Themes

It's been eight years since Apple jumped into a new product category. On June 5 that will likely change when Apple is expected to preview its $3,000 developer version of a mixed reality headset at WWDC. Many investors are skeptical about the prospects of the device given headsets are currently a solution looking for a problem. I believe the trend of more immersive consumer tech experiences will continue, which should pave the way for a robust headset market. By 2030, I believe the wearables/glasses segment could account for 10% of Apple's sales (assuming they don't release a car), a business similar in size to Apple's Mac and iPad businesses today.

At Google’s annual developer conference, the company gave long awaited details on their plans to make AI the backbone of their products. The most significant announcement is the company will overhaul the search results page, making it an important consumer AI starting point. While investors will have concerns about the upcoming decline in Google's advertising blue links, I believe the opportunity for Google to increase their reach into our lives through AI outweighs the near-term (2 years) ad revenue risks.

For the March quarter, Apple beat estimates and guided revenue slightly below the Street for the June quarter. Despite the soft guide, shares of AAPL traded up 2% in after-hours. I believe the stock's strength is evidence that investors are putting more weight on Apple's active device base which grew in the quarter to over 2B despite products revenue being down 5% y/y. A growing base means the Apple product flywheel is working which is the foundation for the Apple investment case to shift to a consumer staples company that should yield a higher multiple. On top of that, AI and India represent untapped opportunities for the company.

Apple reports March results on May 4th. Outside of the typical focus on iPhone and Services revenue and guidance there will be increasing attention on the company's active installed base, which grew 8% y/y in the Dec-22 quarter. A growing base means the Apple product flywheel is working. That base is the foundation for the Apple investment case to shift to a consumer staples company that should yield a higher multiple. On top of that, Apple is making meaningful progress in AI, a dynamic that is under-appreciated by investors.

March quarter investor takeaways were dominated by management commentary suggesting AWS's June quarter revenue growth would decline for the seventh consecutive quarter. While the focus on AWS is understandable, accounting for 118% of operating income in the quarter, it’s worth remembering that Amazon’s long-term growth story is more than AWS.

This was a big week for AI. OpenAI showed off GPT-4, a measurable step forward in terms of accuracy and creative output compared to GPT-3; Baidu announced its chatbot Ernie to mixed reviews; and Microsoft announced AI integration into the Microsoft 365 suite including Word, PowerPoint, and Excel will be available later this year. Big tech is racing to capitalize, and the economic benefit of AI will be spread across a handful of the biggest companies.

On the slim chance you haven’t heard it, this is Meta’s year of efficiency. Based on recent comments, it appears Zuckerberg has made the goal personal. I believe one of the driving reasons is for him to continue the pursuit of the metaverse he needs to improve Meta’s profitably, which will give him breathing room to invest in tech to build the metaverse and keep investors happy at the same time. Historically, it pays to bet on Zuckerberg’s mission.

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In a recent interview with Ron Baron, Elon Musk said it’s likely Tesla will get into the mining and refining business in order to secure the critical elements needed for batteries. This is another reminder that demand for battery metals…