Companies

Shares of GOOG were up 11% on March earnings driven by a combination of growth acceleration in Search and GCP, along with an outlook for improving margins. Additionally, the company is making massive investments in generative AI, as evidenced by capex increasing 91% y/y. In short, the two biggest concerns for Google investors, what the future of Search will look like and is the company moving fast enough in AI, were put to ease for the moment. Long-term, I believe Search revenue is here to stay and AI will be a material net positive for the company.

Tesla had a difficult March quarter, reporting the first year over year revenue decline (9%) since Mar-20. Most of the business metrics suggest 2024 will be a difficult year for the company. That said, shares of TSLA rose 11% given the company's announcement that the next generation vehicle will come about 9 months earlier than expected, along with optimism for a sales rebound this year, and the promise around FSD. Putting it together, investing in Tesla comes down to a belief in the company's ability to convert that vision into reality. We remain optimistic.

Joz, Apple's Head of Marketing, posted on X saying this year’s WWDC will be “Absolutely Incredible!” as in "AI". This will mark the first glimpse into the company's generative AI strategy and be a monumental day given it will usher in the biggest change in Apple's operating system design since the mid-80's point-and-tap/click interface. This will be a new communication interface driven by generative AI.

In 2020 Apple was more or less victorious over Epic games in defending the App Store. Now the DOJ is taking aim at Apple, largely focused on the iPhone’s role at promoting the sale of software and services and locking users into upgrading. The substance of the debate on shares of AAPL will focus on two topics: 1) What will the impact be to Apple’s Services segment? 2) How long will this take to sort out? While I believe this will take three years to sort out, I expect little will actually change, just like we saw 25 years ago with the DOJ going after Microsoft.

The news of Apple launching its own model and talking with Google and OpenAI to license a foundation model speaks to the degree that the company's growth North Star has changed over the past month. First, it was Project Titan getting canceled, now it’s considering doing something rare at Apple, license another company's tech stack. I believe Apple now gets it. AGI has the potential to have a profound impact on their business, and they need to add AI to the company's core competency of hardware, software, and services. To get there, I expect more investment, and a slight decline in margins in the near-term, and expanding margins long-term.

Deepwater’s first annual Frontier Tech Survey measures the American public’s viewpoint on emerging technologies, including AI, Electrification & Automation, the Creator Economy, and Health-Tech. Key Takeaways: AI – General usage and awareness remains low; opinions are mixed when it comes…

Go deeper: For even more on Vision Pro, here’s my discussion with Gene on YouTube. Disclaimer 

Apple's December quarter and guidance highlighted the impact China's macro slowdown had on Apple's business. That reality diluted investor optimism around the long-term progress the company is making when it comes to growing its active base, launching Vision Pro, and entering generative AI likely this spring.

It's official, the world of spatial computing has begun with the launch of Vision Pro. The reviews have been consistent: groundbreaking tech with limited use cases. On launch day, the platform has over 600 apps available, already more than the 574 apps built over the past three years for Meta Quest. Importantly, Vision Pro's developer momentum is pointed in the right direction with about 60% of those apps outside of gaming, compared to about 30% on the Quest platform. Apple's goal is to motivate developers to ensure Vision Pro goes beyond gaming to make the device mainstream.

Tesla's December results and outlook effectively pushed back the positive inflection point in the business by a year. Now it looks to be the second half of 2025 before revenue growth will accelerate. In the near-term, shares will likely drift lower in what will be a vacuum of good news. By mid-year, details of the next-gen platform will arrive and anticipation of new models should mark a positive turning point in TSLA shares. Bigger picture: as traditional auto retreats from EVs, Tesla remains in attack mode.

For Tesla earnings it's all about the margins. While I expect a slight improvement quarter over quarter, I believe the outlook for margins in 2024 will be for stabilization, not expansion. In 2025 I see margins rising back above 20%. As for deliveries, they grew at 38% in 2023 and are expected to grow at 17% in 2024, accelerating to 24% growth in 2025. I'm also looking for growth to step up next year.