Evan Spiegel, CEO of Snap Inc., speaks onstage during the Snap Partner Summit 2023 at Barker Hangar on April 19, 2023 in Santa Monica, California.
Joe Scarnici | Getty Images Entertainment | Getty Images
Snap on Tuesday announced the fifth generation of its Spectacles augmented reality glasses that can overlay digital graphics onto the physical world.
The latest Spectacles are only available for developers, who must commit to paying $99 a month for one full year if they want to build AR apps for the device. The glasses can produce more compelling digital visuals than the prior version and are built on top of a redesigned software operating system dubbed Snap OS.
Additionally, Snap is partnering with ChatGPT creator OpenAI to give developers tools that will allow them to build and port their artificial intelligence features for the smart glasses.
Snap’s announcement comes days before rival Meta’s Connect event, a conference where Facebook’s parent typically unveils its latest hardware. Like Meta, Snap has been trying for years to break into consumer hardware. Unlike Meta, Snap’s core online advertising business has been struggling.
Snap shares fell more than 20% after the company reported its latest quarterly results in August. Investors balked at weaker-than-expected guidance for the third quarter, and the company’s revenue for the second quarter trailed analysts’ expectations.
The previous day Meta reported better-than-expected quarterly results that sent the stock price up 7%. Still, Meta’s AR and VR bets continue to rack up losses — the company’s Reality Labs unit posted a $4.5 billion loss in the second quarter. That unit is responsible for the company’s Quest virtual reality devices and Ray-Ban smart glasses.
Since 2020, Meta has poured more than $63 billion in expenses into its hardware efforts. The company has yet to find meaningful success, but Wall Street has afforded Meta patience with Reality Labs because the company’s advertising business is thriving.
Meta brought in $131.9 billion in advertising sales for 2023, and reported net income of $39.1 billion for the year. By contrast, Snap recorded $4.6 billion in total revenue and a net loss of $1.3 billion in 2023.
“We are at a point where the challenge with Snap is that it is just functioning at a different scale than Meta,” said Leo Gebbie, a principal analyst and director at CCS Insight.
Fifth-generation Spectacles are pictured in a handout image, obtained by Reuters on September 12, 2024.
Snap | Via Reuters
With Meta selling its Quest VR headsets at a loss in order to lead and influence the overall VR market, Gebbie said he expects the company to follow a similar aggressive pricing strategy if it debuts its own AR device. For Snap to compete, the company’s AR device must be “something really impressive” that incorporates the best of its core Snapchat app and appeals to the younger demographic that differentiates it from Meta, he said.
Snap doesn’t break out financials for its hardware efforts as Meta does, but the company has struggled to find success selling hardware.
Snap debuted its first internet-connected Spectacles glasses in 2016, pitching the $130 devices as an easy way for users to capture short, first-person videos that they could post on Snapchat. A year later, Snap disclosed that it wrote down nearly $40 million due to losses from unsold Spectacles, underscoring the challenges it faces selling consumer hardware products.
Since then, the company has released other versions of its Spectacles smart glasses, including a version for $380 in 2019. In 2021, it sold a pair of glasses with AR capabilities in limited numbers to developers and creators instead of the general public, making the product more of a prototype requiring further improvement before a wider release.
Beyond glasses, Snap said in 2022 that it would stop developing its Pixy flying camera drone just months after it released the $230 gadget.
In getting out ahead of Meta with its latest AR glasses, Snap is using a strategy taken by the Facebook parent last summer when CEO Mark Zuckerberg disclosed details of the company’s Quest 3 VR headset a week before Apple announced its much-anticipated Vision Pro VR headset.
Much of Meta’s AR strategy involves sprinkling some AR features into its Quest-branded VR headsets while simultaneously pushing its Ray-Ban Meta smart glasses, made in partnership with EssilorLuxottica. The two companies on Tuesday announced that they had extended their partnership to continue developing smart glasses.
Although Meta doesn’t release sales figures, Zuckerberg has told analysts that its Ray-Ban Meta glasses that went on sale in October “continue to do well and are sold out in many styles and colors, so we’re working to make more and release additional styles as quickly as we can.”
Snap CEO Evan Spiegel has centered the company’s hardware efforts around camera technology, which he believes is a natural fit with the core Snapchat app and its 850 million monthly active users.
It’s unclear how much longer investors will stomach Snap’s hardware push.
“We have seen the losses on Reality Labs grow quarter by quarter, and investors have indulged this because Meta is making enough profit from its advertising business,” Gebbie said. “Snap is hugely more constrained. It’s in a position where to meaningfully compete on hardware is going to be incredibly challenging.”
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.”
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.
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.