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Visitors take photos in front of the Meta sign at its headquarters in Menlo Park, California, December 29, 2022.

Tayfun Coskun | Anadolu Agency | Getty Images

Technology companies are learning an old lesson from Wall Street: maturing means shrinking.

Meta and Amazon saw their shares spike on Friday following their fourth-quarter earnings reports. While revenue for both topped estimates, the story for investors is that they’re showing their ability to do more with less, an alluring equation for shareholders.

There’s also a recognition that investors value cash, in many cases, above all else. The tech industry has long preferred to reinvest excess cash back into growth, ramping up hiring and experimenting with the next big thing. But following a year of hefty layoffs and capital preservation, Meta on Thursday announced that, for the first time, it will pay a quarterly dividend of 50 cents per share, while also authorizing an additional $50 billion stock repurchase plan.

“The key with these companies is really that they’re able to reinvent themselves,” said Daniel Flax, an analyst at Neuberger Berman, in an interview with CNBC’s “Squawk Box” on Friday. They “continue to invest for the future and play offense while at the same time manage expenses in this tough environment,” he said.

Neuberger Berman's Dan Flax breaks down Big Tech earnings results

Amazon is less aggressively moving to send cash to shareholders, but the topic is certainly being discussed. The company instituted a $10 billion buyback program in 2022 and hasn’t announced anything since. On Thursday’s earnings call, Morgan Stanley analyst Brian Nowak asked about plans for additional capital returns.

“Just really excited to actually have that question,” finance chief Brian Olsavsky said in response. “No one has asked me that in three years.”

Olsavsky added that “we do debate and discuss capital structure policies annually or more often,” but said the company doesn’t have anything to announce. “We’re glad to have the better liquidity at the end of 2023 and we’re going to try to continue to build that,” he said.

After years of seemingly unfettered growth, the biggest internet companies in the world are firmly into a new era. They’re still out hunting for the best technical talent, particularly in areas like artificial intelligence, but headcount growth is measured. Staffing up in certain parts of the business likely means scaling back elsewhere.

‘Playing to win’

For example, Meta CEO Mark Zuckerberg told investors that when it comes to AI, “We’re playing to win here and I expect us to continue investing aggressively in this area in order to build the most advanced clusters.”

Later on the call, when asked about expanding headcount, Zuckerberg said new hiring will be “relatively minimal compared to what we would have done historically,” adding that, “I kind of want to keep things lean.” 

Olsavsky said most teams at Amazon are “looking to hold the line on headcount, perhaps go down as we can drive efficiencies in the size of our business.”

The story is playing out across Silicon Valley. January was the busiest month for tech job cuts since March, according to the website Layoffs.fyi, with almost 31,000 layoffs at 118 companies. Amazon and Alphabet added to their 2023 job cuts with more layoffs last month, as did Microsoft, which eliminated 1,900 roles in its gaming unit shortly after closing the acquisition of Activision Blizzard.

SAN FRANCISCO, CALIFORNIA – JUNE 23: XBOX CEO Phil Spencer arrives at federal court on June 23, 2023 in San Francisco, California. Top executives from Microsoft and Activision/Blizzard will be testifying during a five day hearing against the FTC to determine the fate of a $68.7B merger of the two companies. (Photo by Justin Sullivan/Getty Images)

Justin Sullivan | Getty Images News | Getty Images

Downsizing this week hit the cloud software market, where Okta announced it was cutting about 400 jobs, or 7% of its staff, and Zoom confirmed it was eliminating less than 2% of its workforce, amounting to close to 150 positions. Zuora announced a plan to cut 8% of jobs, or almost 125 positions based on the most recent headcount figures.

Evan Sohn, chairman of Recruiter.com, called it a “very confusing job market.” Last year, tech companies were responding to dramatically changing market conditions — soaring inflation, rising interest rates, rotation out of risk — after an extended bull market. Meta slashed over 20,000 jobs in 2023, Amazon laid off more than 27,000 people, And Alphabet cut over 12,000 positions.

The economy is in a very different place today. Growth is back at a healthy clip, inflation appears under control and the Federal Reserve is indicating rate cuts are on the horizon this year. Unemployment held at 3.7% in January, down from 6.4% three years earlier, when the economy was just opening up from pandemic lockdowns. And nonfarm payrolls expanded by 353,000 last month, the Labor Department’s Bureau of Labor Statistics reported Friday. 

Tech stocks are booming, with Meta, Alphabet and Microsoft all at or near record levels.

But the downsizing in the industry continues.

“Companies are still in the cleanup from ’23,” Sohn told CNBC’s “Worldwide Exchange” this week. “There could be a flipping of skills, different skills necessary to really handle the new world of 2024.”

Recent layoffs are fueled by changing skills and push for AI, says Recruiter.com's Evan Sohn

Wall Street is rewarding tech companies for improved discipline and cash distribution, but it raises the question about where they can turn for significant growth. Other than Nvidia, which had a banner 2023 due to soaring demand for its AI chips, none of the other mega-cap tech companies have been growing at their historic averages.

Even Meta’s better-than-expected 25% growth for the fourth quarter is a bit misleading, because the comparable number a year ago was depressed due to a slowing digital advertising market and Apple’s iOS update, which made it harder to target ads. Finance chief Susan Li reminded analysts on Thursday that as 2024 progresses, the company will be “lapping periods of increasingly strong demand.”

By late this year, analysts are projecting growth at Meta will be back down to the low teens at best. Growth estimates for Amazon and Alphabet are even lower, a good indication that calls for capital allocation measures may only get louder.

Ben Barringer, technology analyst at Quilter Cheviot, told CNBC that Meta’s decision to pay a dividend was a “symbolic moment” in that regard.

“Mark Zuckerberg is showing that he wants to bring shareholders along with him and is highlighting that Meta is now a mature, grown-up business,” Barringer said.

— CNBC’s Annie Palmer contributed to this report

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The UK wants to do its ‘own thing’ on AI regulation, suggesting a divergence from U.S. and EU

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The UK wants to do its 'own thing' on AI regulation, suggesting a divergence from U.S. and EU

Jaque Silva | Nurphoto | Getty Images

LONDON — The U.K. says it wants to do its “own thing” when it comes to regulating artificial intelligence, hinting at a possible divergence from approaches taken by its main Western peers.

“It’s really important that we as the U.K. do our own thing when it comes to regulation,” Feryal Clark, Britain’s minister for AI and digital government, told CNBC in an interview that aired Tuesday.

She added the government already has a “good relationship” with AI companies like OpenAI and Google DeepMind, which have voluntarily opened their models up to the government for safety testing purposes.

“It’s really important that we bake in that safety right at the beginning when models are being developed … and that’s why we’ll be working with the sector on any safety measures that come forward,” Clark added.

UK can do its 'own thing' on AI regulation, minister says

Her comments echoed remarks from Prime Minister Keir Starmer on Monday that Britain has “freedom now in relation to the regulation to do it in a way that we think is best for the U.K.” after Brexit.

 “You’ve got different models around the world, you’ve got the EU approach and the U.S. approach – but we have the ability to choose the one that we think is in our best interest and we intend to do so,” Starmer said in response to a reporter’s question after announcing a 50-point plan to make the U.K. a global leader in AI.

Divergence from the U.S., EU

However, so far, the U.K. is yet to confirm details on proposed AI safety legislation, instead saying it will consult with the industry before proposing formal rules.

“We will be working with the sector to develop that and bring that forward in line with what we said in our manifesto,” Clark told CNBC.

Chris Mooney, partner and head of commercial at London-based law firm Marriott Harrison, told CNBC that the U.K. is taking a “wait and see” approach to AI regulation even as the EU is forging ahead with its AI Act.

“While the U.K. government says it has taken a ‘pro-innovation’ approach to AI regulation, our experience of working with clients is that they find the current position uncertain and, therefore, unsatisfactory,” Mooney told CNBC via email.

One area Starmer’s government has spoken up on reforming rules for AI has been around copyright.

Late last year, the U.K. opened a consultation reviewing the country’s copyright framework to assess possible exceptions to existing rules for AI developers using artists and media publishers’ works to train their models.

Businesses left uncertain

Sachin Dev Duggal, CEO of London-headquartered AI startup Builder.ai, told CNBC that, although the government’s AI action plan “shows ambition,” proceeding without clear rules is “borderline reckless.”

“We’ve already missed crucial regulatory windows twice — first with cloud computing and then with social media,” Duggal said. “We cannot afford to make the same mistake with AI, where the stakes are exponentially higher.”

“The U.K.’s data is our crown jewel; it should be leveraged to build sovereign AI capabilities and create British success stories, not simply fuel overseas algorithms that we can’t effectively regulate or control,” he added.

Details of Labour’s plans for AI legislation were initially expected to appear in King Charles III’s speech opening U.K. Parliament last year.

However, the government only committed to establishing “appropriate legislation” on the most powerful AI models.

“The U.K. government needs to provide clarity here,” John Buyers, international head of AI at law firm Osborne Clarke, told CNBC, adding he’s learned from sources that a consultation for formal AI safety laws is “waiting to be released.”

“By issuing consultations and plans on a piecemeal basis, the U.K. has missed the opportunity to provide a holistic view of where its AI economy is heading,” he said, adding that failure to disclose details of new AI safety laws would lead to investor uncertainty.

Still, some figures in the U.K. tech scene think that a more relaxed, flexible approach to regulating AI may be the right one.

“From recent discussions with the government, it is clear that considerable efforts are underway on AI safeguards,” Russ Shaw, founder of advocacy group Tech London Advocates, told CNBC.

He added that the U.K is well positioned to adopt a “third way” on AI safety and regulation — “sector-specific” regulations that rules to different industries like financial services and health care.

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China considers selling TikTok U.S. operations to Musk, Bloomberg reports

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China considers selling TikTok U.S. operations to Musk, Bloomberg reports

Jakub Porzycki | Nurphoto | Getty Images

The Chinese government is considering a plan that would have Elon Musk acquire TikTok’s U.S. operations to keep the app from being effectively banned, Bloomberg News reported on Monday.

The contingency plan is one of several options China is exploring as the U.S. Supreme Court determines whether to uphold a law that calls for China-based ByteDance to divest TikTok’s U.S. business by Jan. 19, the report said, citing anonymous sources.

After that deadline, third-party Internet service providers would be penalized for supporting TikTok’s operations in the country.

Under the plan, Musk would oversee both X, which he currently owns, and TikTok’s U.S. business, Bloomberg said. However, Chinese government officials haven’t yet decided on whether it would proceed, the report said, noting that the plan is still preliminary.

It’s unclear whether ByteDance knows about the Chinese government’s plans and TikTok and Musk’s involvement in the discussions, the report said. Senior Chinese officials are debating contingency plans involving TikTok’s future in the U.S. as part of larger discussions about working with President-elect Donald Trump, the report added.

A TikTok spokesperson said in an email to CNBC, “We can’t be expected to comment on pure fiction.” X didn’t immediately respond to a request for comment.

Last week, the Supreme Court held oral arguments about the law potentially banning TikTok, which President Joe Biden signed in April. TikTok’s legal team argued that the law violates the free-speech rights of the millions of users in the U.S. while the U.S. government said that ByteDance’s ownership of TikTok poses a national security risk.

With the Supreme Court appearing to side with the government, TikTok could turn to Trump, when his second term begins on Jan. 20. Trump, who favored a TikTok ban during his first administration, has since flip-flopped on the matter. Late last month, he urged the Supreme Court to intervene and forcibly delay implementation of Biden’s ban to give him time to find a “political resolution.”

Trump’s rhetoric on TikTok began to turn after he met in February with billionaire Jeff Yass, a Republican megadonor and a major investor in ByteDance who also owns a stake in the owner of Truth Social, Trump’s social media company.

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IAC approves spinoff of home improvement marketplace Angi

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IAC approves spinoff of home improvement marketplace Angi

Joey Levin, CEO of IAC.

Anjali Sundaram | CNBC

Barry Diller’s IAC said Monday that its board approved the spinoff of Angi, the home improvement marketplace the company acquired in 2017.

IAC said it expects the transaction to close in the second quarter of the year. The two companies will post their respective fourth-quarter results when IAC reports on Feb. 11. Angi was founded in 1995 as Angie’s List, which went public on the Nasdaq in 2011.

As part of the spinoff, IAC CEO Joey Levin will leave his role and become an advisor to the company. Levin will also take on a new role as Angi’s executive chairman, serving as the marketplace’s senior executive alongside CEO Jeff Kip, IAC said.

“Joey Levin has been an exemplary leader of IAC, creating significant value during his nearly decade-long tenure as IAC CEO,” Diller, IAC’s chairman, said in a statement.

Upon Levin’s vacancy, IAC will operate without a new CEO, the company said. IAC’s top execs will report directly to Diller, as will publisher Dotdash Meredith, the company’s largest business. The rest of IAC’s units will report to operating chief Christopher Halpin.

IAC has previously used no-CEO structures when reorganizing its businesses. Most recently, in 2013, then-CEO Greg Blatt stepped down from the role to become chairman of the newly formed Match Group division.

“Each of IAC and Angi has a vigorous future, and I expect to remain an active participant in both,” Levin said in a statement.

As part of the spinoff, IAC shareholders will get direct ownership of Angi, IAC said.

IAC first announced it was considering a spinoff of Angi in November. At the time, the company said Angi’s revenue declined 16% year over year to $296.7 million during the third quarter. The company attributed the slide to reduced sales and marketing spend, which led to a decrease in service requests and lower acquisition of new professionals.

IAC acquired Angie’s List in a deal valued at more than $500 million. It merged the site with HomeAdvisor, creating a new public company. Angi currently has a market cap of about $770 million, and IAC owns 85% of it.

The spinoff has been under consideration for several years, but IAC postponed the effort in 2019 as it completed the Match Group transaction. Match owns dating services including Tinder, Match and Hinge.

IAC has become known for incubating businesses and spinning them off into separate companies. It’s done the same with Expedia, Ticketmaster and LendingTree, among others.

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IAC CEO on M&A opportunities, spinoff from ANGI and AI

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