Weekly Reads - January 9, 2023
Please read the Unison Asset Management Social Media Disclaimerhere
Microsoft is making a big bet into conversational AI with reports of the company in talks for a $10 billion investment into Open AI, the owner of ChatGPT. This deal will value the company at $29 billion and will increase Microsoft stake in the company to 49%. This report follows previous news that Open AI was looking to sell existing shares with venture capital firms Thrive Capital and Founders Fund buying shares from existing shareholders. ChatGPT has made major headlines over the last few months becoming the fastest product to reach 1 million users and prominent technologists claiming it could potentially replace search engines. Microsoft clearly sees a lot of value in ChatGPT with plans to integrate ChatGPT with its Bing search engine as a way to boost its market share in search. Microsoft is structuring the deal so they receive 75% of OpenAI profits until it recoups its initial investment once ChatGPT generates money. While the underlying technology behind ChatGPT is interesting it’s still unclear how OpenAI will monetize the product and how the technology will be utilized in the Microsoft ecosystem.
Apple is planning to replace two of its key chip partners with an in-house design. Broadcom who supplies Apple with its wi-fi and Bluetooth chips is getting replaced impacting Broadcom revenues by an estimated $1 - $1.5 billion. Apple is Broadcom’s largest customers accounting for 20% of revenue and buying a wide variety of chips. Joining Broadcom is Qualcomm who Apple is looking to phase out by the end of 2024 or early 2025 with an inhouse design. Qualcomm has already announced they expect minimal contribution from Apple products in fiscal 2025. This news is not shocking as the largest tech companies have experimented with in-house chip designs over the last few years. By insourcing the design of these chips, Apple has full control of the some of the most important inputs that go into their flagship products. With the best talent in the industry, mass scale, and established relationships with chip manufacturers Apple likely sees chip design insourcing as a way to improve the value proposition of their products while reducing costs.
In a weakening economy the very wealthy continue buying luxury cars. Rolls Royce the 116-year-old car brand continues to report strong demand for their vehicles after a record year having delivered over 6,000 vehicles in 2022. This strong demand is continuing despite the continual impact of COVID on the Chinese market which was the fastest growing luxury market in the world prior to the pandemic. Rolls Royce expects 2023 to be another strong year with orders of its new Spectre model already exceeding expectations. Spectre is the company’s all-electric coupe and is attracting new customers to the brand who are interested in electric vehicles. The company has already announced that it plans to sell only fully electronic vehicles by the end of the decade.