In the AI arms race, big tech behemoth Apple has lagged behind the competition.

Microsoft, Google, and Amazon have so far made bigger investments, or more deeply incorporated, machine learning into their products. Microsoft is a primary investor in OpenAI, the operator of Chat GPT, while Google hosts its subsidiary DeepMind, and Amazon has invested $4 billion in OpenAI rival Anthropic.

Given the rapid pace of AI advancements, you may have noticed Siri feels a little outdated—or you may not have noticed, considering barely anyone likes or even uses Siri anymore.

But that is all set to change as Apple unveils its plans to catch up in the AI race at its Worldwide Developers Conference (WWDC), which kicked off today at Apple Park in Cupertino, California.

The company has already begun to announce a whole host of AI implementations in its products, including giving Siri a long-awaited upgrade and adding AI capabilities to text writing and photo editing. Dubbed “Apple Intelligence,” some of these new features include “genmojis,” or generative emoji reactions you can add to messages.

But the biggest announcement of the day is Apple’s partnership with OpenAI. The deal will see the AI startup’s ChatGPT brought to Apple iPhones and integrated with Siri. More importantly, it may help close the gap with Apple’s Magnificent 7 peers.

What investors should pay attention to

Apple’s new relationship with OpenAI could go a long way in making up for lost ground, according to analysts. And right about now, Apple needs all the help it can get.

Falling sales in China, as well as antitrust headwinds internationally, have set Apple back this year—but today could be the beginning of its comeback.

Microsoft, Google, and Amazon have run circles around Apple’s shares in 2024 so far. Microsoft has gained 15% year to date, while Alphabet is up 25% and Amazon has risen 24%. Apple shares, in comparison, have only gained about 5%.

Although the WWDC has previously not had a significant impact on share price, this year should be a different story, Morgan Stanley analysts say.

“While investor expectations are high, we think Apple could positively surprise, helping to unlock pent-up demand, accelerate iPhone replacement cycles,and sustain recent stock outperformance,” wrote Morgan Stanley equity analyst Erik Woodring.

Another big boon could be Apple limiting “AI feature backwards compatibility,” according to Morgan Stanley—meaning new AI software would only work with new iPhones, prompting users to have to buy the latest to get the upgrade (us iPhone users know this trick well).

All together, these potential boosts were enough for Morgan Stanley to give Apple an overweight rating just last week.

Clearly, Apple isn’t going to take losing the #2 spot to Nvidia lying down.—LB

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“Yeah, this is not cool.”

Elon Musk let everyone know how he felt after Norges Bank Investment Management, one of Tesla’s biggest shareholders and the world’s largest sovereign wealth fund, made it clear that it would oppose Musk’s $56 billion pay package when it comes up for a vote on Thursday.

🟢 What’s up

• Diamond Offshore Drilling rose 10.91% after fellow offshore drilling company Noble Corp. announced it would acquire Diamond in a cash and stock deal worth $1.6 billion total. Noble shares rose 6.08% on the news as well.
• Crowdstrike, GoDaddy, and KKR will be added to the S&P 500 when the index rebalances at the end of the quarter. Crowdstrike rose 7.29%, GoDaddy rose 1.94%, and KKR was up 11.22% on the news.
• Texas Pacific Land Corporation shares also rose 24.57% on the news that the company will be inducted into the S&P MidCap 400.

What’s down

• Advanced Micro Devices fell 4.49% after Morgan Stanley analysts issued a rare downgrade for an AI-related stock.
• Moderna shares dropped 1.60% today, as its recent selloff continues despite the news that its combination Covid/flu vaccine is more effective than expected.
• GameStop shares fell 12.04% today, after plummeting about 40% last Friday when the company announced earnings early and hundreds of thousands of people watched Roaring Kitty ramble about the stock.
• Trump Media & Technology Group fell 5.61% after the company filed an amended S-1 with the SEC to sell shares.
• French stocks sagged today on the news that pressure from the far-right opposition party have forced a snap national parliamentary election on June 30. Societe Generale fell 7.46%, and BNP Paribas fell 4.76%.

You can always count on activist investors to keep things interesting—and prevent executives from enjoying their vacations.

Right now, this brazen technique of advocating for change in a company is having a moment, with one activist investor leading the charge. Elliott Investment Management has revealed seven new stakes in target companies globally, including its most recent $2 billion investment in Southwest Airlines.

Elliott, which was founded by billionaire Paul Singer, is calling for a complete overhaul of leadership for Southwest. Elliott’s stake represents about 11% of the beleaguered airline.

Elliott has also unveiled positions in Softbank, Texas Instruments, Sensata Technologies, and Sumitomo since April.

But Singer isn’t the only one looking to shake things up at big companies. Nelson Peltz’s bid to get on Disney’s board of directors played out in a high stakes corporate catfight, which he eventually lost earlier this year.

And big oil is pulling out the big legal guns to try to crush activist investors that question their climate-related policies.

More money to spend fighting

Activist investing got a shot in the arm in September 2022 when the SEC unveiled new rules about how shareholder votes are held. Dubbed the Universal Proxy Card, it dramatically simplified the rules for shareholder voting and choosing board members, opening the door for activist investors to swoop in and take advantage.

Fast forward to today, and a huge part of why activist investors are bolder than ever right now is because their funds performed well last year—and therefore they have renewed confidence and capital to deploy.

Activist investors saw average returns of 20.2% in 2023, up from an average 16% loss the year prior, according to Hedge Fund Research data. While most of these gains are due to a rising stock market, activist funds also picked good targets, according to analysts.

Elliott, for example, has raised billions in capital over the past year, and the fund now has $66 billion in assets to wield like a club.

More activist investment firms are also hitting the scene. There were 252 new activist investor campaigns last year, a 7% increase from 2022, according to investment bank Lazard.

So, get ready for corporate claws to be out.–LB

• Warren Buffett loves Occidental Petroleum: A new filing with the SEC shows that Berkshire Hathaway bought another 2.57 million shares of the oil company, bringing its total to 250.6 million shares.
• Gold is getting even rarer, which is good news for gold bugs but bad news for miners.
• Thematic ETFs were once the talk of the town, but many have closed their doors due to low interest, leaving investors with fewer options to take advantage of meme stock chaos.
• Does the stock market seem calm to you? Look under the hood, and it turns out that this year, stocks have seen their biggest price swings in a decade.
• Boeing may see its debt rating reduced to junk status as the manufacturer continues to face problems across its business.
• A massive wall of debt maturities is looming ahead, and Deutsche Bank analysts believe it will cause a wave of unforeseen defaults.

With the big announcements coming on Wednesday, Tuesday’s reports seem unlikely to shake markets. The NFIB Small Business Optimism Index will tell us how small businesses feel about the current economic headwinds (hint: not good), and the OPEC Monthly Report is unlikely to reveal anything not already discussed at last week’s OPEC+ meeting.

After the close

• Oracle shares hit an all-time high back in March after the company met or beat analyst expectations. Shares have bounced around a bit since then, as investor enthusiasm waned due to the company’s recent spending spree and subsequent margin compression. But Oracle remains a clear beneficiary of the AI trade, and expectations are high that tomorrow will bring more good news. Consensus: $1.53 EPS, $14.59 billion in revenue.
• Rubrik will announce earnings for the first time since going public at the end of April. The data management and cybersecurity company is backed by Microsoft and is a favorite on Wall Street, with all 13 analysts covering the stock giving it glowing “buy” ratings. Their average price target is 29% higher than today’s. Consensus: EPS -$1.84, $171.57 million in revenue.

Apple has big plans for artificial intelligence (as does every company on the market, or so it seems). But we want to know what you think about AI.

This week’s community poll is a two-parter: First, have you ever used AI in any capacity, be it for business or pleasure? And second, which AI software have you engaged with?

Take the survey here to let us know how you feel about our future robot overlords. Please keep "The Terminator" references to a minimum. It's been done to death...and it makes him cranky.