US tech titans buffeted by economic headwinds and TikTok
US tech titans looking to the future are seeing growth take a beating in the face of foreign competition and a tough economy in the here and now.
With Apple and Amazon due to report quarterly earnings after the close of market Thursday, shares of Meta and Google-parent Alphabet have tanked after disappointing financial results this week.
“This week will go down in the history books of earnings season as one of Big Tech’s worst and ultimately could be a ‘fork in the road moment’ for the stalwarts looking ahead,” Wedbush analyst Dan Ives said in a note to investors.
Management teams will need to “quickly adjust to a much different background” or risk losing their luster for investors who have bet on them for the past decade, he said.
In the case of Facebook-parent Meta, the decline comes as chief Mark Zuckerberg rolls the dice on building up the metaverse long-term.
“Facebook shifted to Meta, so they took their eye off the ball,” tech analyst Rob Enderle of Enderle Group said.
“In a way they shot themselves in the foot, and allowed TikTok to advance.”
Meta shares were down some 22 percent by mid-day Thursday to $100.52. Over the past year, the price has plunged nearly 67 percent.
Thursday’s drop came one day after the company, already facing stagnating user numbers and cuts in advertising budgets, said its profit had more than halved in the third quarter from a year earlier, and that it plans “significant changes” to bolster efficiency.
The social networking giant also said revenue slipped from the same quarter a year earlier.
Zuckerberg, while admitting the company is navigating “some challenging dynamics,” said on an earnings call Wednesday that “our product trends look better from what I see then some of the commentary I’ve seen suggests.”
He said priorities will include artificial intelligence that powers recommendations at offerings such as its short-form video feature Reels, launched in response to TikTok, which is owned by China-based ByteDance.
TikTok is eating into ad revenue at Meta and Google, but the US tech giants are still way ahead in that market — for now, according to analysts.
– Party over? –
Alphabet this week also reported quarterly earnings that fell short of market expectations as belts tightened in the digital ad market that drives its revenue.
The company said ad revenue that grew just 6 percent when compared with the same period of last year.
Aside from one period at the start of the Covid pandemic, that would mark the weakest revenue growth at Alphabet for any quarter since 2014.
The earnings report showed that ad revenue at YouTube was slightly lower than it was in the same quarter a year earlier, despite a hot trend of people watching video on-demand and snippets on TikTok.
Alphabet shares have sunk 36.4 percent in the past year, and were trading at $92.79 mid-day Thursday.
Alphabet and Google chief Sundar Pichai said on an earnings call that he sees this as a moment when “you take the time to optimize the company to make sure we are set up for the next decade of growth ahead.”
Like Meta, Alphabet is also looking to the future: in its case, investing in artificial intelligence that Pichai says will transform its offerings, and putting resources into “big bets” such as life sciences arm Verily and self-driving cars at Waymo.
Apple’s data privacy changes have also hit the big tech platforms, reducing leeway for ad personalization.
Meanwhile, Meta and Alphabet’s focus on the long-term has left openings for hungry competitors, Enderle contended.
“It is like watching a sports team lose not because they are facing better players, but because the team’s members decide to go out and party every night,” he said.
“If you are not focusing, someone is going to come up and take customers away from you; it is TikTok now but it could easily be someone else.”
Biden bans US govt use of malicious commercial spyware
US President Joe Biden signed a ban Monday on government use of commercial spyware technology like the controversial Pegasus program, citing its use for political oppression in countries around the world.
The White House said commercial spyware poses a distinct intelligence threat to the United States and has been found on the phones of 50 US officials overseas.
In addition, a number of foreign governments have used it “to facilitate repression and enable human rights abuses.”
“Misuse of these powerful surveillance tools has not been limited to authoritarian regimes,” the White House said in a statement.
“Democratic governments also have confronted revelations that actors within their systems have used commercial spyware to target their citizens without proper legal authorization, safeguards, and oversight.”
Biden’s order was not a full ban on commercial spyware, but would apply to any program deemed a US security risk, or that is used for political abuse by other governments.
It also did not restrict spyware developed by US government agencies themselves, like the CIA or National Security Agency, the leading electronic intelligence body.
The most threatening software can scrape up all data from targeted devices with remote direction and control, according to a senior Biden administration official.
Last year the administration warned that it was planning tight restrictions on privately developed surveillance software after numerous cases surfaced of its use for political purposes in numerous countries around the world.
No specific names were cited in Monday’s announcement, but the US government has already taken action to prevent the use of several programs and companies seen as threatening.
In November the Commerce Department placed four spyware developers on its blacklist: Israeli firms NRO Group and Candiru, Positive Technologies of Russia, and Singapore’s Computer Security Initiative Consultancy.
Pegasus, created by NRO Group, was used by governments and other entities in Mexico, Poland, Spain, Hungary, Bahrain, India and elsewhere.
“There was an effort by commercial spyware vendors, like in other countries, to try to make inroads across the US federal government, and to market and to sell their tools across the federal government,” the senior official told reporters.
“So we purposely announced publicly that we would be pursuing this sort of ban.”
The ban was announced one day before Biden hosts his second Summit for Democracy, with leaders from 121 countries invited to join the three-day event.
The White House called the commercial spyware ban a “cornerstone” initiative for the summit.
The order “demonstrates the United States’ leadership in, and commitment to, advancing technology for democracy,” it said.
Artist Karla Ortiz sees AI ‘identity theft’, not promise
For artist Karla Ortiz, the explosion in artificial intelligence that can stand in for flesh-and-blood artists is nothing more than identity theft.
A native of Puerto Rico, Ortiz is a California-based designer, a concept artist and painter who has worked for videogaming giant Ubisoft, Marvel Studios, the Wizards of the Coast fantasy game publisher and has exhibited her work in galleries.
But now her profession could be completely disrupted by generative AI, the technology behind apps such as Dall-E and ChatGPT, which in seconds can crank out original content — illustrations, poems, computer code — with only a simple prompt.
About a year ago, Ortiz discovered Disco Diffusion, an open source AI-based image generating tool, but it is not easy to use for those less tech savvy.
At first, she thought it was an interesting experiment, but quickly she realized that the program was using the work of many of her friends without them knowing it.
They asked to have their work removed, but to no avail, and they backed down. She told herself art theft is nothing new in their line of work.
“It’s weird that this is happening, but whatever,” she told herself at the time.
But months later, with the introduction of even more powerful programs such as Midjourney and Stable Diffusion, which can generate images “in the style of” a chosen artist, she was brought face to face with the magnitude of the phenomenon.
Ortiz said she was shocked when she looked at how the programs were trained.
“All the training data, all the training material, it’s our work.”
In her studio, standing between her easel and her computer, Ortiz puts the final touches of oil paint on her latest work, “Musa Victoriosa,” a woman surrounded by eagles, brandishing a laurel wreath.
This muse, which will be used to illustrate a copyright protection app, embodies artists defiant against technology.
To those who argue that human artists also draw inspiration from others’ work, Ortiz says they are missing the point.
“Just because I look at a painting that I love, it doesn’t mean that I archive that influence and that it automatically becomes a part of how I paint,” she said.
“Influences can only get you so far in art,” she added.
“The rest is your training, your life, your experiences, your thoughts of the day; that extra bit of humanity that filters inspirations and experiences together and creates your own voice and work,” she said.
She worries about young artists who need the time and experience to find their style but will be squeezed out by AI.
– ‘Canary in the coalmine’ –
“How does a person break in now? And if you break in and you do develop a style, that’s wonderful, but what stops anybody from training a model on your work?”
Along with other artists, Ortiz filed a lawsuit in a California court against three generative AI companies, hoping one day to get the industry regulated.
This fight has strengthened bonds between creators, and not only designers, she said.
“I’m seeing more writers and also voice actors being very concerned because of the technology that can take your voice and mimic it perfectly,” Ortiz said.
Silicon Valley investors “want to expand to pretty much every creative endeavor,” she warned.
“Our profession was automated first so we kind of became the canary in the coal mine.”
Threat of US ban surges after TikTok lambasted in Congress
A US ban of Chinese-owned TikTok, the country’s most popular social media for young people, seems increasingly inevitable a day after the brutal grilling of its CEO by Washington lawmakers from across the political divide.
But the Biden administration will have to move carefully in denying 150 million young Americans their favorite platform over its links to China, especially after a previous effort by then president Donald Trump was struck down by a US court.
TikTok CEO Shou Zi Chew endured a barrage of questions — and was often harshly cut off — by US lawmakers who made their belief quite clear that the app best known for sharing jokes and dance routines was a threat to US national security as well as being a danger to mental health.
In a tweet, TikTok executive Vanessa Pappas deplored a hearing “rooted in xenophobia”.
With both Republicans and Democrats against him at Congress, Chew must now confront a White House ultimatum that TikTok either sever ties with ByteDance, its China-based owners, or get banned in America.
A ban will depend on passage of legislation called the RESTRICT ACT, a bipartisan bill introduced in the Senate this month that gives the US Commerce Department powers to ban foreign technology that threatens national security.
When asked about Chew’s tumultuous hearing, spokeswoman Karine Jean-Pierre repeated the White House’s support of the legislation, which is just one of several proposals by Congress to ban or squeeze TikTok.
– ‘Prove a negative’ –
The sell-or-get banned order tears up 2.5 years of negotiations between the White House and Tiktok to find a way for the company to keep running under its current ownership while satisfying national security concerns.
Those talks resulted in a proposal by TikTok called Project Texas in which the personal data of US users stays in the United States and would be inaccessible to Chinese law or oversight.
But the White House turned sour on the idea after officials from the FBI and the Justice Department said that the vulnerabilities to China would remain.
“It’s hard for TikTok to prove a negative ‘No, we’re not turning over any data to the Chinese government.’ Look at how skeptical our European partners are about US companies where we have a strong legal system,” said Michael Daniel, executive director of the Cyber Threat Alliance, a non-governmental organization dedicated to cybersecurity.
Presently, the White House’s preferred solution is that TikTok sever ties with ByteDance either through a sale or a spin-off.
“My understanding is that what has been… insisted on is the divestment of Tiktok by the parent company,” US Secretary of State Antony Blinken said on Thursday.
But that option is riddled with difficulties, with many experts saying that Tiktok cannot function without ByteDance, which develops the app’s industry-leading technology.
“ByteDance’s ownership of TikTok and the golden jewel algorithm at the center of this security debate is a hot button issue that will not necessarily be solved just by a spin-off or sale of the assets,” said Dan Ives of Wedbush Securities.
Proving the point, China has ruled out giving the go-ahead for a TikTok sale, citing its own laws to protect sensitive technology from foreign buyers.
That leaves a ban which would see the full might of the US government crush TikTok to the undeniable benefit of domestic rivals Instagram, Snapchat and YouTube.
They currently trail TikTok, which is the most popular social media in the United States.
– Snapchat wins –
TikTok’s demise “will clearly benefit Meta and Snapchat front and center in the eyes of Wall Street,” said Ives, who believes the saga will play out for the rest of the year.
One unknown is whether a death sentence for TikTok will cost Washington politically among young voters.
Through a ban, “a democracy will be taking steps that impede the ability of young Americans to express themselves and earn a livelihood,” said Sarah Kreps, professor of government at Cornell University.
The lawmakers putting the Tiktok CEO over the coals minimized the danger of political blowback.
“I want to say this to all the teenagers… who think we’re just old and out of touch,” said representative Dan Crenshaw, a Republican.
“You may not care that your data is being accessed now, but there will be one day when you do care about it,” he said.
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