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Big Tech earnings face more heat as cloud cover fades

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Big Tech earnings face more heat as cloud cover fades

Big Tech results reinforced concerns a boom in cloud services is easing, limiting a lucrative source of profit when a slowing economy has hit the companies’ other businesses and prompting a bet on artificial intelligence as the next growth driver.

Earnings from Amazon.com Inc (AMZN.O) and Microsoft Corp (MSFT.O) – which together dominate the cloud market – showed growth in the business was at its lowest since they started breaking out the metric in 2015 and was on track to slow further.

Alphabet Inc (GOOGL.O), which has the smallest cloud business among the three, said Google Cloud grew 32%, the slowest rise since the company began reporting the measure in 2019.

The poor results reflect a shift to post-pandemic frugality by corporate customers whose budgets have been squeezed in the past year by high inflation and rising interest rates.

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“Once thought as the most defensive revenue stream in tech, we are seeing investors questioning the cyclicality for the (cloud) business,” analysts at Bernstein said.

Cloud services had long been a reliable source of earnings for Microsoft and Amazon.

The Windows maker posted growth of around 50% in its Azure cloud-computing business for each quarter of calendar 2020 when the pandemic forced people to work and study at home. Meanwhile, market leader Amazon Web Services (AWS) reported a sales jump of about 30% during the same period.

Times, though, have changed.

Growth at AWS slowed to a record low of 20% in the last three months of 2022 to $21.4 billion, slightly missing analysts’ estimates of $22.03 billion, according to Refinitiv data.

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Microsoft’s revenue in its so-called intelligent cloud business that includes Azure rose 18% to beat expectations for October to December. But its current-quarter forecast of $21.7 billion to $22 billion was below estimates of $22.14 billion.

“The deceleration in AWS was even worse than expected and means Amazon can’t rely on that business units’ operating profits as much in coming quarters,” said Andrew Lipsman, principal analyst at Insider Intelligence.

Amazon finance chief Brian Olsavsky said on Thursday that the company expects slower cloud growth rates for the next few quarters. That echoed Microsoft, which said last week that growth in its Azure cloud-computing business would slow by 4-5 basis points in the March quarter.

“You’ve just come off two years of rapid movement of workloads to the cloud, there’s probably a lot of inefficiencies in cloud spending and now there is a shifting focus to greater efficiency,” said James Cordwell, an analyst at Atlantic Equities.

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A potential boom in AI after the viral success of OpenAI’s ChatGPT could boost demand for cloud services again though, analysts said. AI applications require massive computing power, a boon for companies whose services help run the technology.

As an investor and partner of OpenAI, Microsoft looks well poised, analysts said, but any gains may take time to translate into profits.

“Those (AI) advancements and demand for related cloud services will take time to materialize. They’re not likely to offset current headwinds in the enterprise market over the next few quarters,” Lipsman said.

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Apple CEO says looking into possibility of building manufacturing facility in Indonesia

Apple CEO says looking into possibility of building manufacturing facility in Indonesia

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Apple CEO says looking into possibility of building manufacturing facility in Indonesia

Apple Inc will look into the possibility of building a manufacturing facility in Indonesia, its CEO said on Wednesday after meeting President Joko Widodo.

Apple CEO Tim Cook arrived in Jakarta on Tuesday, after visiting Vietnam. He met with Jokowi, as the president popularly known, and will be inaugurating an academy for Apple developers on the island of Bali.

“We talked about the president’s desire to see manufacturing in the country, and it is something that we will look at,” Cook told reporters after the meeting. 

Apple has based much of its key manufacturing of iPads, AirPods and Apple Watches in Vietnam and suppliers for MacBooks are also investing in the country.

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Apple has no manufacturing facilities in Indonesia but has established four Apple Developer Academies.

Indonesia has a huge tech-savvy population, making the Southeast Asian nation a key target market for tech-related investment.

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TikTok quizzed by EU on TikTok Lite launch in France, Spain

TikTok quizzed by EU on TikTok Lite launch in France, Spain

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TikTok quizzed by EU on TikTok Lite launch in France, Spain

ByteDance’s TikTok has been given 24 hours to provide a risk assessment on its new app TikTok Lite launched this month in France and Spain on concerns of its potential impact on children and users’ mental health, the European Commission said on Wednesday.

The move by EU industry chief Thierry Breton under EU tech rules known as the Digital Services Act (DSA) comes two months after he opened an investigation into TikTok over possible DSA breaches. 

The landmark DSA requires companies to do more to tackle illegal and harmful content on their platforms, with fines of up to 6% of their global annual turnover for violations.

The Commission on Wednesday said it had sent a request for information to TikTok, asking for more details on the risk assessment the social media company should have done before deploying TikTok Lite in the 27-country European Union.

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“This concerns the potential impact of the new ‘Task and Reward Lite’ programme on the protection of minors, as well as on the mental health of users, in particular in relation to the potential stimulation of addictive behaviour,” the EU executive said in a document seen by Reuters.

“TikTok must provide the risk assessment for TikTok Lite in 24 hours and the other requested information by 26 April 2024, after which the Commission will analyse TikTok’s reply, and then assess next steps.”

The Commission also asked for details on measures the company has put in place to mitigate systemic risks.

TikTok Lite, an app with a new functionality aimed at users aged 18+, was launched in France and Spain this month.

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SiTime introduces chip aimed at saving power in AI data centers

SiTime introduces chip aimed at saving power in AI data centers

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SiTime introduces chip aimed at saving power in AI data centers

SiTime (SITM.O) on Wednesday introduced a chip that it says is designed to help data centers built for artificial intelligence applications run more efficiently.

SiTime makes what are known as timing chips, whose job is set a steady beat for all the parts of a computer and keep them running together in sync, like a conductor in an orchestra directing multiple groups of instruments. The company says its new line of chips, called Chorus, can do so with 10 times more precision than older styles of timing chips.

SiTime CEO Rajesh Vashist said the company aims to help customers save electricity with that precision. SiTime’s chips themselves require less than a watt of power, but powerful AI chips such as Nvidia’s (NVDA.O) require more than 1,000 watts of power.

With a more precise clock to keep all the elements of a computer in sync, parts of the machine can be turned off for a few milliseconds at a time when they are not in use. Over the multiple years a power-hungry data center server might be in use, it can generate energy savings, though the amount will depend on how SiTime’s chips are used.

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“We deliver timing that they can rely on so that they can wake up their products and bring data more efficiently to them, rather than just running more often,” Vashist said in an interview.

SiTime said the chips will be available in the second half of this year.

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