Michiel Frackers: Zuckerberg richly rewarded and Apple severely punished

Innovation is rarely valued by investors, many of whom live with a 24 hour horizon. Apple introduced a revolutionary new form of computing this week with the Apple Vision Pro and lost $70 billion in stock market value.

Amazon sold a lot of stuff in the fourth quarter (gosh) and Meta attracted a lot of advertisers and announced dividends; little innovative, but together they gained $270 billion in market cap. Maybe nice for investors, but totally uninteresting for fans of innovation.

Whirlwind tech week on Wall Street

It was another tumultuous week for Tesla, as growth stalls and conflicts surround Elon Musk's compensation. It even made Tesla's lawyer burst into tears, so moved was this sweetheart as the court made its intentions clear to stop the pay out of a $56 billion bonus to Musk.

The funny thing is that, according to the judge, the tearful episode showed precisely that Musk is not surrounded by independent company officers at Tesla who also have the best interests of the company and other shareholders at heart. It is not known whether Musk himself shed a tear over missing out on his $56 billion bonus.

Moving on, it was another special week on Wall Street for tech companies. Shares of Amazon and Meta jumped, while Apple, on the other hand, paid a hefty price for continued uncertainty over its access to the Chinese market.

Google sold fewer ads than hoped and investors were shocked by Google's investments in AI, as servers for AI applications are incredibly expensive to buy and operate. On the other hand, Google's AI assistant, Bard, is now making great strides against rival OpenAI's ChatGPT. But that apparently did not interest investors, who are focused on the short term.

Memorable week for Zuckerberg

Meta's Mark Zuckerberg experienced a bizarre week. On Wednesday, he appeared together with CEOs of other social media companies before U.S. Congress and apologized for the horrific things that happened to children on his social media networks. Parents of children who committed suicide after the misery happened to them were not impressed.

Zuckerberg has a long history of apologizing for all the out-of-control incidents on his networks. I hold out hope that one day he will come to the realization that a company can have more goals than just linking addictive algorithms to click-hungry advertisers.

Does such an embarrassing display in Congress matter to investors? No, because the next day Meta announced a 25% increase in profits, with a promise to pay dividends from now on, and so Meta could add $196 billion to its market cap. Zuckerberg himself, who owns about $350 million in shares in Meta, will receive an additional $175 million in dividends and will be able to earn an additional $700 million annually.

SMCI stock is super, not micro

While Meta and Amazon attracted most of the attention, it almost went unnoticed that the engine behind all AI developments,chipmaker Nvidia, has nearly overtaken Amazon and Alphabetin market capitalization. Nvidia has already risen just as much this year as Meta, so beloved by investors this week, with 37%.

There's another fascinating stock from a much lesser-known manufacturer: Super Micro (SMCI). Do yourself a huge favor today and click on that link: surely it's pure joy to see such a website, apparently created by the CEO's 11-year old nephew during a homework assignment?

In the chart above, Super Micro is almost invisible among the tech giants with a market value of "only" $32 billion, but the company is rapidly emerging as a mini-Nvidia.

Super Micro (SMCI) Nvidia (NVDA)

last 5 years: 3.664% 1.686%

last year: 587% 214%

year to date: 103% 37%

Super Micro is the cheaper alternative to Nvidia and doubled sales, driven by the global hunger for chips that can handle AI applications, combined with a 71% increase in profits. As a result, SMCI shares have already risen as much as 103% this year. On the stock market, Super Micro has been beating Nvidia for five years.

Apple Vision Pro better than expected

Apple has been surpassed by Microsoft as the world's most valuable company, and the former stock market darling still got a whirl from Wall Street despite rising sales, while virtually all tech companies rose. Perhaps that is precisely why there was a lot of attention on the launch of the Apple Vision Pro, the mixed reality headset that Apple itself for some reason calls "spatial computing.

When the Apple Vision Pro was announced last year, I wrote:

'All the omens are that the Apple Vision Pro will be a flop - a flop by Apple standards, that is. But that's not a bad thing at all. At least Apple is trying to develop something new again, and that's better than unimaginatively buying back its own shares for hundreds of billions, as it has in recent years.'

Because the price is too high at $3,500 to break open a mass market, there is no reason to change my opinion about the Vision Pro's short-term business impact.

Apple is on its way to $500 billion in annual sales, so before any new product raises an eyebrow when going through the annual figures, it has to come close to the annual sales of Apple's least contributing product. That's the iPad, which still did $7 billion in sales last quarter. To get anywhere near that, Apple would have to sell a few million copies of the Apple Vision Pro, which is not going to happen with the current model at this price.

Vanity Fair was invited by Apple CEO Tim Cook to learn about the Apple Vision Pro, which led to this revelation from the reporter:

'When I turn it off, every other device feels flat and boring: my 75-inch OLED TV feels like a TV from the '90s; my iPhone feels like a flip phone from yesteryear, and even the real world around me feels surprisingly flat. And here's the problem.

In the same way I can't imagine driving a car without a stereo, in the same way I can't imagine not having a phone to communicate with people or take pictures of my children, in the same way I can't imagine trying to work without a computer, I can envision a day when we all can't imagine living without augmented reality (AR).

When we become more and more encapsulated by technology, to the point that we crave these glasses like a drug [...], the dopamine rush that this resolution of AR can deliver.'

Most reviews were less lyrical than this one, but mostly positive. The bottom line is that Apple has once again succeeded in developing a surprisingly special and high-quality product. And yet, there's something nagging.

Apple tries to solve an unsolvable problem

Wired correctly states that a "killer app" has not yet been identified for the Apple Vision Pro. It is not yet the ultimate entertainment device and that is not because of the quality of the image, the sound or the controls, because they are extremely good. It's because of the applications, and then not even the "content," the industry buzzword for the traditional linear video form or gaming. The problem lies in the lack of new communication applications between people.

Now I am not neutral when it comes to VR and AR, having worked at VR pioneer Jaunt for a few years. I experienced the exact same experience in Jaunt's test lab as the Vanity Fair journalist, because good VR has an almost hallucinatory effect. But you remain a spectator in someone else's film.

And the core of the Internet's success is not information, transaction or entertainment. It is communication between people. The great breakthrough of social media was not caused by expensive content from movie studios or game developers, but by user created videos like Charlie Bit My Finger.

Despite all the success of social media like Facebook and Instagram, the messaging service Whatsapp is being used more intensively by users. And just when it seemed that the market for messaging apps was saturated, Telegram managed to attract as many as a quarter of a billion new users in 2023, bringing the total number of users to 700 million people. The demand for communication options between people seems inexhaustible.

So the big question for Apple becomes not how it can develop even flashier VR and AR applications, or how it gets Netflix to create apps for the Vision Pro; but whether it manages to develop interpersonal communication applications for the Apple Vision Pro that are as useful, funny and addictive as... text messaging was. As an enthusiast, I wish Apple would focus on that and, for example, shut down its entire automotive division. How many electric automakers does the world need?

Is TikTok the answer?

Especially when it comes to communication between people, TikTok has proven to be a phenomenon. When it seemed like the social media market had been completely nailed shut by Facebook, Twitter and Instagram, with Snapchat and Twitch as boutique stores, dances appeared on this originally Chinese app that were emulated worldwide. For dance requires no spoken language, only a sense of rhythm or a glaring lack of embarrassment.

Meanwhile, TikTok has become so big that Wired wrote an extensive profile on the company's Singaporean CEO, who had to answer to the US Congress for the second time last week, with a senator going out of his way to appear as racist and anti-Chinese as possible to appeal to his constituents. Incidentally, the Singaporean Internet responded within 24 hours with a hilarious video.

I'm curious what a TikTok app on the Vision Pro would look like and what you could do with it. Dance together, or watch movies together, so that using the Vision Pro at least becomes a shared experience?

Or is it Joe Rogan?

Once upon a time, the world's most popular podcast maker Joe Rogan hosted the TV show Fear Factor, a derivative of Now or Neverland. In that tv-show from the Netherlands, home of the cheapest television formats where the talent never gets paid (remember Big Brother or The Voice?), contestants from the Netherlands and Belgium had to complete tasks such as jumping out of a building while holding an egg that was not supposed to break, or eating worms while the host yelled at them "do it for your country, eat those worms for the Netherlands!

I just love how the host of that show, Joe Rogan, signed a new contract with Spotify this week that will net him as much as a quarter of a billion dollars. Interestingly, it is not even an exclusive contract with Spotify, so Rogan will be seen and heard on multiple platforms.

Rogan's podcasts are recorded representations of the most basic form of communication since the dawn of mankind: two people talking to each other. Rogan's success lies in his curiosity.

He is actually interested in his guests and never tends to want to be clever at the expense of his guests. Maybe he's not that smart, which is always the criticism of him, but perhaps that's exactly what makes his podcasts accessible to a wide audience.

I would not be surprised if there are millions of people who, with an Apple Vision Pro on their heads, want the feeling of sitting at the table next to Joe Rogan and Elon Musk, or Quentin Tarantino or Lance Armstrong, as a third person. Not even to participate on equal footing, but to experience an interesting conversation up close. The mere fact that this kind of application is relatively easy to make is a reason to conclude that the Vision Pro is underrated.

Because it may quietly take five years and three versions of the Vision Pro before the device finds its killer apps combined with a good price, but then Apple will have a new successful form of personal computing on its hands alongside the Mac, iPhone, iPad and Apple Watch. Losing seventy billion in market cap the week the Apple Vision Pro hit the market? Investors should be ashamed of themselves.

 

Michiel Frackers is the Chairman of Bluenote and Chairman of Blue City Solutions

www.bluenote.world
www.bluecity.solutions

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