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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Dear reader,
It has been a rollercoaster week for artificial intelligence-related stocks. On Wednesday alone, US chip designer Advanced Micro Devices lost more than $20bn in market value. Shares of server maker Super Micro fell despite its quarterly projections beating expectations, bringing stock price declines to 25 per cent for the past month.
Indeed, conditions are ripe for a correction. The AI stock market boom has been pricing in too much, too fast. Analysts’ expectations for chip sales remain highly optimistic. AMD’s forecast of $4bn in AI chip sales for 2024, for example, was considered a disappointment amid inflated market expectations.
But the good news for makers of chips and AI hardware is that tech giants are only going to be spending more on infrastructure upgrades in the near future. Meta raised its forecast for capital spending in 2024 to what is now anticipated to be in the $35bn to $40bn range. Amazon plans to increase capital investments in its data centre capacity in 2024 following its cloud computing unit posting its strongest sales growth in a year, boosted by strong demand for AI services.
Advanced chip sales may also be about to get a fresh boost from Apple. The US tech company declared that generative AI was a critical opportunity for it. The implication is obvious: an iPhone with generative AI capabilities is coming.
The lesson from tech company earnings this year is that selling the infrastructure needed to build artificial intelligence services remains far more lucrative than selling the AI services themselves. Cloud computing divisions at Alphabet and Microsoft surpassed results in other parts of the business. Amazon has positioned itself as a platform for multiple AI models but is also offering its own generative AI services to enterprise customers.
One thing that is certain is that the excitement around AI will soon start being reflected in rising electricity demand from data centres around the world. The problem is that data centres need electricity all the time, while renewables are volatile. Lex thinks decarbonising data centres will shape the green transition. Just look at the fact that Microsoft recently appointed a director of nuclear technologies.
Elsewhere in tech, a US bill signed into law this month, part of a package that includes aid for Ukraine, means ByteDance, TikTok’s Chinese owner, has until early 2025 to sell the video app to a US company or face a ban from app stores and internet providers. The immediate impact of a ban would be upsetting TikTok’s 170mn US users, who want to be left to make memes in peace. The bigger implication is that the global internet is splintering further apart.
Quick links
Some of the Lex column’s output this week:
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Buyout firm Apollo’s lengthy pursuit of €1.6bn industrial certification group Applus has descended into a complex regulatory stand-off — a warning of how aggressive acquisition strategies can backfire
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Even Walmart cannot crack America’s dysfunctional healthcare market — the retailer would be right to cut losses
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A power price plunge means cuts for Europe’s utilities — the end of historically high energy prices has arrived much earlier than expected
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TSB looks an odd fit for BBVA’s Spanish acquisition — a sale makes more sense
Things I’ve enjoyed this week
President Joe Biden signed a bill last week that could lead to a nationwide TikTok ban. The tech billionaires who helped ban TikTok now want to write artificial intelligence rules for Donald Trump — preparing a proposal to dismantle Biden’s AI rules.
Even with appetite-suppressing drugs, will people keep eating Oreo cookies? The chief executive of Oreo maker Mondelez sees very limited impact from Ozempic.
Finally, an interesting article on a middle school’s battle against mobile phones, which has yielded surprising results. What unfolded at a school in Connecticut reflects a broader struggle in education as some administrators turn to increasingly drastic measures to limit the reach of a technology that is both ubiquitous and endlessly distracting. Is social media exacerbating conflicts among students?
Enjoy your weekend,
June Yoon
Asia Lex editor
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