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An attendee wears an HTC Vive Virtual Reality headset during the Apple Worldwide Developers Conference in San Jose, California, June 5, 2017.

David Paul Morris | Bloomberg | Getty Images

On Monday, Apple is expected to announce its first new major product line since the Apple Watch in 2014.

During Apple’s software-focused developer conference, WWDC, it could release its first mixed-reality headset, according to analyst research, media reports and increasingly, vague references from Apple itself.

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The headset, according to reports, will feature high-definition screens in front of the user’s eyes. But it could also let users see and interact with the real world through high-powered cameras mounted on the device, a trick sometimes called passthrough or mixed reality.

Apple is launching its headset as the broader virtual reality industry sifts through what’s been called a trough of disillusionment.

“Although the lackluster uptake of the AR/VR market and the transitory enthusiasm about the Metaverse create a backdrop of challenges, it is instructive to remember that Apple invents entire new categories that have the potential to disrupt existing markets and create entirely new markets,” Bank of America analyst Wamsi Mohan wrote in a recent note.

When Facebook rebranded as Meta in October 2021, it drew attention to VR and the metaverse headsets could enable. But since then, sales for existing VR headsets haven’t been great, usage has been worse and the anticipated explosion in successful VR software companies hasn’t happened.

Augmented reality, a related technology that shows computer graphics through pricey, specialized transparent lenses, has also failed to thrive. Microsoft’s Hololens, announced in 2014, had a high-profile deal to make headsets for the U.S. Army, but it recently stalled. The most visible AR startup, Magic Leap, has changed management and refocused from making a consumer-oriented gaming device to developing a tool for a small set of industries.

Apple’s headset is expected to be more powerful than what’s out there — even current $6,500 VR headsets. It’s expected to have a 4K resolution screen for each eye and a powerful Apple-designed chip, according to TFI Securities analyst Ming-Chi Kuo.

It could also be pricey, retailing for as much as $3,000, according to a note from TD Cowen analyst Krish Sankar, and could only sell in the hundreds of thousands in the first year. By way of comparison, the Apple Watch sold millions in its first year.

But many people in the industry believe Apple’s announcement will energize consumers and software developers and bring the technology closer to its ultimate promise: a headset you wear daily, as you go about your business, or perhaps a pair of lightweight glasses, helping you with contextual information.

“It’s good to see others get into this business, particularly Apple, who doesn’t jump into markets too early,” Magic Leap CEO Peggy Johnson told CNBC. “That is a huge validation of what we have been doing to date, and we welcome that, because it’s also good for the ecosystem.”

Here’s why Apple could succeed where everybody else has failed.

Apple breaks products into the mainstream

The late Apple CEO Steve Jobs unveiling the first iPhone in 2007.

David Paul Morris | Getty Images News | Getty Images

The language may be dated now. The clunky phrase “internet communications device” transformed into “there’s an app for that” quickly. But it still showed how Apple can quickly slim down a pitch for a new gadget into terms consumers understand.

For now, the world of headset technology is confusing and has no clear use cases. Industry practitioners spend a lot of time explaining the differences between augmented, virtual and mixed reality. If Apple can demystify the whole industry for the public, it could end up with the first headset mainstream consumers understand and want.

Plus, Apple has about 34 million developers for its current phones. That’s a huge resource Apple could encourage to build the killer app that would turn its headset into a must-have.

Apple has been laying the groundwork for a decade

When Apple releases a headset, it won’t just have the technology Apple developed in secret. It will have a base of software and hardware infrastructure Apple has been building and buying for years.

Starting in 2016, Apple CEO Tim Cook began frequently talking about the benefits of augmented reality, often contrasting it with the limitations of virtual reality.

Around the same time, Apple started buying several companies focused on specific technologies that could end up in a headset.

— In 2013, Apple bought PrimeSense, whose 3D camera sensor eventually ended up being part of the basis for Face ID, the company’s facial recognition system for iPhones, and influenced the company’s current depth-sensing cameras.
— In 2015, Apple bought Metaio , which made AR software for mobile devices.
— In 2016, it bought Flyby Media, which worked on computer vision technology.
— In 2017, it bought SensoMotoric Instruments, which developed eye tracking, a core VR technology, as well as Vrvrana, which developed a VR headset.
— In 2018, it bought Akonia Holographics, which developed transparent lenses for AR glasses
— It bought NextVR, which filmed video content for virtual reality, including sports.

Apple also started releasing developer’s kits for augmented reality, including one called ARKit, which could use the iPhone’s hardware to create limited AR experiences on the phone, such as interacting with a virtual pet or trying out digital furniture in a living room.

Apple now has an entire library of software to perform difficult tasks the headset will need to be able to do to integrate the real world and a virtual world seamlessly.

— RealityKit allows developers to render graphics that mesh with the real world.
— RoomPlan scans the room around the user.
— Animoji is a 3D avatar that can match the user’s facial expression.
— Spatial Audio can make audio sound like it’s coming from somewhere, not just from the user’s headphones.

Apple doesn’t give up easily

When the Apple Watch hit the market, Apple didn’t know entirely what it was going to be. Cook even said at its release the company was excited to learn what developers would do with it.

One early thought is the Apple Watch was going to be a fashion must-have. In the early days of the product, Apple spent a lot of time courting fashion media and seeding the product with tastemakers. Beyonce was spotted wearing a gold Apple Watch model, with a never-released band, before it was released.

But once the Apple Watch got into user hands, Apple figured out people were most interested in it as a fitness tracker. Subsequent versions de-emphasized the luxury gold model and introduced a version co-branded with Nike.

When Apple finally released a new premium model of the Apple Watch, the Apple Watch Ultra, its selling point was features that dedicated fitness trackers had for serious weekend warriors, such as marathon battery life and a bigger screen.

Apple announces high-end Apple Watch Ultra for more rugged conditions

Apple could pull the same move with its headset. Even if the first is expensive and doesn’t sell well, Apple is already planning future versions at lower prices and higher volumes, according to Kuo.

Analysts don’t expect Apple’s headset to turn into a significant source of revenue immediately, but they believe Apple is dipping a toe into a market that could one day be worth billions.

“By 2030, I believe the wearables/glasses segment could account for 10% of Apple’s sales (assuming they don’t release a car), a similar size business as Mac and iPad are today,” said Gene Munster, founder of Deepwater Asset Management, in an email.

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Microsoft AI chief Suleyman sees advantage in building models ‘3 or 6 months behind’

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Microsoft AI chief Suleyman sees advantage in building models ‘3 or 6 months behind’

Microsoft owns lots of Nvidia graphics processing units, but it isn’t using them to develop state-of-the-art artificial intelligence models.

There are good reasons for that position, Mustafa Suleyman, the company’s CEO of AI, told CNBC’s Steve Kovach in an interview on Friday. Waiting to build models that are “three or six months behind” offers several advantages, including lower costs and the ability to concentrate on specific use cases, Suleyman said.

It’s “cheaper to give a specific answer once you’ve waited for the first three or six months for the frontier to go first. We call that off-frontier,” he said. “That’s actually our strategy, is to really play a very tight second, given the capital-intensiveness of these models.”

Suleyman made a name for himself as a co-founder of DeepMind, the AI lab that Google bought in 2014, reportedly for $400 million to $650 million. Suleyman arrived at Microsoft last year alongside other employees of the startup Inflection, where he had been CEO.

More than ever, Microsoft counts on relationships with other companies to grow.

It gets AI models from San Francisco startup OpenAI and supplemental computing power from newly public CoreWeave in New Jersey. Microsoft has repeatedly enriched Bing, Windows and other products with OpenAI’s latest systems for writing human-like language and generating images.

Microsoft’s Copilot will gain “memory” to retain key facts about people who repeatedly use the assistant, Suleyman said Friday at an event in Microsoft’s Redmond, Washington, headquarters to commemorate the company’s 50th birthday. That feature came first to OpenAI’s ChatGPT, which has 500 million weekly users.

Through ChatGPT, people can access top-flight large language models such as the o1 reasoning model that takes time before spitting out an answer. OpenAI introduced that capability in September — only weeks later did Microsoft bring a similar capability called Think Deeper to Copilot.

Microsoft occasionally releases open-source small-language models that can run on PCs. They don’t require powerful server GPUs, making them different from OpenAI’s o1.

OpenAI and Microsoft have held a tight relationship shortly after the startup launched its ChatGPT chatbot in late 2022, effectively kicking off the generative AI race. In total, Microsoft has invested $13.75 billion in the startup, but more recently, fissures in the relationship between the two companies have begun to show.

Microsoft added OpenAI to its list of competitors in July 2024, and OpenAI in January announced that it was working with rival cloud provider Oracle on the $500 billion Stargate project. That came after years of OpenAI exclusively relying on Microsoft’s Azure cloud. Despite OpenAI partnering with Oracle, Microsoft in a blog post announced that the startup had “recently made a new, large Azure commitment.”

“Look, it’s absolutely mission-critical that long-term, we are able to do AI self-sufficiently at Microsoft,” Suleyman said. “At the same time, I think about these things over five and 10 year periods. You know, until 2030 at least, we are deeply partnered with OpenAI, who have [had an] enormously successful relationship for us.

Microsoft is focused on building its own AI internally, but the company is not pushing itself to build the most cutting-edge models, Suleyman said.

“We have an incredibly strong AI team, huge amounts of compute, and it’s very important to us that, you know, maybe we don’t develop the absolute frontier, the best model in the world first,” he said. “That’s very, very expensive to do and unnecessary to cause that duplication.”

WATCH: Microsoft Copilot beginning of a seismic shift in AI integration, says Microsoft AI CEO Suleyman

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Former Microsoft CEO Steve Ballmer says, as shareholder, tariffs are ‘not good’

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Former Microsoft CEO Steve Ballmer says, as shareholder, tariffs are 'not good'

President Trump’s new tariffs on goods that the U.S. imports from over 100 countries will have an effect on consumers, former Microsoft CEO Steve Ballmer told CNBC on Friday. Investors will feel the pain, too.

Microsoft’s stock dropped almost 6% in the past two days, as the Nasdaq wrapped up its worst week in five years.

“As a Microsoft shareholder, this kind of thing is not good,” Ballmer said, in an interview with Andrew Ross Sorkin that was tied to Microsoft’s 50th anniversary celebration. “It creates opportunity to be a serious, long-term player.”

Ballmer was sandwiched in between Microsoft co-founder Bill Gates and current CEO Satya Nadella for the interview.

“I took just enough economics in college — that tariffs are actually going to bring some turmoil,” said Ballmer, who was succeeded by Nadella in 2014. Gates, Microsoft’s first CEO, convinced Ballmer to join the company in 1980.

Gates, Ballmer and Nadella attended proceedings at Microsoft’s Redmond, Washington, campus on Friday to celebrate its first half-century.

Between the tariffs and weak quarterly revenue guidance announced in January, Microsoft’s stock is on track for its fifth straight month of declines, which would be the worst stretch since 2009. But the company remains a leader in the PC operating system and productivity software markets, and its partnership with startup OpenAI has led to gains in cloud computing.

“I think that disruption is very hard on people, and so the decision to do something for which disruption was inevitable, that needs a lot of popular support, and nobody could game theorize exactly who is going to do what in response,” Ballmer said, regarding the tariffs. “So, I think citizens really like stability a lot. And I hope people — individuals who will feel this, because people are feeling it, not just the stock market, people are going to feel it.”

Ballmer, who owns the Los Angeles Clippers, is among Microsoft’s biggest fans. He said he’s the company’s largest investor. In 2014, shortly after he bought the basketball team for $2 billion, he held over 333 million shares of the stock, according to a regulatory filing.

“I’m not going to probably have 50 more years on the planet,” he said. “But whatever minutes I have, I’m gonna be a large Microsoft shareholder.” He said there’s a bright future for computing, storage and intelligence. Microsoft launched the first Azure services while Ballmer was CEO.

Earlier this week Bloomberg reported that Microsoft, which pledged to spend $80 billion on AI-enabled data center infrastructure in the current fiscal year, has stopped discussions or pushed back the opening of facilities in the U.S. and abroad.

JPMorgan Chase’s chief economist, Bruce Kasman, said in a Thursday note that the chance of a global recession will be 60% if Trump’s tariffs kick in as described. His previous estimate was 40%.

“Fifty years from now, or 25 years from now, what is the one thing you can be guaranteed of, is the world needs more compute,” Nadella said. “So I want to keep those two thoughts and then take one step at a time, and then whatever are the geopolitical or economic shifts, we’ll adjust to it.”

Gates, who along with co-founder Paul Allen, sought to build a software company rather than sell both software and hardware, said he wasn’t sure what the economic effects of the tariffs will be. Today, most of Microsoft’s revenue comes from software. It also sells Surface PCs and Xbox consoles.

“So far, it’s just on goods, but you know, will it eventually be on services? Who knows?” said Gates, who reportedly donated around $50 million to a nonprofit that supported Democratic nominee Kamala Harris’ losing campaign.

— CNBC’s Alex Harring contributed to this report.

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AppLovin can offer TikTok ‘much stronger bid than others,’ CEO says

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AppLovin can offer TikTok 'much stronger bid than others,' CEO says

Piotr Swat | Lightrocket | Getty Images

AppLovin CEO Adam Foroughi provided more clarity on the ad-tech company’s late-stage effort to acquire TikTok, calling his offer a “much stronger bid than others” on CNBC’s The Exchange Friday afternoon.

Foroughi said the company is proposing a merger between AppLovin and the entire global business of TikTok, characterizing the deal as a “partnership” where the Chinese could participate in the upside while AppLovin would run the app.

“If you pair our algorithm with the TikTok audience, the expansion on that platform for dollars spent will be through the roof,” Foroughi said.

The news comes as President Trump announced he would extend the deadline a second time for TikTok’s Chinese-owned parent company ByteDance to sell the U.S. subsidiary of TikTok to an American buyer or face an effective ban on U.S. app stores. The new deadline is now in June, which, as Foroughi described, “buys more time to put the pieces together” on AppLovin’s bid. 

“The president’s a great dealmaker — we’re proposing, essentially an enhancement to the deal that they’ve been working on, but a bigger version of all the deals contemplated,” he added.

AppLovin faces a crowded field of other interested U.S. backers, including Amazon, Oracle, billionaire Frank McCourt and his Project Liberty consortium, and numerous private equity firms. Some proposals reportedly structure the deal to give a U.S. buyer 50% ownership of the company, rather than a complete acquisition. The Chinese government will still need to approve the deal, and AppLovin’s interest in purchasing TikTok in “all markets outside of China” is “preliminary,” according to an April 3 SEC filing.

Correction: A prior version of this story incorrectly characterized China’s ongoing role in TikTok should AppLovin acquire the app.

WATCH: AppLovin CEO Adam Foroughi on its bid to buy TikTok

AppLovin CEO Adam Foroughi on its bid to buy TikTok

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