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Top stories today:
1. Amazon revenue +9% to $127.4B in Q1, but AWS disappoints
2. Snap revenue -7% to $989M even as DAUs rise by 15%
3. GDP growth slowed to 1.1% in Q1, but it's not that bad

0. Data and calendar

1. Amazon revenue +9% to $127.4B in Q1, but AWS growth and guidance disappoint

Revenue growth was led by AWS's 16% jump; AWS has a 24% operating margin, vs 0% for retail

But AWS growth is stalling, and Amazon guided AWS Q2 growth 5 p.p. lower

This bad guidance led the stock to close the after-hours at only +2%, after reaching +17%

Our view: over the long term, retail will improve its moat and margins, and AWS will do the reverse

• Amazon's retail distribution network provides them with significant advantages over rivals: more products, cheaper prices, and faster deliveries. Amazon already has around 40% market share in U.S. e-commerce.

  • We expect e-commerce to continue to grow, and Amazon's market share to get to 40%+ in many more regions where it operates.

• AWS does not have significant technological advantages vs. Microsoft's Azure or Google Cloud. In fact, with Azure integrating with OpenAI, one could argue that AWS’s technology is a detractor and that they mostly have inertia working for them.

Read more: WSJ, Amazon.

2. Snap revenue -7% to $989M even as DAUs rise by 15%

DAU count grew 15% to 383M

Snap's profitability continues to be horrible, at -33% net profit margin

Markets punished the stock, taking it to -18%

Our view: TikTok and Youtube Shorts have the advance here

• TikTok is the “creator” of short-form vertical video, and the platform has around 2x the number of users than Snap.

• Youtube Shorts is part of Google, meaning that it integrates well with Search, typically ranking highly in the search engine. And Youtube has an estimated 2B+ MAU, and many of those (including us) see Shorts just because it's already on the Youtube app.

3. GDP growth slowed to 1.1% in Q1

But some are saying it's not that bad, as consumer spending was still strong at 3.7%

• GDP price index: 4.0%, vs 3.7% expected

  • This is a widely ignored index but it actually measures the increase in prices of all goods produced, rather than just the typical consumer basket, as in the CPI or the PCE.

Our view: never bet against America, especially as macro predictions are almost useless

• Focus on the micro, not the macro, for good (but medium-term) predictions: the U.S. will win if it continues to be the place where entrepreneurs come from all over the world to innovate, to build new companies, 0 to 1.

  • The U.S. mostly grows by innovating, not by copying other countries. The rest of the world, in contrast, can just copy the U.S. (as they do).

4. Apple sources detail why Siri sucks

• Organizational dysfunction and lack of ambition: “According to interviews with more than three dozen former Apple employees who worked in its AI and machine-learning groups, organizational dysfunction and a lack of ambition have bogged down those efforts—including the work of the group responsible for Siri, Apple’s highest-profile AI technology.”

• Failure to retain top talent: “The three men—Srinivasan Venkatachary, Steven Baker and Anand Shukla—left Apple last fall in part because they believed Google was a better place to work on [LLMs.] They are a hot commodity: Google wanted them badly enough that its CEO, Sundar Pichai, personally wooed the group, while Apple CEO Tim Cook tried to persuade them to stay, according to two people who spoke to Venkatachary about it.” - The Information

Our view: Apple needs a new team focused on AI

• LLMs and a voice assistant would be good priorities, as those would be useful for Siri and for their future mixed-reality headset.

  • Apple can leverage OpenAI's open-source Whisper neural net for speech recognition. It is considered one of the top models today, and is totally free.

5. Brave Search stops using Bing API, is now fully independent

• It was 7% dependent beforehand: “When Brave Search launched in June 2021, about 13% of the queries required the help of third parties to achieve the desired level of quality across various types of queries. Total independence, however, was a primary goal of Brave, and in less than a year the Brave Search global independence score rose from 87% to 93%.” - Hacker News, Brave

Our view: Brave today is the best privacy search engine, ahead of DuckDuckGo

• It is faster at launching new features, for example, the AI summarizer, which has links to original sources, similar to Bing Chat.

• But search quality is still below that of Google and Bing. What Brave Search has for them is really privacy and the Brave browser, which now puts Brave Search as the default search engine.

  • Having a browser is so important that DuckDuckGo followed Brave and launched a Mac app in April 2022.

6. Chart: evolutionary tree of LLMs

• LLaMA or Galactica cannot be used for commercial purposes “not because we don't want to”, “because of complicated legal issues”, says Yann LeCun, Meta's Chief AI Scientist, who posted this amazing infographic on Twitter. - Twitter

7. Other headlines

Tech

• Pinterest revenue +5% YoY to $603M in Q1, starting ad partnership with Amazon.

• Intel revenue -36% YoY to $11.7B, profit -$2.8B.

• Cloudflare revenue +37% YoY to $290M, revises year guidance -4%.

• Lyft to cut 1,072 employees, 26% of staff.

• Clubhouse firing 50% of 100-person staff, prev. said had “years of cash.”

• Dropbox lays off 500 employees, 16% of staff.

• Canada law now requires Canadian content on streaming services.

• Microsoft discontinues mice, keyboards in favor of Surface devices.

• NYC subway ends Twitter alerts service after Musk asks for $50K/mo.

• Google TV rolling out 800 free TV channels.

Biotech

• 2nd Mounjaro trial leads to 15.7% weight loss, FDA approval likely soon.

• Obesity market could be worth $200B in a decade: Barclays.

Business

• China increases pressure on foreign companies; questions Bain staff.

• First Republic: a look at why no buyer has emerged.

• Vice Media cutting 100 out of 1,500 employees, ends Vice News Tonight.

• Apple defrauder sentenced to 3 years in prison and $19M in fines.

• Fintech credit crunch: a look at current market conditions.

Crypto

• BTC pyramid scheme mastermind ordered to pay $3.4B.

• Ohio man sentenced to 4 years for stealing 713 BTC.

• Coinbase shared tough response to SEC Wells notice.

• FTX former exec Ryan Salame has his house searched by the FBI.

• Scaramucci: SBF told him FTX's shortfall was due to mislabeling.

• Bahamas PM doesn't regret FTX, says country is still open to crypto.

• Gensler video: everything is a security, everything is U.S.-based.

• Yuga Labs has 35% of NFT trading volume over past 6 months.

• Warren anti-crypto bill delayed due to lack of sponsors.

U.S. politics

• GOP spending “cuts” are much smaller than the media portrays.

• McCarthy accuses Senate, Biden of ignoring debt limit.

• China: U.S. wants to “de-risk”, not decouple: Jake Sullivan.

• Pence appears on Trump Jan. 6 grand jury.

• Trump commissioned 2 firms to find fraud in 2020, both failed.

• DeSantis dines with Miriam Adelson, other donors in Israel.

• Gun poll: 87% support background checks, 81% legal age of 21.

• Newsmax experiences Tucker-related bump in ratings.

• Georgia man has been jailed for 10 years without a trial.

World

• Russia's attack on Ukraine cities, worst in 2 months, leaves 12+ dead.

• Russia “welcomes” China's contact with Ukraine, who is not ready to give up.

• Russia denies U.S. Embassy's request to visit jailed WSJ reporter.

• U.S. sanctions Russian, Iranian security agencies over WSJ reporter.

• Iran seizes Turkish oil tanker that was headed to Texas.

• Navalny supporters plan worldwide rallies to protest new “terrorism” trial.

8. Interesting tweets, memes, and images

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