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Amazon CEO Andy Jassy speaks at the Bloomberg Technology Summit in San Francisco on June 8, 2022.

David Paul Morris | Bloomberg | Getty Images

As growth in traditional tech equipment and software slowed to a trickle in recent years, cloud computing gobbled up spending, reflecting a dramatic change in how companies were choosing to run applications and store data.

But in the past two weeks, the biggest names in cloud infrastructure issued clear warnings to suggest that the frenetic expansion of the past half-decade is cooling. Historically high inflation and a steady increase in interest rates by the Federal Reserve have led businesses to curtail spending and seek ways to get more out of their existing infrastructure.

Amazon, Microsoft and Alphabet, the three leaders in the market for cloud-based storage and servers, all reported deceleration in their respective businesses. On Thursday, Amazon Web Services and Google Cloud, which also includes Workplace productivity software, showed revenue for the fourth quarter that was below analysts’ estimates.

“In Q4, we saw slower growth of consumption as customers optimized GCP cost, reflecting the macro backdrop,” Ruth Porat, Alphabet’s chief financial officer, told analysts on the earnings call.

Google Cloud revenue growth slowed to 32% in the fourth quarter from almost 38% in the third period. Revenue of $7.32 billion trailed analysts estimates of $7.43 billion, according to StreetAccount.

Amazon, which pioneered the market over 15 years ago and maintains a commanding lead, said AWS revenue growth decelerated to 20% from 27%. The unit notched sales of $21.4 billion, while analysts were projecting $21.87 billion. As recently as 2018, AWS was growing over 45%.

Brian Olsavsky, Amazon’s finance chief, told analysts that large companies worked with AWS in the fourth quarter to trim their spending because of the difficult economy, a trend that started in the middle of the third quarter. He’s not expecting it to reverse anytime soon.

“As we look ahead, we expect these optimization efforts will continue to be a headwind to AWS growth in at least the next couple of quarters,” Olsavsky said.

Amazon CEO Andy Jassy, who started AWS with company founder Jeff Bezos and ran the division until taking the helm at the parent company in 2021, spoke up later on the call to tout the robust pipeline of cloud migrations. However, according to a regulatory filing, customers are showing less confidence in longer-term deals. Amazon reported $110.4 billion in commitments on contracts with original terms longer than one year. That was up 37% from a prior year, a decline from 57% growth in the third quarter.

Analysts at Bank of America lowered their forecast for AWS, and now expect growth for the year of 11% instead of 15%. That would be down from nearly 29% in 2022.

“We see LT cloud trajectory as bent and not broken,” wrote the analysts, who have a buy rating on the stock.

Results from Alphabet and Amazon follow Microsoft’s report last week. Microsoft’s Azure unit is second in cloud infrastructure to AWS.

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

SeongJoon Cho | Bloomberg | Getty Images

Microsoft said its Azure and other cloud services revenue growth slowed to 31% from 35%, though the company doesn’t disclose the size of the business in dollars.

On the earnings call, Chief Financial Officer Amy Hood said growth in Azure consumption moderated in December. The company expects even slower Azure growth in the first quarter as organizations look for opportunities to run their existing applications in a more cost-effective manner.

CEO Satya Nadella acknowledged that trend, but said it’s not permanent.

“At some point, the optimizations will end,” Nadella said on the earnings call. “In fact, the money that they save in any optimization of any workload is what they’ll plough into new workloads, and those workloads will start ramping up.”

Nadella’s view is supported by at least some industry experts. Tech research firm Gartner is expecting the category to grow overall by 26.8% in the full year, compared with 25.9% in 2022. The Gartner prediction across all of IT is for revenue growth of 2.4%.

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Truist Securities' Youssef Squali explains why Amazon stock is trading low

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U.S. revokes some export licenses to sell chips to Huawei in a bid to curb China’s tech power

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U.S. revokes some export licenses to sell chips to Huawei in a bid to curb China's tech power

BERLIN, GERMANY – SEPTEMBER 03: People arrive to attend the Huawei keynote address at the IFA 2020 Special Edition consumer electronics and appliances trade fair on the fair’s opening day on September 03, 2020 in Berlin, Germany. The fair is taking place despite the ongoing coronavirus pandemic, albeit in a reduced form and without personal access for the general public. The IFA 2020 Special Edition will take place from September 3-5. (Photo by Sean Gallup/Getty Images)

Sean Gallup | Getty Images News | Getty Images

The U.S. has revoked certain licenses for chip exports to Chinese tech giant Huawei, the Commerce Department told CNBC on Tuesday, in its latest efforts to curb China’s tech power.

“We continuously assess how our controls can best protect our national security and foreign policy interests, taking into consideration a constantly changing threat environment and technological landscape,” a Commerce spokesperson said in a statement.

“As part of this process, as we have done in the past, we sometimes revoke export licenses,”  the spokesperson said, declining to comment on specific licenses. “But we can confirm that we have revoked certain licenses for exports to Huawei.”

Huawei was placed on a U.S. trade blacklist in 2019, which banned U.S. firms from selling technology – including 5G chips – to the Chinese tech giant over national security concerns. In 2020, the U.S. tightened chip restrictions on Huawei, requiring foreign manufacturers using American chipmaking equipment to obtain a license before they can sell semiconductors to Huawei.

Huawei’s consumer business, which includes smartphones and laptops, is seeing a resurgence after launching the Mate 60 Pro smartphone in August.

Biden administration reportedly revoking certain licenses for exports to Huawei

A TechInsights analysis of Huawei’s Mate 60 Pro smartphone revealed an advanced chip made by China’s top chip maker, SMIC. The smartphone is also said to be equipped with 5G connectivity – a feature which U.S. sanctions had sought to block.

U.S. chip firms Qualcomm and Intel are two of the companies that supply chips to Huawei. Qualcomm in an SEC filing earlier this month said it expects operations to be “further impacted” from its customers, such as Huawei, developing their own chips.

“While we have continued to sell integrated circuit products to Huawei under our licenses, we do not expect to receive product revenues from Huawei beyond the current calendar year,” Qualcomm said.

“Additionally, to the extent that Huawei’s 5G devices take share from Chinese original equipment manufacturers that utilize our 5G products or from non-Chinese OEMs that utilize our 5G products in devices they sell into China, our revenues, results of operations and cash flows could be further impacted,” Qualcomm said.

Last month, Huawei launched a fresh lineup of phones – the Pura 70 series – in a bid to challenge Apple in China.

Apple is facing pressure from Huawei in China as iPhone sales plunged 19.1% in the first quarter while Huawei’s smartphone sales soared 69.7%, according to Counterpoint Research.

Huawei’s net profit in 2023 grew by 144.5% from a year ago to 87 billion yuan (about $12 billion) partially helped by the sales of Mate 60 Pro in China, the firm revealed in March.

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Generative AI is speeding up human-like robot development. What that means for jobs

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Generative AI is speeding up human-like robot development. What that means for jobs

Shenzhen-based LimX Dynamics shows off one of its humanoid robots.

Limx Dynamics

BEIJING — ChatGPT-like artificial intelligence is speeding up research and bringing humanoid robots closer to reality in China, home to many of the world’s factories.

AI has been around for decades. What’s changed with the emergence of OpenAI’s ChatGPT chatbot is the ability of AI to better understand and generate content in a human-like way. While the U.S.-based tech is not officially available in China, local companies such as Baidu have released similar chatbots and AI models.

In robotics, the development of generative AI can help machines with understanding and perceiving their environment, said Li Zhang, chief operating officer of Shenzhen-based LimX Dynamics.

About three months after joining the two-year-old startup, Li said he shortened his expectations for how long it would take LimX to produce a humanoid robot capable of not just factory work, but also helping out in a households.

Li originally expected the entire process to take eight to ten years, but now anticipates some use cases will be ready in five to seven years. “After working for a few months, I saw how various tools’ abilities were improved because of AI,” he said in Mandarin, translated by CNBC.

“It has accelerated our entire research and development cycle,” he said.

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Companies are rushing into the opportunity. OpenAI itself is backing humanoid robot startups, while Elon Musk’s Tesla is developing its own, called Optimus.

Electric car giant BYD last year invested in Shanghai-based Agibot just months after its founding, according to PitchBook.

And at a high level, Chinese state media in November published a photo of Chinese President Xi Jinping watching a humanoid robot at an exhibition center during his first trip to Shanghai since the pandemic. The robot was developed by Fourier Intelligence.

Before humanoid robots reach households, as LimX ultimately intends, factories can be a lucrative, enclosed scenario in which to deploy them.

China surpassed Japan in 2013 as the world’s largest installer of industrial robots, and now accounts for more than 50% of the global total, according to Stanford’s latest AI Index report.

Electronics, automotive and metal and machinery were the three leading sectors for industrial robot installation in China, the report said.

Impact on human jobs

When it comes fully replacing human workers, however, AI advancements alone aren’t enough.

Even if AI allows a robot to think and make decisions on par with humans, mechanical limitations are a major reason why humanoids can’t yet replace human laborers, LimX’s Li said.

One of LimX’s backers, Future Capital, has also invested in a company called Pan Motor that specializes in motors for humanoids.

Generative AI doesn’t directly help with robotic motion, pointed out Eric Xia, partner at Future Capital, an investor in LimX. But “advances in large language models can help humanoid robots with advanced task planning,” he said in Chinese, translated by CNBC.

LimX’s other investors include Lenovo Capital.

A shift toward factory robots can accelerate, once the cost-per-robot comes down.

Steve Hoffman, chairman of a startup accelerator called Founders Space, said he is working with a Chinese startup called Fastra, which he expects can begin mass robot production in one year. He said he spent time in China this year teaching local businesses how to integrate generative AI.

“We have already received six orders from research institutions,” he said, noting the startup aims to lower the cost per robot to between $50,000 to $100,000 by rollout.

“If we can hit a $50,000 price point, we can sell a lot of robots,” he said, pointing out the robots’ batteries can be charged as they work, 24 hours a day. “Could pay for the robot in a year.”

In pharmaceutical research, generative AI can reduce costs, without cutting into human labor.

“You don’t save costs in our business by having less people. You actually save costs by making fewer experiments that fail,” said Alex Zhavoronkov, chairman of the board, executive director and CEO of Insilico Medicine, which has offices in Hong Kong, New York and other parts of the world.

He noted how large pharmaceutical companies have typically had to spend thousands of dollars to replicate a molecule for testing — and would run a few thousand such tests per program. He claimed that with the help of AI, Insilico only needs to synthesize about 70 molecules per program.

The company published a paper in Nature in March claiming to have reached phase 2 clinical trials for an AI-generated drug.

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Tesla must provide NHTSA with Autopilot recall data by July or face up to $135 million in fines

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Tesla must provide NHTSA with Autopilot recall data by July or face up to 5 million in fines

Tesla vehicles sit on the lot at a Tesla dealership in Austin, Texas, on April 15, 2024.

Brandon Bell | Getty Images

The National Highway Traffic Safety Administration is pressing Tesla for answers about changes the company made to its Autopilot driver assistance system following a voluntary software recall in December that affected about 2 million vehicles in the U.S.

Tesla must meet a deadline of July 1 to provide information to the regulator or face fines up to $135.8 million, according to a letter sent by the NHTSA to company on May 6.

The recall was intended to improve Tesla’s driver-engagement systems, which are used to monitor whether drivers are safely using features like traffic aware cruise control, lane keeping and auto steering — part of Autopilot. Since the recall, at least 20 Tesla vehicles have been involved in crashes in which the system was thought to be in use, according to a filing on the NHTSA’s website.

The “recall remedy” probe follows a three-year investigation by the agency that found safety issues with Tesla Autopilot contributed to at least 467 collisions and 14 deaths from January 2018 through August 2023.

The NHTSA had concluded that drivers involved in those crashes “were not sufficiently engaged in the driving task and that the warnings provided by Autopilot when Autosteer was engaged did not adequately ensure that drivers maintained their attention on the driving task.”

Driver-engagement systems, sometimes known as driver-monitoring systems, in Tesla vehicles include torque sensors in the steering wheel to detect whether drivers are keeping their hands on the wheel, and in-cabin cameras that monitor a driver’s gaze. They should alert any inattentive driver to pay attention and stay ready to steer or brake at any time.

The NHTSA is seeking detailed crash data from the electric vehicle maker since the agency issued the recall update on Autopilot, including data and video stored in or streamed from its cars and retained by the company.

They’re also asking for records about Tesla’s engineering teams and their approach to “safety defect determination decision making,” “issue investigation,” “action design including human factors considerations (initial and modifications),” and “testing.”

Tesla is in the middle of a massive reorganization and sweeping layoffs. The company hasn’t disclosed how many jobs in its Autopilot and vehicle-safety engineering teams may have been cut.

For about a decade, CEO Elon Musk has been promising that Tesla is on the cusp of a self-driving breakthrough. With sales of Tesla EVs dropping in the first quarter, Musk has been focusing investors’ attention on his dream of a future full of Tesla artificial intelligence products, including robotaxis and “sentient” humanoid robots that can do factory work.

Tesla shares fell 3.8% on Tuesday to $177.81 and are down 28% year to date.

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