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TikTok Chief Executive Shou Zi Chew is pictured on the day he will testify before a House Energy and Commerce Committee hearing entitled “TikTok: How Congress can Safeguard American Data Privacy and Protect Children from Online Harms,” as lawmakers scrutinize the Chinese-owned video-sharing app, on Capitol Hill in Washington, U.S., March 23, 2023. 

Evelyn Hockstein | Reuters

For several years now, ByteDance’s TikTok has been the focus of lawmakers and intelligence officials who fear it could be used to spy on Americans. Those concerns took center stage during a five-hour grilling of TikTok’s CEO back in March.

But while TikTok has been the one in the spotlight, other Chinese apps that present similar issues are also experiencing massive popularity in the U.S.

Concerns about ByteDance stem in large part from a national security law that gives the Chinese government power to access broad swaths of business information if it claims to be for a national security purpose. U.S. intelligence officials and lawmakers fear that the Chinese government could effectively access any information that China-based app companies have collected from American users, from email addresses to user interests to driver’s licenses.

But that doesn’t seem to have swayed many consumers, as several China-based apps are still booming in the U.S.

For example, the shopping app Temu, owned by China-based PDD Holdings, has the number two spot on the Apple App Store among free apps as of late May. It also held the number 12 spot among digital retailers in the 2022 holiday season for unique visitors to its site, topping stores like Kohl’s, Wayfair and Nordstrom, according to Insider Intelligence, which also credits visibility on TikTok for its rise.

Meanwhile, ByteDance-owned apps CapCut and TikTok hold the fourth and fifth spots on the App Store rankings. Chinese fast fashion brand Shein holds fourteenth.

And between late March and early April, after the TikTok CEO hearing before Congress, ByteDance’s Lemon8, saw nearly 1 million downloads in the U.S., Insider Intelligence reported based on data from Apptopia. It’s an app with similarities to Pinterest and Meta’s Instagram.

These apps share some of the features that have worried the U.S. government about TikTok, including about whether some of these firms adequately protect U.S. user data when operating out of China (TikTok has stressed that U.S. user information is only stored on servers outside of China). Like TikTok, these apps collect user information, can analyze trends in their interests and use algorithms to target consumers with products or information that is likely to keep them engaged with the service.

But experts on China and social media say there are important differences between these apps and TikTok which might explain the relative lack of attention on them. Among the most important of those features is the scale of their presence in the U.S.

TikTok vs. other Chinese apps

In just 17 days after launch, Temu surpassed Instagram, WhatsApp, Snapchat and Shein on the Apple App Store in the U.S., according to Apptopia data shared with CNBC.

Stefani Reynolds | Afp | Getty Images

Even as they grow, the U.S. userbase of many popular Chinese apps is still dwarfed by TikTok’s massive U.S. audience of 150 million monthly active users.

TikTok sister app Lemon8, for instance, has an estimated 1.8 million monthly active users in the U.S., according to Apptopia.

While TikTok has had 415 million downloads in the U.S. since its launch here, CapCut has had 99 million, Temu 67 million and Lemon8 1.2 million, according to Apptopia.

Only Shein surpasses TikTok in downloads among this group of apps, though it launched far earlier in the U.S. in 2014. Shein’s app has 855 million downloads in the U.S. since its debut, though Apptopia estimates it has about 22 million monthly active users.

“An app with a thousand, or even a million users in the U.S. does not present the same widespread cybersecurity threat that an app with 100 million users has,” said Lindsay Gorman, senior fellow for emerging technologies at the German Marshall Fund’s Alliance for Securing Democracy.

Gorman said as the U.S. considers the threat posed by TikTok, it will also need to develop a framework for how to evaluate the relative risk of Chinese apps. The scale should be one factor, she said, and the type of app, including its ability to spread propaganda, should be another.

“The ability for a Chinese technology platform to represent critical information infrastructure in a democracy has to be part of that calculus when assessing risk,” Gorman said. “That’s where I think the analogies with power grids or energy infrastructure are applicable. We we would not allow the authoritarian regime to build significant components of our energy infrastructure and rely on an authoritarian regime for that.”

That means that an app like ByteDance’s CapCut may present a lower risk, both because of its smaller user base and because it’s meant to edit videos, rather than distribute them.

“We’re really at the beginning stages of even recognizing that a broader characterization and categorization is actually needed,” Gorman said, adding that rather than playing whack-a-mole with Chinese technology that poses a threat to U.S. national security, the country should develop a more systematic framework.

But in the meantime, U.S. consumers continue to turn to Chinese apps.

“Among the most downloaded apps consistently are Chinese-based ones like Temu and CapCut,” said Jasmine Enberg, principal analyst covering social media at Insider Intelligence. “And then of course, there’s the early growth of Lemon8, which suggests that the appetite for Chinese apps in the U.S. is still growing.”

For e-commerce apps, the risk of spreading harmful misinformation may not be as high as on a social media service. An e-commerce platform like Temu or Shein is likely a less viable platform to spread propaganda than a video app like TikTok.

“People just aren’t really spending the same amount of time on commerce apps and they’re not exposed necessarily to the same kind of content that could potentially have a negative impact on young people,” Enberg said. “I also don’t necessarily think that the connection to China for some of these apps is as clear to the average consumer and I also don’t think that consumers are really going around thinking about where the apps that they’re using originate from.”

Still, the U.S. could find a reason for concern. A recent CNN report that found Temu sister company Pinduoduo, a shopping app popular in China, contained malware. The parent company of both apps, PDD Holdings, did not respond to a request for comment. Research staff at the U.S.-China Economic and Security Review Commission pointed to that report in assessing Temu’s data risks, though an analyst recently told CNBC that Temu has not been as “aggressive” in requesting access to consumers’ data as Pinduoduo.

At least one group has viewed the pressure on TikTok as an optimal time to raise concerns with another Chinese company popular in the U.S.: Shein. The group Shut Down Shein, which is a “coalition of individuals, American brands and human rights organizations,” according to executive director Chapin Fay, launched the day that TikTok’s CEO was hauled before Congress.

Customers hold shopping bags outside the Shein Tokyo showroom in Tokyo on Nov. 13, 2022. Reuters reports the fast fashion retailer is targeting a U.S. IPO in the second half of 2023.

Noriko Hayashi | Bloomberg | Getty Images

“We were sort of agnostic on the timing, but we wanted to make sure that while people are talking about TikTok, there’s this other nefarious actor, Shein, who’s also collecting data and doing it all under the radar and also doing these other even worse things like slave labor,” said Fay, managing director of Actum consulting firm.

The group specifically takes issue with Shein’s alleged use of forced labor, as Bloomberg reported last year that tests revealed that cotton in clothes shipped to the U.S. were linked to a region in China where the U.S. government has said forced labor is deployed. China has denied the use of forced labor.

Shut Down Shein also rails against the company’s alleged use of an import loophole to avoid tariffs. Through the de minimis trade tax exemption, the group says, individual customers become the importer of their fast fashion goods, a practice that came up at a recent hearing by the House Select Committee on Strategic Competition between the United States and the Chinese Communist Party.

A Shein spokesperson said in a statement that it “complies with the domestic tax legislations of the countries in which it operates.” The spokesperson also said that Shein has “zero tolerance for forced labor,” takes seriously visibility across its supply chain and requires suppliers to follow a “strict code of conduct.”

Fay said it’s important to recognize that the way Shein has been able to grow its brand and gain new customers, in large part via so-called influencer hauls, is through TikTok.

Fear of a ‘slippery slope’ ban

Faced with national security worries over TikTok, lawmakers have considered several proposals that could lead to a ban. But critics fear some proposed solutions could create a slippery slope of unintended consequences. And some say the most effective long-term solution for curbing the use of Chinese apps may be fostering an environment for robust alternatives to grow.

Perhaps the most prominent of the bills that could lead to TikTok’s ban in the U.S., the RESTRICT Act, would give the Commerce Secretary the power to recommend barring technology that comes from a select group of foreign adversary countries if they determine the risks cannot be sufficiently mitigated otherwise.

Though the proposal quickly garnered serious attention for its heavy-hitting group of sponsors, including Senate Intelligence Committee Chair Mark Warner, D-Va., and Commerce subcommittee on communications ranking member John Thune, R-S.D., it’s since appeared to lose the early momentum. That’s due in part to concerns raised by the tech industry and others that the bill could give the executive branch broad power to seek a ban on certain technology.

Sen. Mark Warner (D-VA)

Drew Angerer | Getty Images

“While I understand that Americans enjoy the convenience of Chinese e-commerce and the creative tools of many Chinese communications apps, we have to reckon with the fact that these companies ultimately are beholden to the demands of the Chinese government,” Warner said in a statement. “We’ve had an important and overdue conversation about the predatory and invasive practices of U.S. tech firms in recent years; those same concerns are valid with the growing sway of these foreign apps – and then exacerbated by the manner in which these PRC-based companies serve as instruments of PRC power.”

One of those critics of the bill’s current scope is Andy Yen, CEO of Proton, which makes an encrypted email service and VPN. While Yen believes that TikTok should be banned in the U.S., he fears the RESTRICT Act is currently too broad to effectively do so without additional consequences.

In a recent blog post, Yen argued that the bill would give the Commerce Secretary overly-broad power to designate additional governments as foreign adversaries and feared that ambiguous language in the bill could be used to penalize individuals who use VPNs to access apps that are banned in the U.S.

In the post, Yen suggested these issues could be resolved with changes to the bill’s language to make it more targeted and limited in scope.

Speaking on the “Pivot” podcast recently, Warner stressed the need for a rules-based approach that could be legally upheld to deal with tech from foreign adversaries. He said he believes criticism of the bill, including that it would target individual VPN users or that U.S. companies that do business in China could be swept up in enforcement action, is not valid, though he said he is open to amending the bill to make that more clear.

“There is a very legitimate national security concern here,” Yen said. “So I think it is something that regulators do need to tackle and this is why Congress is trying do something. But I think we need to do it in a way that doesn’t undermine the values of freedom and democracy that make America different from China.”

Still, a TikTok ban would have other effects in the U.S., like yielding more market share to existing tech giants in the U.S. like Meta’s Facebook and Instagram. Proton has been an active proponent of antitrust reform to create what some companies see as a more level playing field for tech developers in the U.S.

Yen said the solution to creating more competitive digital markets in the U.S. is not to allow risky Chinese companies to run rampant, but rather “to have a level playing field that can allow other American companies or European companies to compete in the U.S. fairly.”

That’s a goal shared by Jonathan Ward, an expert on China who founded the Atlas Organization consulting firm.

“The best way that we can do this is to create alternatives,” Ward said. “Because even if these companies don’t take root in our own market, even if we’re able to successfully deny them access here, as we did with Huawei, they can flourish in other parts of the world,” he added, referring to the Chinese telecom company that’s been placed on a U.S. entity list over national security concerns.

“We’re also going to have to stand up American and free world alternatives to these companies because you can’t let them take over industries that matter or create apps that become integral to the fabric of our societies,” Ward said. “And that’s going to require an effort that goes beyond the Congress and into the sort of entire system of democracies worldwide.”

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Proxy advisor ISS recommends Tesla shareholders oppose Elon Musk $1 trillion pay plan

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Proxy advisor ISS recommends Tesla shareholders oppose Elon Musk  trillion pay plan

Elon Musk, CEO of SpaceX and Tesla, attends the Viva Technology conference at the Porte de Versailles exhibition center in Paris on June 16, 2023.

Gonzalo Fuentes | Reuters

Top proxy advisor Institutional Shareholder Services is recommending that Tesla investors vote against a pay plan for CEO Elon Musk that would grant him nearly $1 trillion more in stock.

The “mega performance equity award” to Musk, designed to retain the CEO long-term, “has an astronomical grant value conditioned upon far-reaching performance targets that, if achieved, would create enormous value for shareholders,” ISS wrote on Friday.

Tesla’s 2025 annual shareholder meeting and proxy vote is scheduled for Nov. 5. The company is scheduled to report third-quarter results on Wednesday.

ISS said that while some shareholders may support the pay plan, “there are unmitigated concerns surrounding the special award’s magnitude and design.”

Musk’s plan, if approved, would be the largest ever awarded to a public company CEO. It could could net Musk up to an additional 12% stake in Tesla, should the company hit a market cap of $8.5 trillion and achieve other goals.

Tesla disagreed with the ISS recommendations.

In a post on X, which is owned by Musk, the automaker accused ISS of missing “fundamental points of investing and governance,” and complained that the advisors had previously “recommended against compensation that shareholders have voted on twice before (and that Elon has already earned), as well as the 2025 CEO Performance Award (where Elon receives nothing unless shareholders win big).”

The company urged shareholders to vote with the board’s recommendations on all proposals on the 2025 proxy.

ISS previously advised investors to reject a “ratification” of Musk’s 2018 CEO pay package, which was worth an estimated $56 billion at the time.

The Delaware Court of Chancery ruled early last year that the 2018 pay plan had been improperly granted by the Tesla board and must be rescinded. The ruling said Tesla hid crucial details from shareholders that they were entitled to before voting, and that Musk had controlled the board.

Musk has appealed that court’s decision to the Delaware State Supreme Court, with opening arguments in the appeal heard by a panel of judges this week.

Representatives for ISS declined to comment beyond the report.

ISS, along with Glass Lewis and smaller peers, can influence how shareholders decide to cast their votes at annual elections. Musk accused ISS and Glass Lewis in 2023 of effectively controlling the stock market because of their influence with passive or index funds in some matters. He also baselessly compared ISS to a terrorist organization.

Musk will be able to vote his own shares in the vote concerning his future pay. He holds at least 13.5% of Tesla’s voting power, according to the most recent available disclosures on his stake. Those holdings alone could be enough to secure approval for the nearly $1 trillion pay package.

In September, Musk added to his ownership of Tesla stock buying another $1 billion worth of shares.

Among other ISS recommendations, the firm also suggested that shareholders should vote against giving Tesla’s board authorization to invest in xAI, the AI company that Musk started in March 2023 but only disclosed publicly in July that year. Tesla has sold tens of millions of dollars worth of its Megapack battery energy storage systems to xAI.

ISS also recommended against voting to reinstate Tesla board member Ira Ehrenpreis, a longstanding and close friend of Musk.

In May, Tesla changed its corporate bylaws to limit shareholders’ ability to sue for a breach of fiduciary duties so that only a shareholder that owns at least 3% of the company’s stock can bring what’s called a “derivative” action. Ehrenpreis presided over Tesla’s governance committee at the time that change was made without a shareholder vote.

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$500 purple cables put this little-known company in the middle of the AI boom

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0 purple cables put this little-known company in the middle of the AI boom

A demo setup of racks of AI servers connected with Credo cables, displayed at the Open Compute Summit in San Jose, California.

Credo

In July, Elon Musk posted photos from inside an xAI data center called Colossus 2, which the artificial intelligence startup aims to turn into a massive supercomputing facility in Memphis, Tennessee.

Musk’s pictures, posted to his X feed, didn’t show off the pricey Nvidia racks that are filled with powerful graphics processing units. Rather, he focused on the wires behind the servers, including one image with thousands of neatly organized purple cables connecting the computers together.

Those purple cables are the signature offering of Credo, a 17-year-old Silicon Valley-based semiconductor company whose name rarely gets mentioned alongside the leaders of the AI boom.

But Wall Street has taken notice.

Credo shares have more than doubled this year to $143.61 after soaring 245% in 2024. The company’s market cap, which was about $1.4 billion at the time of its IPO in 2022, now sits at close to $25 billion. Credo is angling to position itself as a key supplier in the trillion-dollar AI infrastructure expansion, and is benefiting as the money flows downstream.

The stock jumped 5% on Friday after analysts at JPMorgan Chase initiated coverage with the equivalent of a buy rating and a $165 stock price. They said the active electrical cable (AEC) market, which Credo pioneered, is on pace to hit $4 billion by 2028, as all the major hyperscalers invest in data center buildouts.

“The industry outlook is supported by increasing deployments from major companies such as Amazon, Microsoft, and xAI as well as broadening adoption, including Meta and more,” the analysts wrote. They predict annualized revenue growth for Credo of at least 50% through 2028.

Big Tech’s AI spending spree is fueling growth. But what happens if the money stops flowing?

Revenue in fiscal 2025, which ended in early May, more than doubled to $436.8 million. The company also turned profitable, recording net income of $52.2 million after losing $28.4 million the prior year. Analysts are expecting sales to more than double again in fiscal 2026 to almost $1 billion, according to LSEG.

Credo’s purple AECs cost between $300 and $500 each, depending on bulk discounts and other negotiations, according to an estimate from the 650 Group, an industry researcher. They are sturdy, moderately thick copper cables wrapped in a braided covering with big connectors containing chips on each side.

Much of the excitement around Credo is driven by the AI boom, which to this point has been driven by a handful of hyperscalers that are rapidly building data centers for future expected workloads. Analysts expect $1 trillion in spending on AI data centers by 2030, but any pullback from the major cloud providers or scaling back in OpenAI’s plans could hurt many suppliers, including Credo.

For now, projections are way up and to the right.

Expanding opportunity

Previous servers typically had one or two processors on a motherboard. Individual servers today can have up to eight, and the most powerful AI models require potentially millions of GPUs all working together as one.

Each GPU needs its own connection to the switch, the term for a computer that routes data around the cluster, often mounted on the top of a server rack.

Nvidia’s latest products slot several of these boards together to comprise a system with 72 GPUs. Next year’s fastest racks will have twice as many, and the following year, a Kyber rack will have 572 GPUs, Nvidia says.

“In the past, Credo’s opportunity was one cable per server, but now Credo’s opportunity is nine cables per server,” said Alan Weckel, an analyst at 650 Group. He estimates that Credo has 88% of the market for AECs, which are also made by Astera Labs and Marvell.

Many GPUs are connected by fiber optic cables powered by components made by companies like Broadcom and Coherent. AECs offer an alternative to fiber optic cables. They have chips called digital signal processors on both sides that use sophisticated algorithms to pull data out of the cable, enabling much longer lengths than traditional copper cables. Credo’s longest AEC is seven meters long.

Credo CEO Bill Brennan, who joined the company in 2013, told CNBC that hyperscalers are choosing his company’s cables because they’re more reliable than fiber optic cables. He said customers are trying to avoid what’s called a “link flap,” where one part of an AI cluster goes offline because the optical cable connecting them fails, costing hours of pricey GPU time.

“It can literally shut down an entire data center,” Brennan said.

He said Credo is increasingly working with hyperscalers in the early stages of planning large AI clusters, especially as some designs become denser, allowing more servers to be connected by shorter cables.

“When you connect with these hyperscalers, the numbers are very large,” Brennan said.

Credo’s AEC leadership team, Hal Hawthorne, Don Barnetson, Ameet Suri, and Ryan Cai.

Corey Bentley, Credo

The company doesn’t name its hyperscaler clients, but analysts have cited Amazon and Microsoft as customers. Amazon Web Services CEO Matt Garman posted an image on LinkedIn of the company’s Trainium AI chip racks on Friday that appeared to show Credo’s purple cables.

Credo says it expects three or four customers to make up more than 10% of revenue each in the coming quarters, including two new hyperscale customers this year.

Amazon and Microsoft declined to comment. Meta and xAI didn’t respond to requests for comment.

At a conference for data center professionals in San Jose this week, Credo presented alongside a representative from Oracle Cloud. An example rack of Nvidia GPUs designed by Meta displayed at the show prominently featured Credo’s purple cables.

“Every time you see a new announcement of a gigawatt data center, you can rest assured that we view that as an opportunity,” Brennan told investors on an earnings call in September.

It’s a market that everyone in AI networking is targeting.

Analysts at TD Cowen estimated earlier this month that the market for AI networking chips could be worth $75 billion per year by 2030. Major players include Nvidia and Advanced Micro Devices, which both have their own networking businesses and have the power to dictate which technologies are part of their broader systems.

‘Insatiable demand’

Christina Locopo | CNBC

The AEC business didn’t take off until the AI boom in the early 2020s, because data centers didn’t yet need its technology, Brennan said.

However, there was early excitement in the air when Musk’s car company came knocking in 2017. Tesla wanted help with its Dojo AI supercomputer and needed chips with more bandwidth than what was available at the time.

Now, Credo is hoping to use its foothold with its active copper cables to branch out into additional product lines, including intra-rack connections, or what’s called “scale-up” networking. The company announced new transceivers and software for optical cables this week.

“You’ve got this market pull like we’ve never had before,” Brennan said. “If you could deliver the next generation right now, it would be consumed. Generation after that, it would be consumed. You’ve got this insatiable demand from the AI cluster world.”

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Salesforce CEO apologizes for saying Trump should send National Guard to San Francisco

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Salesforce CEO apologizes for saying Trump should send National Guard to San Francisco

Salesforce CEO Marc Benioff apologized on Friday for making comments in support of President Donald Trump potentially sending federal troops to San Francisco, where his company is based. 

“Having listened closely to my fellow San Franciscans and our local officials, and after the largest and safest Dreamforce in our history, I do not believe the National Guard is needed to address safety in San Francisco,” Benioff wrote in a post on X.

The Trump administration recently deployed the National Guard to Portland, Oregon and Chicago, sparking protests and lawsuits and resulting in citizens and immigrants being detained without legal representation.

In a story published late last week in The New York Times, Benioff indicated that he would welcome troops to San Francisco. The company’s annual Dreamforce conference was held in downtown San Francisco from Tuesday through Thursday of this week.

“We don’t have enough cops, so if they can be cops, I’m all for it,” Benioff told the Times.

Benioff faced blowback for his comments from local politicians and other leaders. California Governor Gavin Newsom and San Francisco politicians on Wednesday issued statements and held press conferences to deliver the message that federal troops are not welcome in the city, and that crime is coming down.

Prominent startup investor Ron Conway, who backed companies including GoogleAirbnb and Stripe, resigned from the board of the Salesforce Foundation on Thursday. According to the New York Times, Conway told Benioff in an email that their “values were no longer aligned.”

Conway is a longtime Democratic donor who was a member of VCs for Kamala, and donated around $500,000 to at least two funds tied to Kamala Harris’ unsuccessful 2024 election campaign. While Benioff has donated to members of both parties, he has supported Democrats for president, including Barack Obama, Hillary Clinton and Kamala Harris.

Venture capitalist David Sacks, who is now Trump’s AI and crypto czar, said after the news about Conway that Benioff could join the Republicans. On Tuesday, Sacks, a longtime friend and associate of Elon Musk, was featured with Benioff in an onstage interview at Dreamforce.

“Dear Marc @Benioff, if the Democrats don’t want you, we would be happy for you to join our team,” Sacks wrote on X. “Cancel culture is over, and we are the inclusive party.”

Following Benioff’s initial comment to the Times, Benioff appeared to walk back his comments, writing on X that safety is “first and foremost, the responsibility of our city and state leaders.” However, by that point, Musk and other right-wing figures had seized on his original comments, amplifying them to their audiences.

Musk, who has drawn criticism for his personal drug use, characterized downtown San Francisco as a “drug zombie apocalypse.” And on Wednesday, Trump called San Francisco “a mess,” and suggested possibly sending in the National Guard.

“My earlier comment came from an abundance of caution around the event, and I sincerely apologize for the concern it caused,” Benioff wrote in his Friday post. “It’s my firm belief that our city makes the most progress when we all work together in a spirit of partnership.”

Opposition to Benioff’s initial suggestion also came from Garry Tan, CEO of startup incubator Y Combinator. He wrote on X that “We don’t need the National Guard,” but he used his post to go after liberal local officials and judges perceived as too lenient.

— CNBC’s Lora Kolodny contributed to this report.

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