The Sunday Brief

Connecting technology, telecommunications, and the internet

Value Creation – Long-term charts, Fab Five vs. Telco Top Five (March 15)

by | Mar 16, 2024 | TSB

We are nearing the official start of spring (March 19) but the Fab Five have experienced stunted growth over the last seven weeks (+$113 billion this week, but only $573 billion year-to-date). Not surprisingly, there appears to be some window dressing in the quarter with Apple +$29 billion for the week (but still down $307 billion for 2024). Conversely, Microsoft and Meta cooled this week after strong starts to 2024 (MSFT +$76 billion for the week, $300 billion YTD; META -$56 billion, +$332 billion).

Google announced this week that their annual I/O conference will be held on May 14th. Like previous conferences, this one will feature a mix of hardware (Pixel) and software (Gemini, Android) announcements. We anticipate a balance of AI and other improvements with assurances that Google can compete against Microsoft, Anthropic and others in the intelligence race.

Speaking of Apple, it was disclosed this week that they purchased a Canadian startup, DarwinAI, earlier this year. Per this Bloomberg article by Mark Gurman, “DarwinAI has developed AI technology for visually inspecting components during the manufacturing process and serves customers in a range of industries. But one of its core technologies is making artificial intelligence systems smaller and faster. That work that could be helpful to Apple, which is focused on running AI on devices rather than entirely in the cloud.”

On the telco front, rumors are swirling about T-Mobile’s fiber plans with the latest speculation being that they are going to be acquiring a stake in Lumos very soon. See this article for additional details. We wrote about a structure here and it looks like some version of that plan is starting to take shape. Lumos received a major investment from EQT in 2018 (announcement here) so it’s natural that they might start to recoup some of that investment six years later.

Meanwhile, there was a Deutsche Bank investor conference this week (we will use a lot of the commentary in next week’s earnings preview). The interview that impressed us the most was Sampath from Verizon (link to transcript here). Specifically, he lays out the criteria for being added to their remarkably successful myPlan:

“… it has to be exclusive to Verizon. It has to be massively differentiated, and customers need to get value from it.”

Our view is that Verizon has two or three substantial additions to their myPlan in 2024, with at least one being new for the Holiday season and potentially one being oriented to the “prosumer” segment. More on what was said next week or have a read of the transcript. Very insightful.

Full file is below.

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