Today on the Joseph Carlson Show, it's not often that we
talk about Amazon as being bullied.
After all, Amazon is one of the biggest companies in the world.
It has a dominant market share in online retail, cloud hosting,
advertising, video streaming, and so many other businesses.
But in this case, we find ourselves in a situation where
Amazon is not doing the bullying.
They're not pushing around another company.
That company's pushing around Amazon.
There's a company now that is so big and has so much power that
they're actually bullying Amazon.
From a report, from the Information, we see that NVIDIA,
led by Jensen Huang in his leather jacket, is Boeing,
Amazon. And the way that they're doing
this is incredible. NVIDIA knows that Amazon needs
their chips, and they're exploiting that need to the
point that Amazon is allowing NVIDIA to compete directly with
them in cloud hosting. And NVIDIA, importantly, is
transitioning from a hardware maker into a software maker.
They're trying to follow along the path of Apple.
In this report, it details out this scheme or this way that
NVIDIA is doing this, how they're getting into Amazon, how
they're taking control, and this has gotten to the point where
NVIDIA is bullying Amazon so much that the Department of
Justice is looking at it. This is a fascinating story
observing the dominance of NVIDIA and the grip hold they
have on the chip market and how they're leveraging that into
other markets. We're going to be discussing in
this episode. Now, of course, we also have
some other news. We have a story here of other
influencers like Fortnite streamers having a rough go this
year. They're not making a lot of
money. They're they're struggling.
And the Wall Street Journal and CNBC has been reporting on the
decline in influencers incomes. So we're going to take a look at
the poor struggling influencers, the Fortnite streamers and how
bad things are for them. We have news here that Netflix
may be taking on Disneyland. The streaming wars expand to
real world experiences with the Netflix house.
This is like an in person Netflix experience.
And the question is, is this going to be competing with
Disneyland? And then finally, we know that
Apple has benefited greatly from their push and artificial
intelligence after their developer conference where they
showed off many of their AI features, their Apple
intelligence, the stock is up around 20% since then, but
there's a missing piece. And that piece is China.
What is Apple's plans with China knowing that they can't
implement the same things like ChatGPT?
We're going to be looking at what Apple plans to do to
compete with Chinese phone companies.
So as always, we have a lot to get to in this episode.
If you like this type of content and want to support this show,
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I've built the whole thing from the ground up, and I think it's
pretty great. It comes with a free trial.
You can try it out now. Now let's go ahead and jump into
our main story. We know historically that Amazon
is a dominant company. It's a big company that's not to
be messed with or bullied. Amazon, after all, is a company
that aggressively expands into different industries.
They've done this starting off with online bookselling, and
they put a lot of pressure on Barnes and Noble, forcing the
company to downsize and almost go out of business.
They've put out of business lots of smaller
retailerslikediapers.com. They do so aggressively, with
some of the most aggressive tactics the financial world has
seen. Amazon is a company that has the
motto, your margin is our opportunity.
They aggressively seek to grow into different industries,
putting out of business different companies and offering
better value to customers. They've done this so much so
that they become one of the biggest companies in the world,
consolidating their market share in online retail to 40% in the
US, fending off competitors like Timu and Sheen.
In the process, they put out a business, Toys-R-Us.
They've also expanded into advertising, now the third place
advertiser in the world. This company is massive in
advertising. They've also grown to be one of
the biggest streaming companies in the world, surpassing many
companies aside from Netflix with Amazon Prime Video and now
offering ads on that as well. Their company that also has the
dominant market share and online hosting with Amazon Web Services
bringing IT from the local environment into the cloud.
This company is one that's dominated so many different
industries and put out of business so many different
companies that it's seemingly untouchable.
Amazon is like an untouchable company until you get to one
that has become quickly bigger than Amazon, and that is NVIDIA.
Jensen Huang, the CEO of NVIDIA, has LED this company, NVIDIA, to
now the largest market cap in the world, even surpassing Apple
and Microsoft for a time. If we look at it right now,
NVIDIA has a $3.34 trillion market cap.
If we look at Microsoft, this one has a $3.32 trillion market
cap. So NVIDIA is currently the
biggest company in the world, bouncing between 1st and 2nd
place. NVIDIA is bigger than Microsoft
and Apple, Google, Meta, and of course Amazon.
In fact, right now NVIDIA is significantly bigger than
Amazon, over $1.3 trillion bigger.
So NVIDIA is of course doing something right.
They're on the bleeding edge of GPU and chip development.
They're on the cutting edge of it.
NVIDIA builds such big chips that they're not really chips,
they're more like entire server racks.
It's like a huge device so complex that other companies
can't create it, and NVIDIA has a stranglehold on these powerful
devices. And this comes at a time when
companies have an incredible amount of AI demand.
Artificial intelligence takes an incredible amount of computing
power, which NVIDIA provides with their chips.
You can see the growth in demand over just the past couple of
quarters. If we look at this on a
quarterly basis of revenue, you see that the revenue from Q1 of
2023 was $6 billion in the quarter.
Now that's good, but if you look at the explosive growth over
time, you'll see that the revenue quickly 4X within one
year, growing an incredible amount every single quarter
sequentially. If we take a closer look and
examine what has caused NVIDIA to grow so quickly, it's not
gamers buying more and more powerful GPUs for their rigs.
That mark is actually fizzled out over the past couple of
quarters. It's not professional
visualization. This is things like people that
make movies and and studios that type of thing.
This has gone up a bit, but again, it's fizzled out over the
past couple of quarters. It's not even the automotive.
This segment of Nvidia's revenue is too small to be a meaningful
difference. No, the place where all of
Nvidia's demands coming from is the data centers.
The data centre demand has grown sequentially every single
quarter. In fact, it's rocketed upwards.
If you look at Q1 of 2023, again, just the data centers was
4.28 billion and now it's 22.5 billion.
This is the lion's share of Nvidia's revenue, and it's
growing quickly. What Jensen Huang has
accomplished with NVIDIA is incredible.
He's amassed a wealth of over $100 billion for himself while
making thousands and thousands of other people filthy rich in
the process. He's created one of the best
companies, if not the greatest company of the 21st century in
the process. But Jensen Huang is very smart,
and he's smart enough to know that hardware companies and
hardware company demand is typically not sustainable.
In fact, history has taught this lesson before.
We've seen companies rise with insatiable demand in their
hardware, only to fall 50% or 70% or 90% afterwards.
It's a boom and bust cycle. It's similar to oil exploration.
You find something that's worth a lot of money, you extract it,
but then the time passes and the demand falls.
We can see different examples of the same type of thing with
legacy hardware companies. Cisco is one example.
If we zoom way back to Cisco and look at the stock price, you can
see something here. Cisco stock price in 2000
reached prices of $80.00 per share, $80.00 per share over 20
years ago in the year 2000. Now of course this was a.com
bubble, but you can see what happened during this time
period. This was the stock to be in.
This is the hardware maker that everyone needed their products.
The demand was insatiable. Does that story ring familiar?
Now we have a situation where Cisco's at $46 per share. 25
years later and Cisco's still half the stock price it was in
2000. As demand quickly collapsed, so
did the stock price. Cisco is an example of a company
that had a one time influx of demand in their hardware and
they did not properly make the transition to software.
So as the hardware demand inevitably fell, they had no
supporting software to support the revenues or profits of the
company, causing the stock price to go down over 80%.
We have another example here with Intel.
Intel was once at the top of the world.
This is the biggest chip maker in the world.
Every computer had an Intel inside.
If we look over the past 10 years, Intel stock price once
reached $65 per share, racing up to 75.
But you'll notice that the stock price has taken a dip recently.
Apple moved away from Intel. Intel has lost clients left and
right. They've had struggling sales,
and AMD has been eating away at their margin.
Intel deals with a lot of contracts of different
customers. They lose customers with their
hardware contracts. They lose a lot of money in the
process, and Intel stock price has reflected that.
Intel's another example of a company that relied on hardware.
Hardware alone and relying on hardware alone is a recipe for a
volatile stock that cannot support its stock price.
Intel did not properly make the transition to software.
They don't have any type of SAS business, they don't have any
type of corporate software services, and the software they
sell is not enough to support the revenues of the company.
So Intel stock price has met the fate of every other large
hardware company. It's volatile for a time, it has
an epic rise with demand, and then it inevitably falls.
This story of a hardware company having an incredible influx of
demand for a time and then that demand falling afterwards is a
story that's repeated over and over again with so many
different companies. History is replete with examples
of hardware companies not being able to sustain their demand.
This is why investors started to favor a different type of
company. They favored software companies.
Software companies like Microsoft have charts that look
like this, ones that have dips just like any other company, but
overall, they don't have an influx of demand and then a
collapse in demand. Software companies sustain
demand for year after year after year.
They're in an investor term, less cyclical.
Their demand doesn't happen in cycles of booms and busts.
Their demand is ongoing. Microsoft understood this.
Bill Gates understood this when he started Microsoft.
Even Steve Ballmer, who we make fun of from time to time, was
very smart, and he also understood that software had
sustained demand and sustained revenues.
This has caused Microsoft to continue to grow to one of the
top companies in the world, the sustained software demand, and
Microsoft always aims to have this software income and to
always sustain a 70% gross margin.
Some companies understood that software is where you have
sustained demand. The companies like Microsoft
that built out a software business to sustain long term
demand are the ones that have long term success.
And there's other companies that have successfully made this
transition, one of the biggest ones being Apple.
Apple started off as a hardware company.
When Steve Jobs was running Apple, they made the large
majority of their money selling their devices.
But over time, Apple understood history.
Tim Cook understood history. He knew that having a company
where you only made money selling hardware was a recipe
for disaster. He knew about all the different
history of different hardware companies that had major booms
and busts. And Tim Cook pushed Apple into a
service based company. If we look at the revenues of
Apple over the past 10 years and we break it down by segment,
you'll see that there's only one part of Apple that's
consistently growing at this point.
It's not the iPhones. The iPhones are growing, but not
consistently. The iPad, again, is also growing
kind of overtime, but again, not consistently.
We have the wearables like the watch.
We have the Air pods. This is basically flat, no
growth hair. And overall, if you were just to
look at this portion of Apple, it's not that impressive.
There's not a lot of growth here.
The major part of Apple that's been growing steadily over the
past decade is the service business.
You can see steady, reliable growth in services.
The service business includes Apple's App Store.
It includes insurance, it includes Apple TV Plus, Apple
Music, Apple Fitness, and so on and so forth.
Tim Cook built out a robust service business in Apple.
That service business is now massive.
It does $24 billion in revenue per quarter.
That's as much revenue as NVIDIA does right now.
The service business of Apple is by far the most profitable.
It by far has the highest margin, and it's by far growing
the most consistent. Apple would not be worth
anywhere close to what it is today without the service
business. That service business, in a form
of revenue, is the most valuable part of Apple's business.
Apple leadership understood correctly.
To have sustained demand in a hardware company, you need to
grow a robust service business alongside it, and Apple has done
that successfully. Now, if we look back to Jensen,
Huang and NVIDIA, he's certainly built a successful hardware
company, one that sells chips with an incredible demand right
now. But the big question for Jensen,
and one that they're actively trying to solve, is the service
portion of this. Jensen knows, just like Apple
knows, that if they do not build out the service business, this
demand will eventually fall and so will NVIDIA stock price.
So what we see here is NVIDIA using its stranglehold on these
GP US is an opportunity to exploit other big companies like
Amazon into allowing NVIDIA to build a service business.
Let's go ahead and take a look at how they're doing this.
The report states that though demand of NVIDIA GP US the all
powerful chips fueling artificial intelligence is still
high, the greatest existential threat to the company is if
demand slows down. And I would say that this is
inevitable. Again, demand will slow down for
NVIDIA. This is the fate that every
single hardware company has faced.
So to keep itself at the top of the game, NVIDIA has diversified
its business into the world of cloud service, software and
rentals. Last year, NVIDIA started its
cloud service, DGX Cloud, a competitor to some of Nvidia's
own customers, including Microsoft and Amazon Web
Services. Now, if you look at Nvidia's
revenue and that data segment, that huge segment that's growing
fastest, the most important segment, their main customers
for that segment are big tech companies.
It's Meta, it's Microsoft, it's Amazon as the three primary
ones. Also Google, they need these
powerful chips to serve their customers.
So the bulk of Nvidia's revenue right now only comes from a
handful of companies. DGX, this new cloud service that
NVIDIA created, now rents NVIDIA, powers servers from
within AWS data centers, and then, promising greater
computing capability, leases them back to Nvidia's customers.
At first, AWS was hesitant to allow NVIDIA to set up a
competing shop right under its nose.
But once other rival companies agreed to the terms of DGX
Cloud, AWS had no choice but to relent.
Amazon just couldn't risk souring its relationship with
the supplier of its crucial chips.
So Nvidia's basically saying to Amazon, either you allow us to
set up this DGX cloud, right in your own server space, we can
set up this cloud business. Otherwise, we might not have
enough chips for you, we might not be doing business with you.
We might just start selling our chips to Microsoft instead, who
has agreed to do this. So they've kind of twisted the
wrist of Amazon, forcing Amazon to allow them to set up this DGX
cloud. When contacted by Business
Insider, the spokesperson said that Amazon worked closely with
NVIDIA to develop features in the DGX cloud that offered
customers the best of both worlds.
So when Amazon's being contacted and questioned about this,
they're saying this is no big deal.
We agreed to this. We weren't.
We weren't concerned about this. We just want to serve our
customers. And in fact, we even helped
NVIDIA do this. So Amazon seems to be very
friendly with NVIDIA, and they're saying that they're not
being compelled to work with them.
Rather, they're just willingly doing it.
Now, of course, I don't believe that.
I think that Amazon is being compelled to work with them
because they are exclusively the provider of the most important
chips in the world right now. They say, quote, we have a deep
collaboration with NVIDIA that goes back more than 13 years
when together we launched the world's first GPU cloud instance
on AWS. And today we offer the widest
range of NVIDIA GPU solutions for our customers.
Through DGX Cloud. NVIDIA has creatively maneuvered
itself into a position where its own customers are helping it
compete with them. But CEO Jensen Huang's
aggressive strategy to maintain dominance doesn't stop there.
They also reported that NVIDIA is also requiring customers to
build out more space to house the GPU they buy and telling
them how to do it. So NVIDIA is, is like a, a wolf
in the hens house. They've come into Amazon's AWS
servers and now they're calling the shots.
They're saying, here's the new chips, Here's how you're going
to build your warehouse space for them.
Here's the requirements. They're they're like the the
supervisor telling how things should run within Amazon's
warehouses. Now Amazon, again, is trying to
paint this as a nice collaboration between the two
companies. But from the outside, a lot of
this looks like it's done by compulsion, by the fact that
NVIDIA right now has a monopoly over these chips and Amazon has
no choice but to either work with NVIDIA or disappoint their
customers. NVIDIA is giving Amazon an
ultimatum. NVIDIA will not ship GPUs unless
the customer can certify that they have data center capacity
in which to place those GPUs. The outlet reported that the
Titan chip maker, in addition to demanding that the clients
provide proof of their expanded data center capacity, was also
telling customers how to design the racks that hold the servers
and GPUs within those data centres.
And because the racks are specifically designed to fit
NVIDIA chips, it could make it difficult for customers to
switch to chips from competing companies.
One of the reasons that companies have a Moat is called
switching costs. The more difficult it is to
switch from one company's products to another, that's
called switching costs. NVIDIA is artificially creating
switching costs by designing specific server racks that only
work with their chips, and they make it so that these companies
using their chips have to build these specific server racks.
So they're forcing these customers like AWS and Meta and
Google to actually expense and build out these switching costs.
Now, for now, NVIDIA and its clients such as Amazon have
agreed to this somewhat symbiotic relationship.
But that hasn't stopped competition from brewing on both
sides. While NVIDIA has expanded into
cloud services, AWS is also developing its own AI chips
named Tranium and Inferentia, which aim to compete with
Nvidia's. So they're trying to paint this
as this friendly partnership, this symbiotic relationship,
while Amazon is being taken advantage of by NVIDIA, and
Amazon and other companies like them are trying to do what they
can to become less reliant on NVIDIA.
But the task of replacing what NVIDIA has accomplished so far
is proving very difficult. Though its current strategy is
clever enough to propel NVIDIA to become the world's most
valuable company, the company's quest for industrial dominance
could come back to buy it. Political reported earlier that
this month the Department of Justice was looking to launch an
investigation into potential antitrust violations.
The experts now say that the Department of Justice probe into
NVIDIA is further evidence of Nvidia's dominance overall.
With a dominant hardware company like NVIDIA, one that's in as
powerful of a place it is, the question for investors is
whether or not they can successfully make the leap from
hardware to software. Nvidia's success has been
stunning. It's been dramatic.
It's really been incredible to see, but it is inevitable.
Hardware demand will fall after a time.
NVIDIA will not be able to sustain the incredible demand
and growth they've had over the past year with hardware alone.
We've seen the story before many times of hardware companies that
haven't transitioned to software.
The companies like Cisco, the companies like Intel, the ones
that are successful are the ones that start as hardware companies
and bridge the gap to software becoming a hybrid model.
Companies like Apple have successfully done this.
Right now, I can't answer that question for you, but it's one
to consider. Now moving on, let's get to some
other news stories. Here we have this this in depth
look at the life of social media companies and it's kind of a
tragic story. It's a tragic story because it
shows that social media influencers aren't getting rich.
If I know what's on people's minds, what what people are
really concerned about right now, what all of you are really
worrying about when you get up in the morning is whether or not
social media influencers are getting rich.
And I know, I know it makes you all very sad to hear that, that
Fortnite influencers and Youtubers aren't getting rich
right now. I know that's disheartening to a
lot of you. I know that's your primary
concern right now. Now let's go ahead and jump into
this and just take a look at the struggles of these social media
influencers. Many people dream of becoming a
social media star like a Youtubers Mr. Beast or Tik Tok's
Charlie de Emilio. I don't know who that is, but
for most who pursue careers as content creators, just making
ends meet is a lofty goal. Clint Brantley has been a full
time creator for three years, posting videos on TikTok,
YouTube, and Twitch where he comments on news and trends
related to the online game Fortnite.
So he is a Fortnite content creator.
Despite having over 400,000 followers and post the average
100,000 views, his income last year was less than the median
annual pay full time US workers of $58,084.
So he's not making a lot of money working full time as a
Fortnite influencer. Now.
Clint was profiled on the Wall Street Journal as we saw his
struggles of making a decent amount of money as a Fortnite
influencer and he was also brought on to CNBC to further to
further share the struggles, the struggles that everyone is
concerned about of influencers not making a lot of money.
Let's go ahead and take a look at his perspective here.
Flashy lifestyles online. The cold reality is that it's
being a full time social media influencer is hard and maybe not
all is cracked up. That's right folks, this, this
is hard giving your opinions online like like you, you try to
give your opinions and give a a takes on things or you try to
play video games on online and have people watch you playing
video games. It's easier said than done.
This is a this is a struggling life.
You can't even make a lot. You can't even get rich anymore
playing video games. What is the world coming to?
Up to be last year, only 13% of no doubt millions of content
creators made more than $100,000 from their work.
Nearly half made less than $15,000.
Not exactly what you're online, is it?
For more, let's talk about it with some.
We need to have like a a union of some kind.
We need to complain to Twitch and Google to pay us more.
Only 13% are making over 100,000 a year.
It's just tragic to see. But he actually does this at his
full time. Creator Clint Brantley, he is
one of the leading Fortnite streamers on TikTok and other
platforms was featured in the Wall Street Journal.
Clint, thanks for taking some time for us.
How hard is it to make a living as an influencer?
This has been, Brian, probably one of the most challenging
things I've ever done with my life, but it's also one of the
most rewarding. There are a lot of things that
you don't. I just wanna to stop it there.
Clint lives a life where the most challenging thing he's done
is making money streaming video games and and putting out
content. That's one of the most
challenging things that that's probably evidence of a pretty
good life. If your biggest challenge is is
streaming video games and making money, I think you have it.
You think you have it pretty good.
Don't understand until you actually get into the space,
there are a lot of things that you have to learn and adapt to.
You have to be a social media manager, You have to be able to
adapt the trends regularly and you have to be entertaining to
people. And you also have to answer the
question, why should anybody watch me?
So there's a lot of things you kind of just have to learn as
you go, but it's it's a very difficult thing to do.
And I saw your setup actually, I think they call it a rig in I'm
old, so don't at me in the Wall Street Journal.
You also got to be kind of like ATV professional way too.
So it's how do you primarily make money partnerships.
There is a lot of different ways in which you can make money.
Brand deals, partnerships are are one way, ad revenue, of
course, through different social media platforms.
The biggest thing about being a content creator is the more ways
you diversify yourself, right? Just like if you're investing in
different assets, right, stocks or whatever, you want to do the
same thing with content creation.
You, you have to divert you're your biggest assets.
You have to diversify yourself. YouTube is an income stream,
TikTok could be an income stream.
Twitch can be an income stream. It just kind of depends on the
kind of content that you make and what your goals are.
So there you have it from Clint. It's a struggling year for many
people that are playing video games online and being paid for
it. It's been a real challenge for
them. And I know, again, I know all of
you are very concerned. It's the top of your mind of, of
what's going on with social media Fortnite influencers.
That is a segment of America that I think everybody just
feels a little bit of concern about.
We're all, we're all wondering what's going to happen to them.
So I don't want to downplay these concerns.
I don't want to sound insensitive.
And I know that this is a bit of a, a, a contradiction.
I, I know the, the relationship pairs me being a, a social media
influencer myself, but I think normal jobs are OK too.
I think maybe if the social media influencer thing isn't
working out, consider just getting a job, a job where you
go in to work, you work and then you come home and you get a
paycheck. That's what most people do.
I I think there's always that option if the social media thing
isn't working out. After all, there's nothing wrong
with working a normal job. Now Next up, we have a story
here with a provocative headline.
Is Netflix taking on Disneyland? Not just Disney and their
streaming and their content, but Disneyland parks.
Rather than planning a family trip to Disneyland next year,
your family might be planning an adventure to Netflix House
instead. Interesting name for it.
I guess they really couldn't go with Netflix Land.
I think that'd be a bit too on the nose, but Netflix House
sounds all right. I think it's I think it's a
decent name. Netflix has announced plans to
launch two gigantic in person venues in 2025.
The two spaces will take over former department store
locations at two malls. Unlike Disneyland, there won't
be any rides in the Netflix House, but there will be an
immersive show, themed experiences and shopping
opportunities. So right there, we know they're
doing things differently. You go to Disneyland to ride
rides. That's what Disneyland is.
It's all just rides. There's some food places, of
course, there's shops and merchandise, but the majority of
Disneyland is rides. So is this taking over
Disneyland? No, this isn't like a direct
competitor to Disneyland, but I do think there's some overlap
here. An analytics firm notes that
malls are increasingly looking to bring entertainment zones and
pop up shops to increase the number of people who visit.
Malls need more anchor tenants. Anchor tenants are tenants that
bring people as a destination to the mall because of course, less
people are visiting malls. Similar to how the Disney parks
focus on the studio's iconic titles, both locations will
extend to over 100,000 square feet and will include
restaurants as well as stores and activities tied to some of
Netflix's biggest properties, such as Stranger Things and
Bridgerton. Outside each location will be
eye popping sculptures and mural mashups of characters from
popular Netflix titles. This seems to me a bit like it's
going to be, you know, if you went to like a Comic Con
convention. There's just tons of different
things related to the characters, to the stories.
Netflix will likely create Netflix House as an attempt to
bolster their IP to integrate things like Stranger Things and
Bridgerton, increasing the value of their IP.
I imagine they'll do this with other titles like Squid Game and
any other popular series. At Netflix House, you can enjoy
regularly updated immersive experiences, indulge in retail
therapy, and get a taste, literally, of your favorite
Netflix series and films through unique food and drink offerings.
The house will build off of the successful pop up events Netflix
has held across the country over the past few years.
We've launched more than 50 experiences in 25 cities and
Netflix House represents the next generation of our
distinctive offerings. Now as a customer, I think this
is a welcomed addition. Disney for far too long has been
the only real media company that has successfully tied the parks
experience to their content. You can say that Universal has
done that as well with their major parks.
Those are basically your only two options.
There's not many other companies that have successfully done
this. And if Netflix is able to pull
this off and create Netflix House, this fun immersive
experience you can go to, and it's a bit cheaper than
travelling to Disneyland, I think that's a welcome
experience. If HBO does this as well and
it's more of an HBO themed immersive experience, I think
that's better as well. So I like that Netflix is
pushing the boundaries, trying new things, and I also believe
that this has relatively low downside.
I can't imagine this being too heavy of a CapEx investment.
So I think this has a lot of upside by bolstering their IP
and content and minimal downside.
I don't believe that Disney investors have any reason to be
concerned about this. It's certainly not going to
replace Disneyland parks, but as a Netflix investor, I feel good
about this. Now, finally, we get to the news
that Apple's AI push so far has been well received.
The stock is up around 20%. It's reached all new highs.
Apple's demonstration of their integration of Apple
Intelligence in their hand off to Chachi BT was something that
investors really liked, especially when they could think
about it for a couple of days. The stock continued to rise as
people became more convinced that Apple's AI strategy was
going to work. Now, all of that's great for
Western countries, but with China, they have different rules
there and Apple cannot connect to Chachi BT like they can in
the West. And that is prompting Apple to
look for a Chinese partner to help offer its Apple
Intelligence services, said people in the industry.
So far, no deal has been announced.
With the next iPhone model released just months away in
China, Apple is falling behind local rivals.
They've already incorporated AI functions into their phones.
The iPhone dropped to 3rd place by handset market share among
smartphone brands in China in the first quarter and this year
behind two local brands, according to Counterpoint
Research. So Apple's losing market share
in China as other phones have already integrated AI into their
phones. And Apple, like they usually
are, is a little bit behind. In China, things run
differently. Companies must seek Beijing's
approval before introducing AI chat bots and large language
models. So Apple's in a situation where
in the West, it seems like their AI strategy is full steam ahead,
but in China it's being held back.
It's being held back because they can't partner with the same
partners. They have to go with a Chinese
firm for AI and they have to get specific approvals before
releasing an LLM. Now ultimately, I can't see this
being a big deal for Apple or holding them back in China.
They eventually will be able to find Chinese partners that will
partner with their artificial intelligence.
They can integrate the handoff default position to those
companies instead of open AI, and Apple will be able to
function the same way mirroring in the West that they do in
China, just with different partners.
But overall, I don't see this as a major concern.
Now, that's going to be it for this episode.
If you want to see additional content, you can check out the
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the next one.