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Big Tech

Judy Dutton

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Google may be America’s go-to search engine, but that doesn’t mean it’s a monopoly in need of a massive breakup—at least, not yet.

In one of the biggest antitrust cases in decades, US District Judge Amit Mehta 

 many of the Department of Justice’s harshest proposals for Alphabet—including breaking the company up. “Google will not be required to divest Chrome,” Mehta said in his ruling, pointing out that chatbots and other AI technologies that work like search engines present enough of a threat to the tech company’s search dominance that the court does not need to step in and break up a fight that’s barely begun. “The emergence of GenAI changed the course of this case.”

This win, after five years of legal battles, sent Alphabet shares soaring 9.01% to a new all-time high—but the victory was not absolute. The judge ordered Alphabet to share certain data on search index and user interaction, although not for ads. The court also ruled that Alphabet must end its practice of “compelled syndication,” or striking deals with companies that locks in its search engine as the default for browsers and cellphones and locks out competitors.

Alphabet may not be able to shut out its search rivals anymore, but the court ruled that it can still pay for the privilege of becoming a platform’s default search engine. That’s fantastic news for Apple, which rakes in an estimated $20 billion a year from Alphabet for giving Google prime placement on iPhones.

That money, which comes at little to no cost, has proven pivotal to supplementing Apple’s margins and cushioning its bottom line at a time when the company has struggled. Its cash cow, the iPhone, has been sputtering along at just 2% annual revenue growth for the past three years, and pressure from President Trump to move manufacturing to the US threatens to cut into profits.

Apple has also been slow to catch up in the AI race, which could lead to a shockingly ho-hum unveiling of the 

 next week. Just yesterday, Meta Platforms poached a handful of the company’s 

 isn’t over yet: Mehta ordered all parties to convene again by Sept. 10 for the final verdict. In the meantime, though, two tech titans are breathing easier, and that’s great for the entire market, which 

Alphabet's courtroom victory: What it means for Apple

Alphabet won't be broken up, and Apple keeps getting free money.

Google scores a big win...for Apple

Lucy Brewster

Chatting with a customer service rep often feels like you’re face-to-face with a lifeless animatron. And if Klarna’s IPO goes as planned, you probably will be.

The Swedish buy now pay later giant is hoping to 

 by half with the help of AI as it looks to ramp up profitability ahead of its IPO, the Financial Times reported. The company, which is seeking to go public next year, is an early adopter of generative machine learning in marketing and customer service and 

 is already doing the work of 700 employees.

“By simply not hiring, which we haven't done since September ... the company is kind of becoming smaller and smaller," CEO Sebastian Siemiatkowski told Reuters.

Siemiatkowski said that Klarna’s workforce has already dropped from 5,000 to 3,800, and that it could see that number shrinking to 2,000 in the next few years due to AI.

The company said that its average revenue per employee grew 73% year over year.

Klarna’s commitment to reducing its labor costs comes as it reported surging profits for the first half of the year. It reported an adjusted operating profit of $66.1 million in the first half of 2024, compared to a $44.8 million 

 the same period last year. Revenue also grew 27% year over year, reaching $1.31 billion.

Klarna, which last raised $800 million at a $6.7 billion valuation in July 2022, ​​is one of a handful of mature tech startups looking to hit the public markets while the good times are rolling. The firm is talking to financial advisors including potentially Morgan Stanley, JPMorgan Chase, and Goldman Sachs, according to the Financial Times.

With rising interest rates and a rocky stock market in 2022 and 2023, the IPO pipeline became more of a slow drip. Now, with the S&P 500 up 19% this year so far, private companies could feel ready to jump in the IPO waters sooner rather than later. Many are 

 in the popular Labor Day-to-early November window, but face a conundrum: You either risk rushing to an IPO but catching the bull market, or you could wait until next year when interest rates are lower. —

Two laptops, one with a human hand and one with a robot hand

Klarna goes robot-mode 

The Swedish tech giant is looking to go public early next year.

During a crazy Monday featuring a massive market implosion, you may have missed a huge ruling that could significantly affect the way big tech operates for years to come.

A federal judge ruled that Google operates as an illegal monopoly, arguing that the company suppresses its competitors in an effort to maintain its hegemony. Judge Amit Mehta 

ruled in favor of the Department of Justice

, writing unequivocally: “Google is a monopolist, and it has acted as one to maintain its monopoly.”

The ruling was perhaps the most pivotal antitrust victory since the 1990s, when regulators 

 broke up Microsoft. Yesterday’s ruling means Google could get away with simply paying a fine and receiving a reprimand—or it could open the door for regulators to break up the company, which is admittedly very unlikely, according to analysts. Google is appealing the ruling, and it could take months or years to play out in court.

Other big tech heavyweights are currently facing 

, and the Google ruling could influence the decisions on the cases regulators have brought against Apple, Amazon, and Meta Platforms. Regulators assert that these tech companies have acted as monopolies by favoring their own products on their platforms, as well as acquiring smaller rivals, extinguishing competition.

While the Google ruling is a major symbolic victory for antitrust regulators, some say it is too late to make a dent in the tech behemoth’s search dominance.

“I have yet to hear any compelling logic about how Google’s search operation could be split up in a way that would bring more competition to online search,” wrote Bloomberg tech columnist Dave Lee 

Investors seemed relatively unconcerned. While Alphabet stock fell along with the rest of US stocks yesterday, it finished virtually flat today.

Wedbush analyst Dan Ives maintained his “outperform” rating on Google in the wake of the ruling, explaining that, “We do not expect any disruption to Google's near-term operations as a result of this ruling.”—

Google was declared a monopoly by a federal judge

The antitrust ruling opens the door to severe consequences for all of big tech.

Big tech faces big regulation

It seems like the biggest tech companies are in a race to see who can spend the most this year. Meta is 

 to raise eyebrows with its monster AI spending.

But Meta, unlike many of its Big Tech peers, actually has something to show for its investments.

While the company still has a ways to go before it sees the 

 returns on AI that executives are hoping for, AI is already boosting revenue for the tech giant via the company’s advertising business.

“So the ways that it is improving recommendations and helping people find better content, as well as making the advertising experiences more effective,” said CEO Mark Zuckerberg of AI. “I think there is a lot of upside there. Those are already products that are at scale. The AI work that we are doing is going to improve that. It will improve the experience and the business results.”

Meta gave investors plenty of other good news in its second-quarter earnings, catalyzing a 4.82% jump in its shares on Thursday.

Earnings per share (EPS) of $5.16 beat estimates of $4.74 for the second quarter.

Revenue came in at $39.07 billion, beating estimates of $38.3 billion and rising 22% year over year.

It also reported strong advertising demand, with ad pricing increasing 10% year over year.

But just because AI investments are beginning to pay off doesn’t mean Meta has plans to turn off the money faucet anytime soon.

CFO Susan Li warned in the company’s second-quarter earnings call that, “[W]e expect infrastructure costs will be a significant driver of expense growth,” while also noting the company wouldn’t give investors a specific number in the company’s earnings statement. The company said its capital spending forecast will be in the high range of Li’s estimate of $96 billion to $99 billion.

And despite what Zuckerberg’s well-documented fashion transformation may lead you to believe, the “significant” capital spending isn’t fueling his personal collection of 

Just last week, the internet’s newest hypebeast himself announced Meta was planning to roll out another open source language model, Llama 3.1. But AI infrastructure, including data centers, seems to be guzzling most of the cash at the moment.

“We aren’t convinced Meta will earn strong returns on its infrastructure investment, but we expect the firm will continue to generate strong cash flow regardless of the direction AI takes,” wrote Michael Hodel, director of communications services equity research at Morningstar, in a note today.

These early AI trends can be fickle, as Meta recently learned when it turned out nobody wanted to play with their 

So even if its AI ventures haven’t turned an enormous profit just yet, there’s still enough hits to keep investors on board.—

Meta earnings impressed investors

Meta Platforms is beginning to reap rewards from AI investments, though it's still spending big bucks.

Meta splashes out on AI

Turns out that applies to the tech stocks that pushed every major equity index to an all-time high this year, and now are leading the way down as the market sells off this week.

Tesla and Alphabet reported disappointing earnings after the bell on Tuesday, spurring a selloff across the market on Wednesday that saw both the Nasdaq and S&P 500 suffer their worst day of trading since 2022. The pain continued on Thursday as a major tech selloff gained steam—according to Semafor, tech stocks lost $1.2 trillion in market value in just the last 48 hours.

Nvidia is down 6.65% in the previous 5 trading sessions, while Alphabet has fallen 6.14%, and Tesla dropped 11.07%.

The tech selloff has been driven by a combination of faltering faith in AI returns, along with shifting macroeconomic conditions that have made other corners of the market suddenly look more appealing.

 that inflation was decelerating, analysts and investors are growing more confident that the Federal Reserve will finally cut interest rates in September. The optimism about rate cuts has driven investors to other parts of the market beyond tech that could get a boost, 

Tech stocks have also risen so high this year that their valuations are starting to look stretched, leading investors to take profits and search for value elsewhere. Plus, earnings have been a referendum on whether or not AI companies can actually monetize artificial intelligence after making insanely large bets on the nascent technology—suddenly investors are worried tech companies aren’t going to get enough bang for their buck.

Tech comprises such a large part of the S&P 500 that its selloff is driving the entire index down—but under the surface, other sectors are actually faring pretty well.

Deutsche Bank’s Jim Reid pointed out that while investors have rotated out of tech since July 11, sectors like utilities and healthcare are up over the same period.

“Even a small rotation out of tech could mean a big rotation into other sectors,” he wrote.

Investors who are bullish on AI argue that this selloff is a breather, not a break, on AI returns. “We believe this tech sell-off will be short lived as the Street better digests results and commentary from the broader tech sector over the coming weeks during earnings season,” wrote Wedbush analyst Dan Ives. “This is the start....not the end of this tech bull run in our view fueled by this AI tidal wave of spending on the doorstep.”

The takeaway from all this volatility is as old as time: stay diversified.—

Big Tech

Google scores a big win...for Apple

Klarna goes robot-mode

Big tech faces big regulation

Meta splashes out on AI

Big tech is down bad

Making sense of market moves