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Workers stock shelves at an Amazon Fresh grocery store in Seattle, Washington, US, on Thursday, May 2, 2024. 

David Ryder | Bloomberg | Getty Images

On a humid afternoon in August, a few hundred shoppers lined up outside an Amazon Fresh supermarket in a Philadelphia suburb, eagerly awaiting the store’s grand opening. A person in a banana costume hyped up the crowd, while Amazon staffers handed out free samples of cold brew coffee.

The event was a long time coming. Since 2022, the Fresh store in Bensalem, Pennsylvania, looked ready to open. But month after month, it sat vacant, with Amazon’s familiar smile logo plastered on a sign overlooking an empty parking lot.

“I kept thinking it would open, but it didn’t,” Joe Knowles, Bensalem Township’s council president, told CNBC. “All of a sudden, bang, it was ready to go.”

The Bensalem store is one of a handful of new Fresh locations that Amazon has launched in recent months, the first new store openings since the company halted expansion of the franchise more than a year ago. Since June, Amazon has opened seven other stores in California, Illinois, Maryland, New Jersey and Virginia, with more locations expected this year and into next. The company said it’s also launching five redesigned stores in Illinois and California this week.

It’s the latest development in Amazon’s on-again, off-again effort to become a powerhouse in a market the company has been pursuing for 17 years, culminating with its $13.7 billion acquisition of Whole Foods in 2017, the company’s biggest deal ever. Amazon’s scattershot approach has at times been about expanding its “everything store” mission and at others has been focused on making high-end produce more affordable. In some cases, the markets have provided a testing ground for in-store technologies.

Through it all, Amazon in 2023 claimed just 1.4% of the U.S. grocery market, compared compared with Walmart at 23.6% and Kroger’s 10% share, according to Numerator data.

Fresh supermarkets are a piece of the portfolio, which also includes Go convenience stores and same-day delivery for Prime members. The company also launched an unlimited grocery delivery subscription in the U.S. earlier this year. On Tuesday, Amazon introduced a new grocery private label called Amazon Saver, which includes items like pancake syrup, deli meat and canned goods mostly priced under $5.

The Fresh chain made its debut during the early months of the Covid pandemic. Amazon opened the first such store in September 2020, in the Woodland Hills neighborhood of Los Angeles, with an eye toward offering cheaper prices than Whole Foods. The company added package drop-off counters, along with cashierless checkout lanes and voice-activated displays, allowing shoppers to ask Alexa for recipe ideas or help finding items. 

Amazon would reach 46 Fresh locations worldwide by early 2022. But the expansion plans ran head first into CEO Andy Jassy’s efforts to rein in costs as rapidly changing macro conditions forced dramatic downsizing. Amazon instituted mass layoffs starting in 2022, and shuttered some of its newer, more unproven bets. 

In February 2023, Jassy announced on a quarterly earnings call that Amazon planned to close some Fresh supermarkets and Go convenience stores. He also hit pause on further growth of its Fresh footprint until the company could identify a store format that resonated with shoppers and “where we like the economics,” Jassy said.

Krispy Kreme donuts

With headcount cuts largely in the rearview mirror, Amazon is back into investing mode and pouring resources into Fresh, opening new stores after refining the experience and testing out a redesigned format late last year in select California and Illinois locations. Jassy and Amazon Fresh leaders have acknowledged that in order to grow its already “very large” grocery business, the company needs a bigger brick-and-mortar footprint.

In 2022, just 11% of sales in the $1.6 trillion U.S. grocery market took place online. That’s far below the level of e-commerce penetration in other categories, such as consumer electronics, where 41% of purchases were made online, according to Jefferies data. Companies “need to have a physical presence to be big in grocery,” analysts from the bank wrote in a note in October.

As part of the Fresh store redesign, Amazon created a more colorful layout and added Krispy Kreme donut and coffee stalls. In April, the company said it would remove the cashierless checkout technology, called Just Walk Out, from its U.S. Fresh stores and Whole Foods markets in favor of computerized Dash Carts, which track and tally up items as customers shop.

Amazon told CNBC it’s seen increased purchasing and higher customer satisfaction scores at the redesigned locations. The company said it expects to selectively open new Fresh locations over time based on feedback from shoppers.

“We like the early results a lot,” Jassy said on the company’s first-quarter earnings call in April, referring to the revamped Fresh stores. “They’re really meaningfully better in almost every dimension. It’s still early, and there’s some things to work through, but we like what we’re seeing there.”

A woman uses a dash cart during her grocery-shopping at a Whole Foods store as Amazon launches smart shopping carts at Whole Foods stores in San Mateo, California, United States on February 25, 2024. The smart shopping cart makes grocery shopping quicker by allowing customers to scan products right into their cart as they shop and then skip the checkout line.

Tayfun Coskun | Anadolu | Getty Images

Still, at least 22 Fresh supermarkets across the country remain vacant or unopened even though construction is complete, according to interviews with city officials and local news reports.

Delayed openings or cancellations have triggered at least five lawsuits. Landlords in Pennsylvania, New Jersey, New York, Florida and Washington alleged the company breached its contract by terminating its lease, with some parties seeking tens of millions of dollars worth of damages. Amazon last year reached a settlement with property owners in Florida and Washington, according to court documents. Attorneys representing the property owners didn’t respond to requests for comment.

Amazon declined to comment on the status of the Fresh stores that remain unopened.

One store in limbo is in Rancho Mirage, California, a desert town about 30 minutes southeast of Palm Springs. Previously the location of a Stein Mart department store, the market is in a shopping center that also includes a Hobby Lobby, an Italian restaurant and a blood bank. Shoppers in the area can find a Whole Foods, Walmart, Trader Joe’s and Aldi all within a short drive.

Amazon began remodeling the store in 2021 and signage went up the following year. But “opening soon” signs are still plastered on the doors. The company has told Rancho Mirage officials and AlbaneseCormier, the owner of the shopping complex, that it expects the store to open in 2025, said Ted Weill, a city council member.

AlbaneseCormier didn’t respond to a request for comment.

Weill said there aren’t many companies that can afford to just let a building sit idle for years.

“Amazon has so much money that whether they’ve invested $10 million, $20 million, $30 million in the project and decide not to go forward, so be it,” Weill said. “That won’t be the criteria that holds them back from pulling out.”

More than 500 miles north of Rancho Mirage, in the Sacramento suburb of Roseville, Amazon recently opened the doors of a Fresh supermarket. The store was fully constructed by last summer.

Brent Thill, an analyst at Jefferies, took the two-hour drive to Roseville from the Bay Area with his 16-year-old son a week after the Fresh store opened last month. Thill said the supermarket had an “amazing” selection, though he described the overall vibe as “sterile.”

“You walk into the Amazon Fresh store in Roseville and it feels like you’re in a stainless steel wine cellar,” Thill said. “And the store doesn’t have any decorations, it’s just a giant building.”

Thill has a buy rating on Amazon stock, but he says in grocery the company is spending a lot of money to compete in “one of the lowest-margin businesses on the planet.” But he called it “one of the highest budget items in the pocketbook,” which is where it clearly fits into Amazon’s broader retail strategy.

“And if there’s synergies around Amazon returns, if they can make it more unique, then who knows which way it goes,” Thill said.

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How Elon Musk’s plan to slash government agencies and regulation may benefit his empire

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How Elon Musk’s plan to slash government agencies and regulation may benefit his empire

Elon Musk’s business empire is sprawling. It includes electric vehicle maker Tesla, social media company X, artificial intelligence startup xAI, computer interface company Neuralink, tunneling venture Boring Company and aerospace firm SpaceX. 

Some of his ventures already benefit tremendously from federal contracts. SpaceX has received more than $19 billion from contracts with the federal government, according to research from FedScout. Under a second Trump presidency, more lucrative contracts could come its way. SpaceX is on track to take in billions of dollars annually from prime contracts with the federal government for years to come, according to FedScout CEO Geoff Orazem.

Musk, who has frequently blamed the government for stifling innovation, could also push for less regulation of his businesses. Earlier this month, Musk and former Republican presidential candidate Vivek Ramaswamy were tapped by Trump to lead a government efficiency group called the Department of Government Efficiency, or DOGE.

In a recent commentary piece in the Wall Street Journal, Musk and Ramaswamy wrote that DOGE will “pursue three major kinds of reform: regulatory rescissions, administrative reductions and cost savings.” They went on to say that many existing federal regulations were never passed by Congress and should therefore be nullified, which President-elect Trump could accomplish through executive action. Musk and Ramaswamy also championed the large-scale auditing of agencies, calling out the Pentagon for failing its seventh consecutive audit. 

“The number one way Elon Musk and his companies would benefit from a Trump administration is through deregulation and defanging, you know, giving fewer resources to federal agencies tasked with oversight of him and his businesses,” says CNBC technology reporter Lora Kolodny.

To learn how else Elon Musk and his companies may benefit from having the ear of the president-elect watch the video.

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Why X’s new terms of service are driving some users to leave Elon Musk’s platform

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Why X's new terms of service are driving some users to leave Elon Musk's platform

Elon Musk attends the America First Policy Institute gala at Mar-A-Lago in Palm Beach, Florida, Nov. 14, 2024.

Carlos Barria | Reuters

X’s new terms of service, which took effect Nov. 15, are driving some users off Elon Musk’s microblogging platform. 

The new terms include expansive permissions requiring users to allow the company to use their data to train X’s artificial intelligence models while also making users liable for as much as $15,000 in damages if they use the platform too much. 

The terms are prompting some longtime users of the service, both celebrities and everyday people, to post that they are taking their content to other platforms. 

“With the recent and upcoming changes to the terms of service — and the return of volatile figures — I find myself at a crossroads, facing a direction I can no longer fully support,” actress Gabrielle Union posted on X the same day the new terms took effect, while announcing she would be leaving the platform.

“I’m going to start winding down my Twitter account,” a user with the handle @mplsFietser said in a post. “The changes to the terms of service are the final nail in the coffin for me.”

It’s unclear just how many users have left X due specifically to the company’s new terms of service, but since the start of November, many social media users have flocked to Bluesky, a microblogging startup whose origins stem from Twitter, the former name for X. Some users with new Bluesky accounts have posted that they moved to the service due to Musk and his support for President-elect Donald Trump.

Bluesky’s U.S. mobile app downloads have skyrocketed 651% since the start of November, according to estimates from Sensor Tower. In the same period, X and Meta’s Threads are up 20% and 42%, respectively. 

X and Threads have much larger monthly user bases. Although Musk said in May that X has 600 million monthly users, market intelligence firm Sensor Tower estimates X had 318 million monthly users as of October. That same month, Meta said Threads had nearly 275 million monthly users. Bluesky told CNBC on Thursday it had reached 21 million total users this week.

Here are some of the noteworthy changes in X’s new service terms and how they compare with those of rivals Bluesky and Threads.

Artificial intelligence training

X has come under heightened scrutiny because of its new terms, which say that any content on the service can be used royalty-free to train the company’s artificial intelligence large language models, including its Grok chatbot.

“You agree that this license includes the right for us to (i) provide, promote, and improve the Services, including, for example, for use with and training of our machine learning and artificial intelligence models, whether generative or another type,” X’s terms say.

Additionally, any “user interactions, inputs and results” shared with Grok can be used for what it calls “training and fine-tuning purposes,” according to the Grok section of the X app and website. This specific function, though, can be turned off manually. 

X’s terms do not specify whether users’ private messages can be used to train its AI models, and the company did not respond to a request for comment.

“You should only provide Content that you are comfortable sharing with others,” read a portion of X’s terms of service agreement.

Though X’s new terms may be expansive, Meta’s policies aren’t that different. 

The maker of Threads uses “information shared on Meta’s Products and services” to get its training data, according to the company’s Privacy Center. This includes “posts or photos and their captions.” There is also no direct way for users outside of the European Union to opt out of Meta’s AI training. Meta keeps training data “for as long as we need it on a case-by-case basis to ensure an AI model is operating appropriately, safely and efficiently,” according to its Privacy Center. 

Under Meta’s policy, private messages with friends or family aren’t used to train AI unless one of the users in a chat chooses to share it with the models, which can include Meta AI and AI Studio.

Bluesky, which has seen a user growth surge since Election Day, doesn’t do any generative AI training. 

“We do not use any of your content to train generative AI, and have no intention of doing so,” Bluesky said in a post on its platform Friday, confirming the same to CNBC as well.

Liquidated damages

Bluesky CEO: Our platform is 'radically different' from anything else in social media

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The Pentagon’s battle inside the U.S. for control of a new Cyber Force

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The Pentagon's battle inside the U.S. for control of a new Cyber Force

A recent Chinese cyber-espionage attack inside the nation’s major telecom networks that may have reached as high as the communications of President-elect Donald Trump and Vice President-elect J.D. Vance was designated this week by one U.S. senator as “far and away the most serious telecom hack in our history.”

The U.S. has yet to figure out the full scope of what China accomplished, and whether or not its spies are still inside U.S. communication networks.

“The barn door is still wide open, or mostly open,” Senator Mark Warner of Virginia and chairman of the Senate Intelligence Committee told the New York Times on Thursday.

The revelations highlight the rising cyberthreats tied to geopolitics and nation-state actor rivals of the U.S., but inside the federal government, there’s disagreement on how to fight back, with some advocates calling for the creation of an independent federal U.S. Cyber Force. In September, the Department of Defense formally appealed to Congress, urging lawmakers to reject that approach.

Among one of the most prominent voices advocating for the new branch is the Foundation for Defense of Democracies, a national security think tank, but the issue extends far beyond any single group. In June, defense committees in both the House and Senate approved measures calling for independent evaluations of the feasibility to create a separate cyber branch, as part of the annual defense policy deliberations.

Drawing on insights from more than 75 active-duty and retired military officers experienced in cyber operations, the FDD’s 40-page report highlights what it says are chronic structural issues within the U.S. Cyber Command (CYBERCOM), including fragmented recruitment and training practices across the Army, Navy, Air Force, and Marines.

“America’s cyber force generation system is clearly broken,” the FDD wrote, citing comments made in 2023 by then-leader of U.S. Cyber Command, Army General Paul Nakasone, who took over the role in 2018 and described current U.S. military cyber organization as unsustainable: “All options are on the table, except the status quo,” Nakasone had said.

Concern with Congress and a changing White House

The FDD analysis points to “deep concerns” that have existed within Congress for a decade — among members of both parties — about the military being able to staff up to successfully defend cyberspace. Talent shortages, inconsistent training, and misaligned missions, are undermining CYBERCOM’s capacity to respond effectively to complex cyber threats, it says. Creating a dedicated branch, proponents argue, would better position the U.S. in cyberspace. The Pentagon, however, warns that such a move could disrupt coordination, increase fragmentation, and ultimately weaken U.S. cyber readiness.

As the Pentagon doubles down on its resistance to establishment of a separate U.S. Cyber Force, the incoming Trump administration could play a significant role in shaping whether America leans toward a centralized cyber strategy or reinforces the current integrated framework that emphasizes cross-branch coordination.

Known for his assertive national security measures, Trump’s 2018 National Cyber Strategy emphasized embedding cyber capabilities across all elements of national power and focusing on cross-departmental coordination and public-private partnerships rather than creating a standalone cyber entity. At that time, the Trump’s administration emphasized centralizing civilian cybersecurity efforts under the Department of Homeland Security while tasking the Department of Defense with addressing more complex, defense-specific cyber threats. Trump’s pick for Secretary of Homeland Security, South Dakota Governor Kristi Noem, has talked up her, and her state’s, focus on cybersecurity.

Former Trump officials believe that a second Trump administration will take an aggressive stance on national security, fill gaps at the Energy Department, and reduce regulatory burdens on the private sector. They anticipate a stronger focus on offensive cyber operations, tailored threat vulnerability protection, and greater coordination between state and local governments. Changes will be coming at the top of the Cybersecurity and Infrastructure Security Agency, which was created during Trump’s first term and where current director Jen Easterly has announced she will leave once Trump is inaugurated.

Cyber Command 2.0 and the U.S. military

John Cohen, executive director of the Program for Countering Hybrid Threats at the Center for Internet Security, is among those who share the Pentagon’s concerns. “We can no longer afford to operate in stovepipes,” Cohen said, warning that a separate cyber branch could worsen existing silos and further isolate cyber operations from other critical military efforts.

Cohen emphasized that adversaries like China and Russia employ cyber tactics as part of broader, integrated strategies that include economic, physical, and psychological components. To counter such threats, he argued, the U.S. needs a cohesive approach across its military branches. “Confronting that requires our military to adapt to the changing battlespace in a consistent way,” he said.

In 2018, CYBERCOM certified its Cyber Mission Force teams as fully staffed, but concerns have been expressed by the FDD and others that personnel were shifted between teams to meet staffing goals — a move they say masked deeper structural problems. Nakasone has called for a CYBERCOM 2.0, saying in comments early this year “How do we think about training differently? How do we think about personnel differently?” and adding that a major issue has been the approach to military staffing within the command.

Austin Berglas, a former head of the FBI’s cyber program in New York who worked on consolidation efforts inside the Bureau, believes a separate cyber force could enhance U.S. capabilities by centralizing resources and priorities. “When I first took over the [FBI] cyber program … the assets were scattered,” said Berglas, who is now the global head of professional services at supply chain cyber defense company BlueVoyant. Centralization brought focus and efficiency to the FBI’s cyber efforts, he said, and it’s a model he believes would benefit the military’s cyber efforts as well. “Cyber is a different beast,” Berglas said, emphasizing the need for specialized training, advancement, and resource allocation that isn’t diluted by competing military priorities.

Berglas also pointed to the ongoing “cyber arms race” with adversaries like China, Russia, Iran, and North Korea. He warned that without a dedicated force, the U.S. risks falling behind as these nations expand their offensive cyber capabilities and exploit vulnerabilities across critical infrastructure.

Nakasone said in his comments earlier this year that a lot has changed since 2013 when U.S. Cyber Command began building out its Cyber Mission Force to combat issues like counterterrorism and financial cybercrime coming from Iran. “Completely different world in which we live in today,” he said, citing the threats from China and Russia.

Brandon Wales, a former executive director of the CISA, said there is the need to bolster U.S. cyber capabilities, but he cautions against major structural changes during a period of heightened global threats.

“A reorganization of this scale is obviously going to be disruptive and will take time,” said Wales, who is now vice president of cybersecurity strategy at SentinelOne.

He cited China’s preparations for a potential conflict over Taiwan as a reason the U.S. military needs to maintain readiness. Rather than creating a new branch, Wales supports initiatives like Cyber Command 2.0 and its aim to enhance coordination and capabilities within the existing structure. “Large reorganizations should always be the last resort because of how disruptive they are,” he said.

Wales says it’s important to ensure any structural changes do not undermine integration across military branches and recognize that coordination across existing branches is critical to addressing the complex, multidomain threats posed by U.S. adversaries. “You should not always assume that centralization solves all of your problems,” he said. “We need to enhance our capabilities, both defensively and offensively. This isn’t about one solution; it’s about ensuring we can quickly see, stop, disrupt, and prevent threats from hitting our critical infrastructure and systems,” he added.

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