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Apple is behind on artificial intelligence.

Now, the company is getting ready to unleash its first wave of user-facing AI products. And behind that push is John Giannandrea, a Silicon Valley veteran who is Apple’s top executive in charge of AI strategy.

On Monday, Apple will hold its annual developers conference called WWDC, where it’s expected to show customers and investors its take on generative AI across products like the iPhone, iPad and Mac, the fruit of Giannandrea’s work.

There’s enormous pressure on Apple to deliver an impressive slate of AI products and services. In interviews with CNBC, several people who know and have worked with Giannandrea over the years depict him as a humble and ahead-of-the-curve technologist, a quality that could be essential to Apple catching up in AI.

Siri is a mess and struggles with even the most basic questions. Apple doesn’t sell a product like the AI chatbots being pushed out by Microsoft or startups OpenAI and Anthropic. It doesn’t sell powerful chips to cloud companies running AI services like Nvidia. Apple stock has lagged while shares of its peers have ballooned this year on the promise of AI. The stock is up just 1% this year, while Nvidia, which overtook Apple in market value on Wednesday, is up 144%. Apple also lost its spot as the most valuable public company in the world to another AI leader, Microsoft, in January.

Apple declined to comment.

Wall Street sees this as a moment for Apple to prove it’s not behind on AI, serving as a catalyst for the stock through the second half of the year and spurring a hot upgrade cycle for the next iPhone model.

“We believe that AI features, combined with other Apple ecosystem investments and hardware upgrades for iPhone 16, has the potential to drive upside to product estimates by increasing upgrade rates,” Morgan Stanley analysts wrote in a note to investors this week.

Now it’s up to Giannandrea and his team to match those expectations.

As the tech world became increasingly obsessed with AI over the last 18 months or so, Apple began to talk more openly about how AI powers product features and development.

“We view AI and [machine learning] as fundamental, core technologies, and they are virtually embedded in every product that we build,” Apple CEO Tim Cook told CNBC in August of 2023.

Until now, Giannandrea’s team has worked on AI features that run behind the scenes on Apple devices and software. That includes things like an accessibility feature that can digitally mimic someone’s voice if they lose the ability to speak themselves, or automatic edits that make your iPhone photos look better.

If you ask the folks at Apple, the company has been using AI for many years to power what you do on your Apple devices without you even knowing about it. That’s expected to evolve into more user-facing features this year, like improvements to the Siri digital assistant, a partnership with OpenAI that’ll add the ChatGPT-maker’s tech to the iPhone’s software and sophisticated voice controls for its apps, according to a Bloomberg report last week.

People who have worked with Giannandrea over the years who spoke to CNBC characterize him as a humble, mild-mannered technologist who doesn’t seek attention like more flashy Silicon Valley executives typically do.

His most notable start was at a company called General Magic, which spun out of Apple and began business in the early 1990s making software for PDAs, the predecessors to today’s modern smartphones. Late in that decade he cofounded TellMe, a startup that made a voice-activated, online information service.

A TellMe cofounder, Anthony Accardi, said Giannandrea always seemed ahead of his time, working on technology like running software in the cloud many years before it became the standard.

“He has the foresight to recognize this is an inevitability and direction we’re going in the future,” Accardi said.

Giannandrea, known by most as “JG,” joined Google after the search giant acquired another startup he cofounded called Metaweb.

Geoffrey Hinton, known as one of the “godfathers” of AI, worked with Giannandrea at Google. Hinton said Giannandrea had a rare skillset among tech executives as both a great researcher and manager. Hinton pointed to a generative AI breakthrough Google made last decade: the ability to automatically caption images using AI.

“He really understood the importance of it,” Hinton said.

By 2018, Giannandrea oversaw AI at Google, and it was seen as a huge coup when Apple poached him that year. Within eight months, he was promoted to Apple’s leadership team, reporting directly to Cook along with other top executives like Chief Operating Officer Jeff Williams and services boss Eddy Cue. It was the biggest sign yet Apple was taking AI seriously, especially for future projects like its now-defunct self-driving car project.

So why leave Google, the perceived leader in AI at the time, for Apple? He didn’t like how leadership at Google had trouble making decisions and executing them, instead treating parts of the business like a skunkworks research lab, according to one person who spoke to Giannandrea recently. He found the opposite at Apple: leadership makes a decision, and then the rest of the company gets behind it to make it happen.

But in the six years since joining Apple, Giannandrea hasn’t been in the public view like his peers on Apple’s leadership team often are, showing off the company’s latest products and updates in flashy promotional videos littered with slick edits and dad jokes. Yet his many years of experience and expertise have earned him wide respect among other Silicon Valley leaders.

“I still go to him for wisdom,” said Emil Michael, a former top executive at Uber who also cofounded TellMe with Giannandrea.

Outside of Apple, Giannandrea sits on the board of SETI, the nonprofit organization founded in 1984 to detect radio signals from potential intelligent life across the cosmos. He also ran a data center business with his wife in recent years, which he eventually sold, adding to his list of successful exits at tech companies he cofounded.

At SETI, Giannadrea is an active and engaged board member, and even gave some of his own money to help fund a new project called COSMIC that uses powerful computers to analyze radio signals from outer space, SETI CEO Bill Diamond told CNBC. Giannandrea also sat on a SETI review committee to give feedback on research plans for planetary defenses against asteroids, according to Diamond.

“He’s got a very scientific mind, an engineering mind,” Diamond said. “The question about life beyond Earth fascinates him.”

Some who know Giannandrea told CNBC they’d be surprised if he made an appearance during Apple’s WWDC keynote next week, instead delegating the spotlight to members of his team or Craig Federighi, Apple’s head of software.

“JG is not a showman,” one person who knows him well told CNBC. “That’s not his vibe.”

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As Microsoft turns 50, Nadella sees future success built on ability to ‘win the new’

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As Microsoft turns 50, Nadella sees future success built on ability to 'win the new'

Microsoft CEO Satya Nadella speaks during the Microsoft Build conference at Microsoft headquarters in Redmond, Washington, on May 21, 2024.

Jason Redmond | AFP | Getty Images

A half-century ago, childhood friends Bill Gates and Paul Allen started Microsoft from a strip mall in Albuquerque, New Mexico. Five decades and almost $3 trillion later, the company celebrates its 50th birthday on Friday from its sprawling campus in Redmond, Washington.

Now the second most valuable publicly traded company in the world, Microsoft has only had three CEOs in its history, and all of them are in attendance for the monumental event. One is current CEO Satya Nadella. The other two are Gates and Steve Ballmer, both among the 11 richest people in the world due to their Microsoft fortunes.

While Microsoft has mostly been on the ascent of late, with Nadella turning the company into a major power player in cloud computing and artificial intelligence, the birthday party lands at an awkward moment.

The company’s stock price has dropped for four consecutive months for the first time since 2009 and just suffered its steepest quarterly drop in three years. That was all before President Donald Trump’s announcement this week of sweeping tariffs, which sent the Nasdaq tumbling on Thursday and Microsoft down another 2.4%.

Cloud computing has been Microsoft’s main source of new revenue since Nadella took over from Ballmer as CEO in 2014. But the Azure cloud reported disappointing revenue in the latest quarter, a miss that finance chief Amy Hood attributed in January to power and space shortages and a sales posture that focused too much on AI. Hood said revenue growth in the current quarter will fall to 10% from 17% a year earlier

Nadella said management is refining sales incentives to maximize revenue from traditional workloads, while positioning the company to benefit from the ongoing AI boom.

“You would rather win the new than just protect the past,” Nadella told analysts on a conference call.

The past remains healthy. Microsoft still generates around one-fifth of its roughly $262 billion in annual revenue from productivity software, mostly from commercial clients. Windows makes up around 10% of sales.

Meanwhile, the company has used its massive cash pile to orchestrate its three largest acquisitions on record in a little over eight years, snapping up LinkedIn in late 2016, Nuance Communications in 2022 and Activision Blizzard in 2023, for a combined $121 billion.

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“Microsoft has figured out how to stay ahead of the curve, and 50 years later, this is a company that can still be on the forefront of technology innovation,” said Soma Somasegar, a former Microsoft executive who now invests in startups at venture firm Madrona. “That’s a commendable place for the company to be in.”

When Somasegar gave up his corporate vice president position at Microsoft in 2015, the company was fresh off a $7.6 billion write-down from Ballmer’s ill-timed purchase of Nokia’s devices and services business.

Microsoft is now in a historic phase of investment. The company has built a $13.8 billion stake in OpenAI and last year spent almost $76 billion on capital expenditures and finance leases, up 83% from a year prior, partly to enable the use of AI models in the Azure cloud. In January, Nadella said Microsoft has $13 billion in annualized AI revenue, more even than OpenAI, which just closed a financing round valuing the company at $300 billion.

Microsoft’s spending spree has constrained free cash flow growth. Guggenheim analysts wrote in a note after the company’s earnings report in January, “You just have to believe in the future.” 

Of the 35 Microsoft analysts tracked by FactSet, 32 recommend buying the stock, which has appreciated tenfold since Nadella became CEO. Azure has become a fearsome threat to Amazon Web Services, which pioneered the cloud market in the 2000s, and startups as well as enterprises are flocking to its cloud technology.

Winston Weinberg, CEO of legal AI startup Harvey, uses OpenAI models through Azure. Weinberg lauded Nadella’s focus on customers of all sizes.

“Satya has literally responded to emails within 15 minutes of us having a technical problem, and he’ll route it to the right person,” Weinberg said.

Still, technology is moving at an increasingly rapid pace and Microsoft’s ability to stay on top is far from guaranteed. Industry experts highlighted four key issues the company has to address as it pushes into its next half-century.

Microsoft didn’t respond to a request for comment.

Regulation

There’s some optimism that the Trump administration and a new head of the Federal Trade Commission will open up the door to the kinds of deal-making that proved very challenging during Joe Biden’s presidency, when Lina Khan headed the FTC.

But regulatory uncertainty remains.

It’s not a new risk for Microsoft. In 1995, the company paid a $46 million breakup fee to tax software maker Intuit after the Justice Department filed suit to block the proposed deal. Years later, the DOJ got Microsoft to revamp some of its practices after a landmark antitrust case.

Microsoft pushed through its largest acquisition ever, the $75 billion purchase of video game publisher Activision, during Biden’s term. But only after a protracted legal battle with the FTC.

At the very end of Biden’s time in office, the FTC opened an antitrust investigation on Microsoft. That probe is ongoing, Bloomberg reported in March.

Nadella has cultivated a relationship with Trump. In January, the two reportedly met for lunch at Trump’s Mar-a-Lago resort in Florida, alongside Tesla CEO Elon Musk.

President Donald Trump shakes hands with Microsoft CEO Satya Nadella during an American Technology Council roundtable at the White House in Washington on June 19, 2017.

Nicholas Kamm | AFP | Getty Images

The U.S. isn’t the only concern. The U.K.’s Competition and Markets Authority said in January that an independent inquiry found that “Microsoft is using its strong position in software to make it harder for AWS and Google to compete effectively for cloud customers that wish to use Microsoft software on the cloud.”

Microsoft last year committed to unbundling Teams from Microsoft 365 productivity software subscriptions globally to address concerns from the European Union’s executive arm, the European Commission.

Noncore markets

Fairly early in Microsoft’s history the company became the world’s largest software maker. And in cloud, Microsoft is the biggest challenger to AWS. Most of the company’s revenue comes from corporations, schools and governments.

But Microsoft is in other markets where its position is weaker. Those include video games, laptops and search advertising.

Mary Jo Foley, editor in chief at advisory group Directions on Microsoft, said the company may be better off focusing on what it does best, rather than continuing to offer Xbox consoles and Surface tablets.

“Microsoft is not good at anything in the consumer space (with the possible exception of gaming),” wrote Foley, who has covered the company on and off since 1984. “You’re wasting time and money on trying to figure it out. Microsoft is an enterprise company — and that is more than OK.”

It’s unlikely Microsoft will back away from games, particularly after the Activision deal. Nearly $12 billion of Microsoft’s $69.6 billion in fourth-quarter revenue came from gaming, search and news advertising, and consumer subscriptions to the Microsoft 365 productivity bundle. That doesn’t include sales of devices, Windows licenses or advertising on LinkedIn.

“As a company, Microsoft’s all-in on gaming,” Nadella said in 2021 in an appearance alongside gaming unit head Phil Spencer. “We believe we can play a leading role in democratizing gaming and defining that future of interactive entertainment, quite frankly, at scale.”

AI pressure

Microsoft has an unquestionably strong position in AI today, thanks in no small part to its early alliance with OpenAI. Microsoft has added the startup’s AI models to Windows, Excel, Bing and other products.

The breakout has been GitHub Copilot, which generates source code and answers developers’ questions. GitHub reached $2 billion in annualized revenue last year, with Copilot accounting for more than 40% of sales growth for the business. Microsoft bought GitHub in 2018 for $7.5 billion.

Microsoft CEO Satya Nadella, right, speaks as OpenAI CEO Sam Altman looks on during the OpenAI DevDay event in San Francisco on Nov. 6, 2023.

Justin Sullivan | Getty Images

But speedy deployment in AI can be worrisome.

The company is “not providing the underpinnings needed to deploy AI properly, in terms of security and governance — all because they care more about being ‘first,'” Foley wrote. Microsoft also hasn’t been great at helping customers understand the return on investment, she wrote.

AI-ready Copilot+ PCs, which Microsoft introduced last year, aren’t gaining much traction. The company had to delay the release of the Recall search feature to prevent data breaches. And the Copilot assistant subscription, at $30 a month for customers of the Microsoft 365 productivity suite, hasn’t become pervasive in the business world.

“Copilot was really their chance to take the lead,” said Jason Wong, an analyst at technology industry researcher Gartner. “But increasingly, what it’s seeming like is Copilot is just an add-on and not like a net-new thing to drive AI.”

Innovation

At 50, the biggest question facing Microsoft is whether it can still build impressive technology on its own. Products like the Surface and HoloLens augmented reality headset generated buzz, but they hit the market years ago.

Teams was a novel addition to its software bundle, though the app’s success came during the Covid pandemic after the explosive growth in products like Zoom and Slack, which Salesforce acquired. And Microsoft is still researching quantum computing.

In AI, Microsoft’s best bet so far was its investment in OpenAI. Somasegar said Microsoft is in prime position to be a big player in the market.

“To me, it’s been 2½ years since ChatGPT showed up, and we are not even at the Uber and Airbnb moment,” Somasegar said. “There is a tremendous amount of value creation that needs to happen in AI. Microsoft as much as everybody else is thinking, ‘What does that mean? How do we get there?'”

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AI could affect 40% of jobs and widen inequality between nations, UN warns

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AI could affect 40% of jobs and widen inequality between nations, UN warns

Artificial intelligence robot looking at futuristic digital data display.

Yuichiro Chino | Moment | Getty Images

Artificial intelligence is projected to reach $4.8 trillion in market value by 2033, but the technology’s benefits remain highly concentrated, according to the U.N. Trade and Development agency.

In a report released on Thursday, UNCTAD said the AI market cap would roughly equate to the size of Germany’s economy, with the technology offering productivity gains and driving digital transformation. 

However, the agency also raised concerns about automation and job displacement, warning that AI could affect 40% of jobs worldwide. On top of that, AI is not inherently inclusive, meaning the economic gains from the tech remain “highly concentrated,” the report added. 

“The benefits of AI-driven automation often favour capital over labour, which could widen inequality and reduce the competitive advantage of low-cost labour in developing economies,” it said. 

The potential for AI to cause unemployment and inequality is a long-standing concern, with the IMF making similar warnings over a year ago. In January, The World Economic Forum released findings that as many as 41% of employers were planning on downsizing their staff in areas where AI could replicate them.  

However, the UNCTAD report also highlights inequalities between nations, with U.N. data showing that 40% of global corporate research and development spending in AI is concentrated among just 100 firms, mainly those in the U.S. and China. 

Furthermore, it notes that leading tech giants, such as Apple, Nvidia and Microsoft — companies that stand to benefit from the AI boom — have a market value that rivals the gross domestic product of the entire African continent. 

This AI dominance at national and corporate levels threatens to widen those technological divides, leaving many nations at risk of lagging behind, UNCTAD said. It noted that 118 countries — mostly in the Global South — are absent from major AI governance discussions. 

UN recommendations 

But AI is not just about job replacement, the report said, noting that it can also “create new industries and and empower workers” — provided there is adequate investment in reskilling and upskilling.

But in order for developing nations not to fall behind, they must “have a seat at the table” when it comes to AI regulation and ethical frameworks, it said.

In its report, UNCTAD makes a number of recommendations to the international community for driving inclusive growth. They include an AI public disclosure mechanism, shared AI infrastructure, the use of open-source AI models and initiatives to share AI knowledge and resources. 

Open-source generally refers to software in which the source code is made freely available on the web for possible modification and redistribution.

“AI can be a catalyst for progress, innovation, and shared prosperity – but only if countries actively shape its trajectory,” the report concludes. 

“Strategic investments, inclusive governance, and international cooperation are key to ensuring that AI benefits all, rather than reinforcing existing divides.”

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Nvidia positioned to weather Trump tariffs, chip demand ‘off the charts,’ says Altimeter’s Gerstner

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Nvidia positioned to weather Trump tariffs, chip demand 'off the charts,' says Altimeter's Gerstner

Altimeter CEO Brad Gerstner is buying Nvidia

Altimeter Capital CEO Brad Gerstner said Thursday that he’s moving out of the “bomb shelter” with Nvidia and into a position of safety, expecting that the chipmaker is positioned to withstand President Donald Trump’s widespread tariffs.

“The growth and the demand for GPUs is off the charts,” he told CNBC’s “Fast Money Halftime Report,” referring to Nvidia’s graphics processing units that are powering the artificial intelligence boom. He said investors just need to listen to commentary from OpenAI, Google and Elon Musk.

President Trump announced an expansive and aggressive “reciprocal tariff” policy in a ceremony at the White House on Wednesday. The plan established a 10% baseline tariff, though many countries like China, Vietnam and Taiwan are subject to steeper rates. The announcement sent stocks tumbling on Thursday, with the tech-heavy Nasdaq down more than 5%, headed for its worst day since 2022.

The big reason Nvidia may be better positioned to withstand Trump’s tariff hikes is because semiconductors are on the list of exceptions, which Gerstner called a “wise exception” due to the importance of AI.

Nvidia’s business has exploded since the release of OpenAI’s ChatGPT in 2022, and annual revenue has more than doubled in each of the past two fiscal years. After a massive rally, Nvidia’s stock price has dropped by more than 20% this year and was down almost 7% on Thursday.

Gerstner is concerned about the potential of a recession due to the tariffs, but is relatively bullish on Nvidia, and said the “negative impact from tariffs will be much less than in other areas.”

He said it’s key for the U.S. to stay competitive in AI. And while the company’s chips are designed domestically, they’re manufactured in Taiwan “because they can’t be fabricated in the U.S.” Higher tariffs would punish companies like Meta and Microsoft, he said.

“We’re in a global race in AI,” Gerstner said. “We can’t hamper our ability to win that race.”

WATCH: Brad Gerstner is buying Nvidia

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