese yen all weakened compared to the dollar. Apple management previously said the strong dollar would be a 10 percentage point drag on sales growth.

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Folding iPad will launch next year, top Apple analyst Kuo says

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Folding iPad will launch next year, top Apple analyst Kuo says

The world’s biggest iPhone factory, located in China and run by Foxconn, faced disruptions in 2022. That is likely to filter through to Apple’s December quarter results. Meanwhile, analysts questioned demand for the iPhone 14 from Chinese consumers.

Nic Coury | Bloomberg | Getty Images

Apple will slow the pace of iPad releases for the rest of 2023, with an eye towards releasing a foldable iPad by 2024, noted Apple analyst Ming-Chi Kuo wrote on Monday.

“I’m positive about the foldable iPad in 2024 and expect this new model will boost shipments and improve the product mix,” Kuo wrote on Twitter. Kuo’s prediction aligns with a report from analyst firm CCS Insight, which wrote in Oct. 2022 that the Cupertino company would launch a foldable iPad before a foldable iPhone.

Several other manufacturers, including Lenovo and Samsung, make laptops or phones with full-size foldable displays. Apple has so far shied away from taking advantage of OLED technology in the same way. Rival Samsung has released multiple foldable phones but Apple has maintained the rectangular shape of the iPhone since its launch.

“Right now it doesn’t make sense for Apple to make a foldable iPhone. We think they will shun that trend and probably dip a toe in the water with a foldable iPad,” Ben Wood, chief of research at CCS Insight told CNBC in a 2022 interview.

In 2021, Kuo had predicted the release of a foldable iPhone in 2024, the same year he now predicts a foldable iPad to launch instead.

Kuo expects that a foldable iPad to feature a carbon fiber kickstand sourced from Chinese manufacturer Anjie Technology.

A representative for Apple did not immediately respond to a request for comment.

Kuo is one of the most prolific and respected Apple analysts. The analyst has predicted multiple details on the iPhone SE 3, the 2021 MacBook Pro, and on numerous iPad releases which have been substantiated at launch. Most recently, Kuo predicted a delayed launch for Apple’s highly-anticipated mixed reality headset.

How Apple can reduce its dependence on China, with D.A. Davidson's Tom Forte

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TikTok CEO to testify before House panel about app’s security and ties to China

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TikTok CEO to testify before House panel about app's security and ties to China

Shou Zi Chew, chief executive officer of TikTok Inc., speaks during the Bloomberg New Economy Forum in Singapore, on Wednesday, Nov. 16, 2022. The New Economy Forum is being organized by Bloomberg Media Group, a division of Bloomberg LP, the parent company of Bloomberg News. Photographer: Bryan van der Beek/Bloomberg via Getty Images

Bloomberg | Bloomberg | Getty Images

TikTok CEO Shou Zi Chew will testify before a House panel on March 23 about the app’s security and privacy practices and its ties to China through parent company ByteDance.

The House Energy and Commerce Committee announced the hearing on Monday, saying it would be Chew’s first appearance before a congressional panel.

“ByteDance-owned TikTok has knowingly allowed the ability for the Chinese Communist Party to access American user data,” E&C Chair Cathy McMorris Rodgers, R-Wash., said in a statement. “Americans deserve to know how these actions impact their privacy and data security, as well as what actions TikTok is taking to keep our kids safe from online and offline harms.” 

The hearing announcement comes as the company’s negotiations with U.S. government over how to secure its app in the country have continued to drag. TikTok has been engaging with the Committee on Foreign Investment in the U.S., which can determine if certain risk mitigation measures are adequate to dampen national security concerns.

Still, those negotiations have reportedly been delayed at least as of last month, as officials continue to worry about the implications of the app’s ownership by Chinese parent company ByteDance. That’s because Chinese-based companies can be compelled to hand over data to the government there on request. In the past, TikTok has assured U.S. officials and lawmakers that it does not store U.S. user data in China to mitigate that risk, but that’s done little to assuage fears.

Fears over TikTok’s national security and privacy implications for consumers have spanned both sides of Congress, and stretched across the Trump administration into the Biden administration.

Lawmakers passed a ban on TikTok on government devices in a year-end legislative package, citing security fears. A TikTok spokesperson called the passage of the bill “a political gesture that will do nothing to advance national security interests,” in a statement at the time, adding that the agreement CFIUS was reviewing would “meaningfully address any security concerns that have been raised at both the federal and state level.”

TikTok did not immediately respond to a request for comment on the House hearing.

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