Apollo Go Seeks International Expansion

Apollo Go, Baidu’s autonomous ride-hailing service, provided 988,000 rides in the third quarter of 2024, up 20% year over year. As of October 28, 2024, the cumulative rides provided to the public by Apollo Go surpassed 8 million. 

During the third quarter of 2024, rides provided by Apollo Go’s fully driverless vehicles accounted for over 70% of total rides nationwide. The proportion of fully driverless rides further increased to 80% in October 2024. Apollo Go’s sixth generation autonomous vehicle, the RT6, is now operating on public roads in multiple cities in China. 

"The overall market is still in its infancy," said Robin Li, CEO of Baidu, on an earnings call with analysts. "So, competition should help accelerate the growth of the market and foster a more friendly, pro innovation regulatory environment. We believe such regulatory environment is essential for the healthy growth of the -- of this industry and we remain prepared for expansion when the time is right.

"We are actively seeking new opportunities for international expansion. We see significant potential in cities that enable large-scale, fully driverless operations, similar to Wuhan, Chongqing. Additionally, we are open to exploring different business model options, focusing on asset-light strategy to keep our operations flexible and efficient as we grow." Source: Baidu's results

Meta Heralds AR and AI Traction

Meta's Reality Labs unit grew revenue by 29% in the third quarter to 270 million US dollars, driven by sales of its mixed reality headsets and smart glasses. Reality Labs' expenses were 4.7 billion dollars, up 19% year-over-year driven primarily by higher headcount and infrastructure costs.

Mark Zukerberg, CEO of Meta, said "demand for [Ray Ban Meta smart] glasses continues to be very strong. The new clear edition that we released at Connect sold out almost immediately and has been trading online for over a thousand dollars. We've deepened our partnership with EssilorLuxottica to build future generations of smart eyewear that deliver both cutting-edge technology and style." 

Meta also said Reality Labs has "evolved [its] roadmaps to respond to the earlier-than expected success of smart glasses," which now support AI functionality. The company plans to significantly scale up its generative AI infrastructure capacity, "while also prioritising its fungibility."   It anticipates full year 2024 capex will be in the range of 38-40 billion dollars, updated from the prior range of 37-40 billion dollars. Meta also expects significant capex growth in 2025. 

Meta said its Llama large language model (LLM) is seeing strong momentum, with Llama token usage growing exponentially this year (LLMs decompose text into tokens - words, character sets or combinations of words and punctuation). It has just released Llama 3.2 and is developing Llama 4. 

"We're training the Llama 4 models on a cluster that is bigger than 100,000 H100s or bigger than anything that I've seen reported for what others are doing," Zuckerberg claimed. "I expect that the smaller Llama 4 models will be ready first, and they’ll be ready, we expect sometime early next year, and I think that they're going to be a big deal on several fronts -- new modalities, capabilities, stronger reasoning, and much faster." Source: Meta

Waymo Reports Rapid Growth

Alphabet reported that its self-driving ride hailing unit has increased the number of paid rides it provides  by 50% since August. Each week, Waymo is driving more than one million fully autonomous miles and serves over 150,000 paid rides, Alphabet said. The Other Bets unit (in which Waymo is the largest component) increased revenues by 31% to 388 million US dollars, while making a loss of 1.1 billion dollars.

"Through its expanded network and operations partnership with Uber in Austin and Atlanta, plus a new multi-year partnership with Hyundai, Waymo will bring fully autonomous driving to more people and places," said Sundar Pichai, CEO of Alphabet. "By developing a universal driver, Waymo has multiple paths to market. And with its sixth-generation system, Waymo has significantly reduced unit costs without compromising safety." He went on to say that the pace at which Waymo can launch in a new city is accelerating. 

Alphabet also reported that its Lens augmented reality app is now used for over 20 billion visual searches per month. It added that one in four of these searches have commercial intent.  Source: Alphabet

Tesla Expects Energy Storage Deployments to Double

Reporting a 2% year-on-year uptick in automotive revenues for the third quarter, Tesla said that it is on-track to deliver more affordable electric vehicles starting in the first half of 2025. As a result, CEO Elon Musk posited Tesla could achieve a 20% to 30% increase in vehicle sales in 2025.

Tesla also reported a 52% year-on-year rise in energy generation and storage revenues to 2.4 billion US dollars for the third quarter of 2024. The company expects energy storage deployments to more than double year-over-year in 2024.

Tesla reported that Powerwall (a home battery that stores energy generated by solar or from the grid) achieved record deployments in the quarter, although shipments of Megapacks (a large scale energy storage solution for organisations) declined sequentially. 

Still "ramp of Powerwall 3 and the Lathrop Megafactory continued successfully – with Lathrop demonstrating 200 Megapack production (40 GWh annual run rate) in a single week," Tesla said. "As of Q3, over 100,000 Powerwalls were enrolled in Virtual Power Plant programs, delivering additional financial value to owners while providing much needed support to the grid during periods of stress. The Shanghai Megafactory remains on track to begin shipping Megapacks in Q1 2025."  Source: Tesla investor relations

Deutsche Telekom Flags Growth Opportunities

Deutsche Telekom is targeting 4% annual growth in service revenues between 2023 and 207, compared with estimated 3.6% growth between 2020 and 2024. It is also aiming for a return on capital employed (ROCE) of 9% (after tax) in 2027 compared with 9% in 2023 and 4.5% in 2022, as it looks to raise free cash flow to 21 billion euros in 2027 from approximately 19 billion euros in 2024.

Between 2020 to 2027, Telecom Deutschland is aiming to double its ROCE and "move from hardly any fiber to close to 40% of the country being fiberised," said Srinivasan Gopalan, member of the management board, responsible for Germany. 

The telco is also looking to increase its share of the German TV market from 13% today to 20% in 2027. "Magenta TV, with the plethora of streaming services, customers are looking for a simple aggregator. Magenta TV has filled that need, which is why it's one of our fastest-growing categories right now," added Gopalan, while Wolfgang Metze, managing director of private customers, described TV as "an important piece in our strategy and key to emotionalize our best infrastructures."

Elsewhere in Europe, Deutsche Telekom is looking to scale its "instant payment solution, Payzy, which is already on the market in Greece for two years," to other European countries, noted Yvette Dominique Leroy, member of the management board, responsible for Europe.  "Based on our market research and customer feedback, insurance is really something which they naturally would like to get as a service from us," she added. "The last piece here is personally my favourite is the Wi-Fi Sensing, whereas we actually try, with the help of team, to bring a product to the market where we can actually give further peace of mind of our customers when it comes to home security and also taking care of their elderly member of the families." Source: Deutsche Telekom Capital Markets day

Meta Claims AR Breakthroughs

Meta unveiled prototype augmented reality (AR) glasses that it described as "truly representative of something that could ship to consumers." The Orion glasses support holographic displays, which enable the wearer to place 2D and 3D digital content within their field of view.

Although the prototype glasses look comically large (see picture) and could attract ridicule, Meta enthused: "Nailing the form factor, delivering holographic displays, developing compelling AR experiences, creating new human-computer interaction paradigms – and doing it all in one cohesive product – is one of the most difficult challenges our industry has ever faced. It was so challenging that we thought we had less than a 10% chance of pulling it off successfully. Until now." 

While many people will be too self-conscious to wear the Orion glasses out and about, the form factor could be light enough and sleek enough to be used for enterprise applications or in the privacy of the home.

Orion will only be available to Meta employees and some external actors, but the company said it is building towards a consumer AR glasses product line, which it plans to begin shipping in the near future.

Meta said it is focused on "tuning the AR display quality to make the visuals even sharper,  optimising wherever we can to make the form factor even smaller and building at scale to make them more affordable."

Meta also unveiled Meta Quest 3S, a headset that promises the same mixed reality capabilities and performance as the Meta Quest 3, but at a lower price point - starting at 299.99 US dollars for the 128 GB model. The 128 GB Meta Quest 3 had cost about 500 dollars, but its display resolution and field of view is better than that of the Meta Quest 3S.

The company also announced new capabilities for its Ray-Ban Meta glasses, such as being able to translate speech in real time. "When you’re talking to someone speaking Spanish, French or Italian, you’ll hear what they say in English through the glasses’ open-ear speakers," Meta said, noting the glasses will support more languages in future.

Source: Meta newsroom

T-Mobile Forecasts Strong Service Growth

T-Mobile US forecast a compound annual growth rate of approximately 5% in service revenue in the next three years, as the mobile operator expects to generate 75-76 billion US dollars in revenue in 2027. "This is driven by continued wireless and broadband customer growth, continued growth in average revenue per account from deepening customer relationships and growth in new businesses," it said. It plans to invest 9-10 billion dollars in annual capital expenditures between now and 2027.

Providing examples of opporunities, T-Mobile US said it has grown "solutions that it built to improve advertising in its own business to other advertisers into an over 1 billion dollar in annual revenue business." The operator also pointed to its T-Priority service, "which gives first responder agencies of all sizes priority on the T-Mobile network to help ensure best-in-class connectivity during times of congestion, especially massive emergencies, and offers support for a wide range of data-intensive applications." Source: T-Mobile US

Big Tech Steps Up Investment

The AI arms race is driving up capital spending by the tech giants. In the first half of 2024, the aggregate capital spending of the Magnificent Seven was more than 107 billion US dollars, compared with 77 billion dollars in the same period of 2023. In 2024, Alphabet and Microsoft have both already invested about 25 billion dollars each in capex, compared with 8.6 billion dollars (including spectrum) for Deutsche Telekom - one of the biggest investors in the telecoms sector.

On its second quarter earnings call, Alphabet said its increase in capital spending was "driven overwhelmingly by investment in our technical infrastructure, with the largest component for servers, followed by data centres." It expects total capital spending to be about 48 billion dollars in 2024.

On that call, Sundar Pichai, CEO Alphabet and Google, added: "Aggressively investing upfront in a defining category (AI), particularly in an area, which in a leveraged way, cuts across all our core areas, our products, including search, YouTube and other services as well as fuels growth in cloud and supports the innovative long-term bets and Other Bets. It is definitely something that for us makes sense to lean in."

"The risk of underinvesting is dramatically greater than the risk of over-investing for us here. Even in scenarios where if it turns out we are over-investing, these are infrastructure which are widely useful for us, they have long useful lives, and we can apply it across and we can work through that."

Despite Alphabet's ramp up, Amazon still has by far the biggest capex budget in the Magnificent Seven, reflecting the fact that it runs a massive logistics business, in addition to its cloud services and apps. After cutting investment sharply in 2023 (through lower spending on fulfilment and transportation), Amazon has said it will increase capex in 2024 to support growth in its cloud computing business (AWS), which is investing in generative AI and large language models.

Source: The Magnificent Seven - Follow the Money 

Nvidia Sees Major Surge in Cash Flow

Now more than 30 years old, Nvidia reported revenue for the second quarter ended July 28 of 30 billion US dollars, up an extraordinary 122% from a year ago. The vast majority of that performance was down to the data centre business, which saw a 154% year-on-year rise to 26.3 billion dollars. 

Perhaps, even more impressively, Nvidia's net cash from operating activities in the six months to July 28 tripled year-on-year to 29.8 billion dollars. 

Net cash flow from operating activities in 2023 versus 2020
Source: The Magnificent Seven - Follow the Money

In this decade, Nvidia has seen a massive increase in its cash flow, thanks to its leadership in the development of the GPUs (graphics processing units) underpinning the recent advances in AI. In particular, Nvidia has benefitted from a step change in spending on AI-related computing capacity by other members of the so-called Magnificent Seven, notably Amazon, Meta, Microsoft and Alphabet.

Like Apple, Nvidia makes an extraordinary return on capital employed (ROCE). Nvidia made a ROCE of more than 80% in 2023, compared with an aggregate ROCE of the Magnificent Seven of 29%.  In the telecoms industry, ROCE tends to be below 10%.  

Source: The Magnificent Seven - Follow the Money 

Apollo Go Now Fully Driverless in Wuhan

Chinese Internet giant Baidu reported that its Apollo Go ride-hailing service has successfully transitioned to offering 100% fully driverless services in "practically the entire Wuhan municipality." It said that all its vehicles in the city are now operating without the need for human safety officers on board, reducing the cost per vehicle in the second quarter of 2024 by more than half compared to the same period in 2023. In the first quarter of 2024, 55% of trips in Wuhan were fully driverless.

In Wuhan, Apollo Go's 400 vehicles are now available to seven million people around the clock, Robin Li, CEO of Baidu, told analysts, but its share of the city's ride hailing market is just 1%. The number of Apollo Go's pickup points at the end of June had increased by over three-fold from the previous quarter, he added. Nationwide, Apollo Go provided about 899,000 rides to the public in the second quarter, marking a 26% year-over-year increase. That equates to about 69,000 rides a week. Waymo, Alphabet's self-driving ride hailing service, recently reported that it is now making 100,000 paid trips a week in the US.

Apollo Go has also begin large-scale open-road testing of its sixth-generation autonomous vehicle, the RT6. Equipped with a battery-swapping solution, RT6 is priced at below 30,000 US dollars for mass production, Baidu said. "After thorough testing, we plan to officially roll out RT6 into our fleet, establishing a strong foundation for further substantial cost reductions in Apollo Go operations," Li added. Source: Motley Fool transcript

Waymo Claims to Have Doubled Paid Trips

In a short LinkedIn post, Waymo reported that its self-driving vehicles are now taking 100,000 paid trips a week - that's double the figure it reported on August 6th. The company didn't provide an explanation for the sudden leap, but the August 6th blog post did reference "well over 50,000" paid rides a week.

Waymo has also published some details of its sixth generation hardware - a modified Zeekr electric vehicle. It said the vehicle's new sensor suite - 13 cameras, 4 lidar, 6 radar and array of external audio receivers - is optimised for greater performance at a significantly reduced cost, without compromising safety. "It provides the Waymo Driver with overlapping fields of view, all around the vehicle, up to 500 meters away, day and night, and in a range of weather conditions," Waymo claimed.  Source: Waymo blog post

Streaming Sales Drive Disney Forward

 

The Walt Disney Company reported a 4% year-on-year rise in revenues for the quarter ending June 29th to 23.16 billion US dollars. The uptick was driven by a 4% rise in revenues in its entertainment division, where its direct to consumer streaming business lifted revenues by 15% to 5.8 billion dollars. Source: Disney collateral

SK Telecom Talks Up AI Prospects

SK Telecom reported that its data centre revenue grew 20.5% year-on-year to 59.2 billion Korean won (43 million US dollars) in the second quarter of 2024 "thanks to AI-driven demand growth for data centre and higher utilisation rates of the data centres." 

In the past two years, SK Telecom has invested more than 300 million dollars in AI, including a 10-million-dollar investment in Perplexity, which is developing an AI-based search engine, and a 200-million-dollar investment in Smart Global Holdings (SGH), a provider of AI data centre solutions. 

SKT says SGH developed "ultra-large AI clusters" with 16,000 GPUs for Meta in 2023 and was selected in 2024 as an AI cluster operator of the Voltage Park with 24,000 GPUs. "We plan to combine SGH’s capabilities to build and operate AI clusters with SK Telecom’s solutions, such as data centre management system and liquid immersion cooling, to target the global AI data centre market aggressively," SKT added. "SGH owns edge solutions specialised for industrial applications. The two companies will cooperate to develop telecom edge AI solutions by combining AI with telecom infrastructure."  

Also targeting the PAA (personal AI assistant) market, SKT has started to offer a call recording and summary service and real-time call interpretation service for Android handsets via its A. (A dot) app. As of the end of June, the cumulative downloads of A. (A dot) had exceeded 4.55 million. "In the second half of the year, we will upgrade (the) UX to make it more user-friendly and introduce a generative AI search feature of Perplexity," the telco added. SKT also plans to develop localised PAAs in collaboration with telcos in various countries and expand the service worldwide.  Source: SK Telecom collateral

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Waymo Reports 50,000 Paid Trips per Week

Waymo, Alphabet's driverless ride hailing service, is expanding its service area to cover more places in the San Francisco Bay Area and Los Angeles County. Waymo said its operations now cover 55 square miles of the Bay Area. 

The company said that Waymo One is growing steadily, serving well over 50,000 paid rides per week across San Francisco, Los Angeles and Phoenix, up from 10,000 a week in May 2023. However, Waymo had hoped to be serving 100,000 trips a week by the summer of 2024.

"In total, members of the public have taken more than two million paid trips with Waymo, and our vehicles have driven more than 20 million miles fully autonomously," it added. Source: Waymo blog post

AI Prompts Meta to Crank Up Capex Again

Meta reported a 23% year-on-year rise in revenues for the second quarter of 2024 (in constant currencies) to 39.1 billion US dollars. Capital expenditure rose 33% to 8.17 billion dollars. That equates to a capital intensity of almost 21%.

Meta anticipates its full-year 2024 capital expenditures will be between 37 billion and 40 billion dollars, and it expects significant capex growth in 2025, "as we invest to support our AI research and our product development efforts." 

Mark Zuckerberg, CEO of Meta, again highlighted the stronger than expected sales of Ray-Ban Meta glasses "thanks in part to AI." He said that "demand is still outpacing our ability to build them, but I'm hopeful that we'll be able to meet that demand soon. EssilorLuxottica has been a great partner to work with on this, and we're excited to team up with them to build future generations of AI glasses as we continue to build our long term partnership."

He went on to suggest that the glasses need to be significantly better to go mainstream: "Compared to, I think, what it needs to be, to be like a really leading piece of consumer electronics, I think we're still early, but all the signs are good." 

Zuckerberg also said that Quest 3 sales are outpacing Meta's expectations. "In addition to gaming, people are increasingly taking advantage of Quest's capabilities as a general computing platform, spending time watching videos, browsing websites, extending their PC via virtual desktop, and more."

Within Meta's Reality Labs segment, revenue was 353 million dollars for the quarter, up 28% driven primarily by Quest headset sales. But Reality Labs expenses were 4.8 billion dollars, up 21% year-over-year. Source: Meta's collateral

Reporting its quarterly results, chipmaker Qualcomm added: "We remain excited about the continued positive momentum in XR (extended reality), particularly the success of Meta’s Ray-Ban smart glasses. Sales are exceeding our expectations, due in part to the integration of Llama (Meta's AI model), and we foresee an acceleration in demand for extended and mixed reality devices as new use cases enabled by generative AI gain scale." Source: Qualcomm results

ROCE Remains Depressed for Europe's Big Telcos

Amid growing concerns about an over-supply of telecoms capacity, Europe's major telcos continue to struggle to make an adequate return on their capital employed (ROCE). In this decade, Telefónica, Orange and Telecom Italia have generated a lower average ROCE than they did in the previous decade, while Deutsche Telekom has seen an uptick, mostly thanks to its success in the US. After making some divestments, Vodafone is performing significantly better on this metric, albeit after a woeful return between 2010 and 2019. 

The charts in this post show ROCE before tax, calculated as EBIT divided by the average capital employed.

In 2021, Telefónica's performance was boosted by gains on the sale of the towers divisions of Telxius, amounting to almost 6.1 million billion euros and from the establishment of VMO2 amounting to almost 4.5 billion euros. Even so, its average ROCE remains close to its weighted average cost of capital.

Still, the aggregate ROCE for Deutsche Telekom, Vodafone, Telefónica, Orange and Telecom Italia is at least rising again (see chart below), as they cut back on spending on infrastructure and spectrum.

Network Slicing Now Generating Revenues for Telefónica

Telefónica reported a 2% year-on-year increase in total connections for the second quarter of 2024 to 392 million, with FTTH (fibre-to-the-home) connections up 12%. The telco also highlighted its efforts to lower capex, which was down 4% year-on-year in the first half of 2024 to 2.3 billion euros, excluding spectrum. That equates to 11.3% of sales. 

Telefónica Germany claims to have achieved the world's first software upgrade for a 5G core network’s user plane without interrupting ongoing operations, as well as becoming the first telecoms  operator worldwide to switch its core network to a public cloud (AWS). "This is a milestone in our multicloud strategy towards cloud-based and automated architectures, which will allow us to save investments in setting up computing capacities and, in addition, reduce costs and time to update core network functions, designed as software," the Madrid-based telco added.

Telefónica also said a higher degree of virtualisation is accelerating its deployments of FTTH and 5G: its 5G network now covers 89% of the population in Spain, 96% in Germany, 50% in Brazil and 65% in the UK. With the switch-off of the retail copper service in Spain earlier this year, the telco has been able to close a further 123 central offices, taking the total to 4,272 since 2014.

Telefónica has launched 5G standalone (SA) in Spain, Brazil, Germany, and the UK, allowing  enterprises to implement advanced mobile connectivity services. "Our network cores have been completely updated in the four core markets so they can manage all types of traffic (4G, 5G NSA and 5G SA).. we are already generating revenues from services provided on the 5G SA network as slicing services." Source: Telefónica statement

Alphabet to Invest a Further $5 Billion in Waymo

Alphabet reported a 15% year-on-year rise in revenues to 84.7 billion US dollars for the second quarter of 2024 in constant currencies. It also announced that it would invest a further 5 billion dollars in its self-driving developer Waymo. 

Sundar Pichai, CEO of Alphabet, said: "In Other Bets, I'm really pleased with the progress Waymo is making, a real leader in space and getting rave reviews from users. Waymo served more than two million trips to date and driven more than 20 million fully autonomous miles on public roads. Waymo is now delivering well over 50,000 weekly paid public rides, primarily in San Francisco and Phoenix. And in June, we removed the wait list in San Francisco, so anyone can take a ride. Fully autonomous testing is underway in other Bay Area locations without a human in the driver seat." Source: Alphabet collateral

Energy Business Offsets Automotive Slowdown for Tesla

Tesla said its vehicle volume growth rate may be notably lower in 2024 than the growth rate achieved in 2023, as its teams work on the launch of a "next generation vehicle and other products." It added that the growth in its energy generation and storage business should outpace the automotive business.

Energy generation and storage revenue doubled year-on-year to more than 3 billion US dollars in the second quarter of 2024, while automotive revenues fell 7% to 19.9 billion dollars.

Tesla said "though the timing of robotaxi deployment depends on technological advancement and regulatory approval, we are working vigorously on this opportunity given the outsized potential value." Tesla invested 600 million dollars in AI infrastructure in the second quarter. 

In the second quarter, Tesla rolled out a version of its FSD (Supervised) automation system that primarily relies on eye tracking software to monitor driver attentiveness. The company also said it increased the robustness of its next gen FSD (Supervised) model with substantially more parameters.

Source: Tesla collateral 

Netflix Talks Up Growth Opportunities

Netflix increased its forecast for revenue growth for 2024 slightly from 13% to 15% to 14% to 15%, after reporting revenue growth of 22% on a currency neutral basis for the second quarter to almost 9.6 billion US dollars. Streaming paid memberships rose 17% to almost 278 million worldwide. 

Citing figures from Nielsen, Netflix claimed that, together with YouTube, it accounts for 50% of all streaming to the TV in the US. However, it also stressed it has plenty of scope to grow: "Across streaming, pay TV, film, games and branded advertising, it’s a 600 billion dollar + market, and today Netflix accounts for just ~6% of that revenue." 

Having launched more than 100 games so far, Netflix says it has 80-plus games in development. It is particularly excited about "interactive narrative games", based on its own intellectual property. Source: Netflix collateral

Slump in India Drags Down Ericsson

 

Ericsson reported a 7% decline in sales year on year for the second quarter of 2024 on an organic basis to 59.8 billion Swedish krona (5.6 billion US dollars). Börje Ekholm, CEO, said: “We expect market conditions to remain challenging this year, as the pace of India investments slow, however our sales will benefit during the second half from contract deliveries in North America.”  Source: Ericsson report

Baidu Hails Improving Self Driving Economics

Baidu reported that its self-driving taxi service Apollo Go provided about 826,000 rides to the public in the first quarter of 2024, marking a 25% year-over-year increase. In the first quarter, the rides provided by fully driverless vehicles accounted for over 55% of total rides in Wuhan, which is up from 45% in the fourth quarter of 2023. "This figure continues to rise, exceeding 70% in April, with expectations of sustained rapid growth ahead and reaching 100% in the coming quarters," added Robin Li,  CEO of Baidu.

Baidu claimed that in Wuhan "Apollo Go is gradually becoming an integral part of the city's transportation network." In the past year, Apollo Go's fully driverless fleet in Wuhan has grown threefold, reaching about 300 vehicles today. It plans to increase that number to 1,000 vehicles by the end of 2024.

As it has won the trust of local government, Apollo Go has more than doubled its operational area in Wuhan from a quarter ago, and is now serving a population of over seven million in the city. Its vehicles started to operate 24/7 in Wuhan in early March.

To significantly reduce hardware depreciation costs, Baidu plans to deploy RT6, its sixth generation robotaxi, in its Wuhan Apollo Go operation this year. Adopting a battery swapping solution, the mass production price for RT6 excluding battery is below 30,000 US dollars, according to Baidu. "With the scaling of driverless operations and continuous improvement of cost structure, we believe Apollo Go will achieve operational unit economics breakeven in Wuhan in the near future," added Li.

Baidu is also making its autonomous driving solution, which is solely reliant on vision, available to other automakers.  "This allows us to make advanced autonomous driving attainable across a broad spectrum of passenger vehicles from high-end to economy models priced as low as 150,000 yuan, and it serves as another proof of our technology leadership," Li explained. Baidu said that its ASD technology can now effectively navigate complex, urban environments across more than 100 cities in China and it has plans to expand in to hundreds of cities in the coming months.  Source: Baidu earnings call

IDC Predicts Slowdown in Global Telecoms Market

Worldwide spending on telecom and pay TV services reached 1.5 trillion US dollars in 2023, an increase of 2.1% over 2022, according to International Data Corporation, which expects the market to grow by 1.4% in 2024. Source: IDC press release

Autonomous Driving Start-Up Raises One Billion Dollars

Artificial intelligence start-up Wayve, which is working with various vehicle makers on autonomous driving, said it has raised 1.05 billion US dollars in a series C funding round led by SoftBank Group with contributions from new investor NVIDIA and existing investor Microsoft. The London-based company has now raised 1.3 billion dollars across three rounds. 

Wayve's immediate plans include launching its first product featuring L2+ ADAS (level 2 advanced driver assistance systems).  Its automated driving technology is built with "end-to-end deep learning" and doesn't require high-definition maps, potentially making it more cost-effective and scalable than rival solutions. The start-up believes the ADAS market will be worth more than 100 billion dollars even before full autonomy is reached.

Wayve claims its "technology excels where others have struggled: mastering driving in complex urban environments with camera-only navigation and adapting to cities unseen during training just like how you and I drive."

In a blog post, CEO Alex Kendall wrote: "Since our inception, we have held a core belief that end-to-end AI (see AV2.0 graphic below) will make autonomy possible. This has been a deeply contrarian approach against the rest of the market, and we are excited to see our progress and this funding as a massive endorsement of our vision." The AV1.0 graphic below shows Wayve's view of how other companies are developing autonomous vehicle technologies, although Kendall noted that Tesla has pivoted to end-to-end AI with v12 of its full self driving system.

Comparing "embodied AI" with generative AI, Kendall said that the data collected from vehicles' video, radar and LiDAR systems already amount to several times the petabytes of all the language data in the world. "Every year, millions of vehicles are built with the necessary sensing and compute for training and deploying embodied AI," he added. "These vehicles are already being driven today doing useful work, meaning that data collection can be achieved with low operational cost, unlike with other robotics applications. These vehicles are being operated around the world and experience open-set, unconstrained environments, rich with the long tail of edge cases." Source: Wayve blog post

AT&T Opens Up 5G Priority Lane

AT&T has launched a new product - called AT&T Turbo - which enables customers to pay to prioritise their data traffic (over that of non-Turbo customers) during busy times on the network. Costing seven US dollar a month, Turbo can be activated (and cancelled) at any time by AT&T customers with a 5G-capable smartphone.

However, AT&T cautions that the "performance, experience, and speed [are] not guaranteed and may be affected by other factors such as network congestion, coverage, your device, and third-party limitations." AT&T hasn't said how significant the performance boost provided by Turbo might be.  Source: AT&T web site

Apple Heralds Enterprise Demand for Vision Pro

With iPhone sales in decline, Apple tried to talk up the prospects of its spatial computing hardware - the Vision Pro. CEO Tim Cook said that "more than half of the Fortune 100 companies have already bought Apple Vision Pro units and are exploring innovative ways to use it to do things that weren't possible before, and this is just the beginning." He elaborated to say that the headset is being employed "for many different things in enterprise, and that varies from field service to training to healthcare related things like preparing a doctor for pre-op surgery or advanced imaging..... our focus is on -- is growing that ecosystem and getting more apps and more and more enterprises engaged. And the event that we had recently, I can't overstate the enthusiasm in the room. It was extraordinary. And so we're off to a good start, I think, with the enterprise." Source: Transcript of Apple earnings call

Euro Telcos' Top Lines Under Pressure

 

Despite inflation, the revenues of the big five telcos in Europe has been flatlining for much of this decade. Even Deutsche Telekom, the out performer of the group, is no longer growing reported revenues. In 2023, its revenues from the US (DT's primary growth engine for the past 10 years) declined by 4%, partly due to exchange rate effects and partly because of a decline in device revenue.

Amazon Flags "Unbelievable" Growth Opportunities

Amazon flagged that it plans to "meaningfully increase" capital investment in 2024, primarily to support growth in AWS, including generative AI. Amazon defines capital investment as a combination of capex plus equipment finance leases.  In 2023, overall capital investments were 48.4 billion US dollars. In the first quarter of 2024, Amazon invested 14 billion dollars, which CFO Brian Olsavsky said is likely to be the "low quarter for the year."

AWS increased revenue 16% year-on-year (excluding the impact from the leap year) in the first quarter to 25 billion dollars.  "I think there are really unbelievable growth opportunities in front of us," said Amazon CEO Andy Jassy. "85-plus percent of the global IT spend is on premises. And if you believe that equation is going to flip, which we do, it means we have a lot of growth in front of us, and that's before the generative AI opportunity, which I don't know if any of us have seen a possibility like this in technology in a really long time, for sure, since the cloud, perhaps since the Internet." 

Jassy contended that generative AI workloads are largely going to be built from scratch on the cloud. He said that AWS is already seeing a multibillion-dollar revenue run rate in AI, claiming that tens of thousands of companies are building large language models on top of Amazon Bedrock.  "Those models consume an incredible amount of data with a lot of tokens, and they're significant to actually go train.... and I expect an increasing amount of those to be built on AWS over time because our operational performance and security, as well as our chips, both what we offer from NVIDIA. But if you take Anthropic, as an example, they're training their future models on our custom silicon on Trainium."

As companies bring their large language models into production, AWS will "see significant run rates," Jassy noted. "You spend much more in inference than you do in training because you train only periodically, but you're spinning out predictions and inferences all the time. ... many companies, their models and these generative AI applications are going to have their most sensitive assets and data. And it's going to matter a lot to them what kind of security they get around those applications." Source: transcript of Amazon earnings call

AT&T Talks up Fibre, Talks down FWA

AT&T reiterated its forecast of 3% growth in wireless service revenues and 7% growth in broadband revenues in 2024, despite a fall of 0.4% in group revenues in the first quarter of 2024 to 30 billion US dollars (even with a favourable impact from foreign exchange rates in Mexico). The US telco blamed the fall on lower "mobility equipment" revenues and lower business wireline revenues. 

AT&T also reiterated that it plans to make capital investments of between 21 billion and 22 billion dollars in 2024, down from 23.6 billion in 2023. However, the 2023 figure included 5.7 billion of cash payments for vendor financing (debt repayments). 

"We continue to invest in key growth areas, given the compelling returns on these investments," said Pascal Desroches, CFO of AT&T. "In mobility, we are focused on modernising our network through our Open RAN initiative. And with fibre, we remain on track to pass 30 million-plus consumer and business locations by the end of 2025....As we've stated before, the better-than-expected returns we're seeing on our fibre investment potentially expands the opportunity to go beyond our initial target by roughly 10 million to 15 million additional locations." 

Explaining AT&T's preference for delivering fibre broadband over fixed wireless access (FWA) to residential properties, CEO John Stankey added: "Wireless networks aren't particularly the best place to take the single-family home that streams hours and hours of video a day and try to serve them with a kind of $50 a month product or service." Source: AT&T collateral

Alphabet Forecasts 50% Rise in Capex

Alphabet, owner of Google, indicated it will spend 48 billon US dollars on capex in 2024, up from 32.3 billion dollars in 2023. CFO Ruth Porat said that its reported capex in the first quarter of 12 billion dollars was "once again driven overwhelmingly by investment in our technical infrastructure, with the largest component for servers, followed by data centres. The significant year-on-year growth in capex in recent quarters reflects our confidence in the opportunities offered by AI across our business."

Alphabet also noted that YouTube surpassed 100 million Music and Premium subscribers globally, including trialers, while YouTube TV now has more than eight million paid subscribers. It also confirmed that "Waymo’s fully autonomous service continues to grow ridership in San Francisco and Phoenix, with high customer satisfaction; and we started offering paid rides in Los Angeles, and testing rider-only trips in Austin." source: Alphabet collateral

Verizon Continues FWA Growth

Reporting revenue growth of 0.2% to almost 33 billion US dollars in the first quarter, Verizon said that it added 151,000 fixed wireless access (FWA) business customers and 203,000 FWA consumer customers. But wireless equipment revenues fell almost 7%.

Overall, broadband net adds were 389,000, including 53,000 Fios (fibre) Internet net adds. In total, Verizon completed the  quarter with more than 11.1 million broadband subscribers, including over 3.4 million on FWA. "We've now added more than three million broadband subscribers in the last two years alone," noted CEO Hans Vestberg. Source: Verizon collateral

Meta Ramps Up AI Investment

Meta forecast that its full-year 2024 capital expenditures will be in the range of 35-40 billion US dollars, up from 28 billion dollars in 2023, and up from its previous forecast range of 30-37 billion dollars. As it plans to further accelerate its infrastructure investments to support its AI roadmap, Meta also intends to increase capex in 2025.

Mark Zuckerberg, Meta's CEO, said his company "should invest significantly more over the coming years to build even more advanced models and the largest scale AI services in the world." He predicted that AI-enabled glasses will be "a really important platform for the future."

The outlook for smart glasses "has improved quite a bit because previously we thought that that would need to wait until we have these full holographic displays to be a large market. And now we're a lot more focused on the glasses that we're delivering in partnership with Ray-Ban," Zuckerberg added, noting that those glasses "continue to do well and are sold out in many styles and colours." This product, which resembles conventional glasses, lack a built-in display, but are equipped with a camera, microphones and speakers to enable a wearer to query an AI system running in the cloud.

"If we want everyone to be able to use wearable AI, I think eyewear is a bit different from phones or watches in that people are going to want very different designs," Zuckerberg opined. "So I think our approach of partnering with leading eyewear brands will help us serve more of the market." Source: Meta collateral

Orange Sees Strong Growth in Africa

Orange reported a 2.1% year-on-year rise in revenues on a comparable basis for the first quarter of 2024 to 9.58 billion euros. The company said Africa & Middle East was the main contributor to this growth, with revenues rising11.1% (or +185 million euros) led by a robust performance in voice and double-digit increases in its four growth engines (+15.7% in mobile data, +20.6% in fixed broadband, +23.5% at Orange Money and +14.1% in B2B across all activities).

Revenues in France increased 0.8% (+35 million euros) thanks to growth in retail services, while sales in other European markets declined 2% (-35 million euros). Source: Orange statement

Tesla Steps Up Capital Spending

Tesla increased its capital spending by 34% year-on-year in the first quarter of 2024 to 2.8 billion US dollars. "While many are pulling back on their investments, we are investing in future growth – including our AI infrastructure, production capacity, our Supercharger and service networks and new products infrastructure," the company said.

Tesla reiterated its belief that a scalable and profitable autonomous vehicle business can be realised through a vision-only architecture with end-to-end neural networks, trained on billions of miles of real-world data. "Since the launch of FSD (Supervised) V12 earlier this year, it has become clear that this architecture long pursued by Tesla is the right solution for scalable autonomy," the company said, while reporting its first quarter results.

Tesla has rolled out FSD (Supervised), which now costs 99 US dollars a month, with a 30-day free trial to eligible cars in U.S. and Canada. It claims the system can change lanes, select forks to follow routes, navigate around vehicles and objects and make turns, as well as park the vehicle. "We are currently working on ride-hailing functionality that will be available in the future," Tesla added.  Source: Tesla collateral

India and US Cutbacks Drag Down Ericsson

Ericsson's networks business reported a 19% organic fall in revenue to 33.7 billion Swedish krona (3.07 billion US dollars) year-on-year for the first quarter of 2024. It blamed reduced operator investment across a number of geographies, but said the sales decline was most pronounced in South East Asia, Oceania and India, with a decrease of 42%. "This was primarily due to a reduction in capex investments in India, after record-high investment levels in 2023, as well as a year-on-year decrease in sales in the Philippines and Malaysia due to timing of project milestones in Q1 2023," Ericsson added. 

Ericsson's network sales in North America declined by 23% year-on-year, reflecting a lower level of 5G capex. But sales increased in Middle East and Africa, driven by a second wave of 5G investments across several markets. IPR licensing revenues also increased. Source: Ericsson statement

Nvidia Heralds Advent of AI Factories

Chip designer and software provider Nvidia reported a 126% increase in revenue for the year ending January 28th to 60.9 billion US dollars.  Data centre revenue for the fiscal 2024 year was 47.5 billion dollars, more than tripling from the prior year. "The world has reached the tipping point of new computing era," Nvidia said. "The 1 trillion dollar installed base of data centre infrastructure is rapidly transitioning from general purpose to accelerated computing. ...At the same time, companies have started to build the next generation of modern data centres, what we refer to as AI factories, purpose built to refine raw data and produce valuable intelligence in the era of generative AI." 

In the fourth quarter, data centre revenue was up 409% year-over-year, driven by the NVIDIA Hopper GPU computing platform, along with InfiniBand end-to-end networking, the company added.

Nvidia said the supply of Hopper architecture products is improving, but it expects its next-generation products to be "supply constrained" as demand far exceeds supply. Fourth quarter data centre growth was driven by both training and inference of generative AI and large language models across a broad set of industries, use cases and regions, Nvidia noted. Source: Nvidia collateral

Apple Points to New Growth Opportunities

Apple said it is now serving an installed base of more than 2.2 billion active devices. For the quarter ending December 30, 2023, it reported services revenue of 23 billion US dollars, up 11% year-over-year, despite there being one less week in the quarter.  Apple said it achieved all-time revenue records across advertising, cloud services, payment services and video, as well as December quarter records in App Store and AppleCare. 

Apple also said its paid subscriptions, which now number more than one billion, showed strong double-digit growth in the quarter.

Speaking the day before the launch of it new Vision Pro headset, Tim Cook, CEO of Apple, said: "We are incredibly excited about the enterprise opportunities with Vision Pro.... Walmart has a very cool merchandising app. There are firms that are doing collaboration -- design collaboration apps. There are field service applications. Really all over the map, there are applications that are for control centre, command centre kind of things. SAP has really gotten behind it and, of course, SAP is in so many of companies." Source: Apple earnings call transcript via Seeking Alpha

Amazon Talks Up Gen AI Opportunity

Amazon believes demand for generative AI (gen AI) is a major opportunity for its cloud business AWS. It has identified three distinct layers in the gen AI stack, "each of which is gigantic and [in] each of which we're deeply investing."

At the bottom layer, customers, who are building their own models, run training and inference on specialised chips. Amazon says customers using its AI chips include Anthropic, Airbnb, Hugging Face, Qualtrics, Ricoh and Snap.

In the middle layer, companies seek to leverage an existing large language model, and customise it with their own data, as a managed service. Amazon said that thousands of customers are already using its new Bedrock proposition in this layer.

The top layer of the stack is the application layer. Amazon has launched Amazon Q, a gen AI application that is intended to be an expert on AWS, and can write, debug and test code, and can also query customers’ various data repositories and answer questions, summarise the data, conduct a coherent conversation, and take action. Source: Amazon earnings transcript

Strong Sales of Meta Smart Glasses

The Ray-Ban Meta smart glasses are off to a very strong start, in terms of both sales and engagement, Mark Zuckerberg, CEO of Meta, told financial analysts.  "Our partner EssilorLuxottica is already planning on making more than we'd both expected due to high demand. Engagement and retention are also significantly higher than the first version of the glasses. The experience is just a lot better with Meta AI in there, as well as a higher resolution camera, better audio, and more. We also have an exciting roadmap of software improvements ahead, starting with rolling out multimodal AI and then some other really exciting new AI features later in the year."

Zuckerberg went on to argue that people are going to "want new categories of devices that let you frictionlessly engage with AIs frequently throughout the day without having to take out your phone and press a button and point it at what you want it to see. I think that smart glasses are going to be a compelling form factor for this."

He admitted that Meta had initially assumed that smart glasses would need to have full displays, support holograms and deliver a sense of presence to become a mainstream product. But "now it seems quite possible that smart glasses that have AI assistants built in will be the killer app, and that the holograms and sense of presence will come later." 

At the same time, Meta reported that its new virtual reality headset, the Quest 3, has got off to "a strong start". Zuckerberg said he expects the Quest 3 to continue to be the most popular mixed reality device (despite the launch of Apple's Vision Pro headset). Source: Meta Q4 earnings call transcript

Regulations Still Require Remote Monitoring of Driverless Cars

Although Baidu has trumpeted “fully driverless vehicles” in China, the Financial Times reported that a visit to the group’s autonomous driving centre in Beijing in June found each robotaxi was remotely monitored by a human sitting in an arcade-like driving station ready to intervene. The monitoring is required by regulators, according to the newspaper, which quoted consultancy Bain as predicting that the current scale of commercial trials means China is tracking towards a “tipping point” of around 2027 for the key technologies to be commercially viable at a large scale. 

Bain expects a similar timeframe for completing the legal framework for liability and insurance and improving the accompanying road and telecoms infrastructure. The Financial Times said the ability of companies to tap into cities’ networks of roadside cameras, traffic lights and other inner-city infrastructure, as well as widespread 5G coverage and digital mapping, is already underpinning industry confidence in China. 

However, a global survey of autonomous vehicle executives by McKinsey found that expectations for commercially-viable robotaxis in the Asia-Pacific region have been extended by a year to 2029 since the previous survey in 2021. (see graphic). 

The Financial Times reported that Waymo, part of the Alphabet group, refused to provide a specific number for how many people remotely monitor each of its self driving cars, which are being piloted in several US cities. However, the US group stressed that its fully autonomous cars were “responsible for making every driving decision on the road and do not rely on a human driver, either in the car or remotely”. 

Sources: Financial Times article and McKinsey report

Alphabet Puts a Spotlight on Subscription Growth

Alphabet generated 15 billion US dollars from subscriptions in 2023, up fivefold since 2019. It said the growth was driven by demand for YouTube Premium and Music, YouTube TV and Google One.

Alphabet's 2023 revenues of 307 billion dollars were up 9% versus 2022, with fourth quarter revenues up 13% year-on-year in both reported and constant currency.

Google Cloud reported a 26% increase in revenues for the fourth quarter to 9.2 billion dollars. It now offers an "AI Hypercomputer" - a supercomputing architecture composed of TPUs (Google’s application-specific integrated circuit for deep learning and machine learning) and GPUs (graphical processing units), AI software and multi-slice and multi-host technology.  Anthropic, Character.ai, Essential AI, and Mistral AI are among the companies building and serving AI models on the architecture. Source: Alphabet earnings transcript

Tesla Anticipates Slower Growth in 2024

Tesla warned that its "vehicle volume growth rate" may be notably lower in 2024 than in 2023, as it works on the launch of a "next-generation vehicle" at its Gigafactory Texas. Tesla said the growth rate of deployments and revenue in its energy storage business should outpace the automotive business in 2024.

In 2023, Tesla delivered 1.8 million vehicles, 38% more than in 2022, including more than 1.2 million Model Ys, making it the best-selling vehicle, of any kind, globally.  Energy storage deployments reached 14.7 GWh in 2023, more than double those in 2022.

In late December, Tesla started rolling out version 12 of its FSD (full self driving) Beta system, which is trained on data collected from more than a million vehicles. The company says the system uses AI to "influence vehicle controls (steering wheel, pedals, indicators, etc.) instead of hard-coding every driving behaviour." It also demonstrated the 2nd generation of its general purpose Optimus humanoid robot, which uses Tesla-designed actuators and sensors and improved AI capabilities. Source: Tesla statement