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Apple goes all-in on AI to overcome iPhone slump

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In Q3, Apple reported a drop in iPhone sales, leading to a sales slump that is expected to continue into the current quarter.

Despite beating Wall Street’s sales and profit targets for the fiscal third quarter, Apple’s shares fell about 2% due to weaker-than-expected iPhone sales. The company’s services segment performed well, driven by Apple TV+ and strong sales in China.

Apple’s next big product, the Vision Pro mixed-reality headset announced in June, is yet to reach consumers, adding to the pressure as the iPhone battles against Android rivals in a mature market.

In response to the competitive landscape and the need for innovation, Apple’s CEO Tim Cook revealed an increase in research and development (R&D) spending, primarily focusing on generative artificial intelligence. This field is also driving spending at other major technology companies. The company is researching a wide range of AI technologies and plans to integrate AI features into its products, including real-time voicemail transcription for iPhones starting this autumn.

While iPhone sales in China outperformed the overall market decline, Apple’s sales forecast for the fiscal fourth quarter is below analyst expectations. The services segment and wearables business, including Apple Watch and AirPods, continue to be bright spots for the company.

Despite challenges in the smartphone market, Apple remains committed to innovation and product enrichment with the integration of AI technologies into its offerings. Investors are now closely watching for potential announcements related to the Vision Pro mixed-reality headset and other AI-related developments during the earnings call.

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Big Tech pushes AI investments

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Tech giants like Microsoft and Meta are accelerating AI data center spending, with massive capital pouring into these projects.

Microsoft and Meta reported on Wednesday that AI investments are spiking their expenses, while Alphabet announced similar trends.

Amazon, due to report earnings shortly, is expected to mirror these projections, foreseeing further pressure on profit margins.

Wall Street is getting wary of the financial strain, as each company’s stock took a hit this week despite strong quarterly numbers.

Shares of Meta fell over 3%, and Microsoft saw a 6% drop, underscoring Wall Street’s jitters.

“It’s expensive to keep up with AI technology demands,” says GlobalData’s Beatriz Valle, emphasising a competitive race in AI capacity.

The high-stakes investments are starting to test investor patience in Big Tech’s ambitious AI journey.

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Meta expects strong holiday ad revenue boost

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Meta’s holiday-quarter forecast beats expectations as AI tools drive growth

Meta Platforms, parent company of Facebook, has forecast holiday-quarter revenue that surpasses market expectations, anticipating a surge in ad spending as the year ends.

The projection comes as Meta’s AI-driven advertising tools and short-form video feature Reels have spurred revenue growth this year.

Meta’s shares dipped 2.5% in after-hours trading, despite a third-quarter profit of $6.03 per share—well above analysts’ forecast of $5.25.

Analysts expect digital ads to have a “blockbuster” year in 2024, helped by improved economic forecasts and steady consumer spending.

Meta, heavily reliant on advertising revenue, stands to benefit from increased holiday marketing as it eyes revenues of $45 to $48 billion this quarter.

The company’s third-quarter revenue reached $40.59 billion, narrowly topping analysts’ estimates.

With interest rates easing, analysts suggest Meta’s ad revenue could continue to thrive into the new year.

As holiday spending ramps up, Meta’s AI investments are paying off.

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Microsoft CEO Satya Nadella receives $30 million pay raise

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Despite layoffs, Nadella’s pay jumps 63% amid company growth

Microsoft’s CEO, Satya Nadella, saw a significant 63% pay raise this year, with his total compensation rising to $71 million, up from $48.5 million in 2023. This comes even as Microsoft laid off 2,500 employees, including job cuts in its gaming division, following its $69 billion acquisition of Activision Blizzard.

While concerns were raised in Congress over cybersecurity breaches, Microsoft’s stock still rose by over 16% this year, benefiting investors, although it lags behind the broader S&P 500. Investors are now eagerly awaiting the company’s earnings report next week.

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