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Vested Shorts: Bitcoin at $150K, Tim Cook praises China, Microsoft acquires Inflection, and monopoly accusations on Apple

by Parth Parikh
March 23, 2024
3 min read
Vested Shorts: Bitcoin at $150K, Tim Cook praises China, Microsoft acquires Inflection, and monopoly accusations on Apple

In today’s edition

  • Where is Bitcoin going?
  • Apple’s China challenge
  • Microsoft’s new strategy
  • Apple’s legal hurdle

Market Snapshot

US stocks enjoyed their most significant weekly rise in three months, with the S&P 500 gaining 2.3% and the Nasdaq Composite up by 2.9%, buoyed by expectations of interest rate cuts from major central banks. 

This optimism followed comments from Federal Reserve Chair Powell signaling potential rate cuts and was further supported by the Bank of England’s hints at multiple rate reductions, igniting stock rallies worldwide. London’s FTSE 100 and Europe’s Stoxx 600 also posted notable gains, with markets reacting positively to the prospect of cheaper borrowing costs enhancing the sustainability of the current equity rally.

Stock market closing data for the week from March 18th to 22nd, 2024

News Summaries

As Bitcoin approaches its next halving, an event that reduces the reward for mining new blocks and historically triggers market volatility and consolidation among miners, its price has seen an 11% drop from its mid-March peak. This trend aligns with past cycles, suggesting a potential rebound post-halving. Experts project significant price increases, with predictions ranging up to $150,000 by year’s end, attributing the halving to effectively doubling Bitcoin’s fair value. While the introduction of spot ETFs and inscriptions could slightly dampen this cycle’s growth, reducing the fair value increase from 100% to perhaps 60%, the overall sentiment remains decidedly bullish. Analysts from Bernstein to Standard Chartered echo this optimism, adjusting their forecasts upwards, in stark contrast to the scarcity of bearish predictions, underlining the strong confidence in Bitcoin’s post-halving performance.

In a strategic move to reaffirm its commitment to China amid declining iPhone sales and growing geopolitical tensions, Apple CEO Tim Cook praised the country’s advanced manufacturing capabilities and pledged increased investment during a visit. Despite generating $21 billion in sales in the fourth quarter, Apple witnessed a 17% year-over-year decrease in its Chinese market revenue, with a notable 24% drop in iPhone sales early this year. The downturn is attributed partly to a governmental push towards domestic brands over security concerns and the resurgence of Huawei as a formidable competitor. In response, Apple is intensifying its local investments, including upgrading its Shanghai research center and opening a new lab in Shenzhen, aiming to reverse the negative sales trajectory and reinforce its presence in this crucial market.

In an approach to bypass potential regulatory scrutiny, Microsoft has opted not to acquire the artificial intelligence start-up Inflection directly but rather to hire its co-founders and staff and license its AI software in a non-exclusive deal. This strategy aims to sidestep the Hart-Scott-Rodino Antitrust Improvements Act’s requirements for pre-merger notifications, reflecting a growing trend among tech giants to avoid direct acquisitions amid increasing regulatory vigilance. The US Department of Justice’s recent lawsuit against Apple for monopolistic practices and the heightened scrutiny of big tech mergers, such as Microsoft’s $13 billion investment in AI firm OpenAI and Adobe’s failed $20 billion acquisition of Figma, highlight the regulatory challenges facing the tech industry. Tech M&A spending has hit a decade low, emphasizing the cautious atmosphere. Microsoft’s move, which includes promising Inflection investors up to 1.5 times their investment while maintaining a stake in the company, underscores the evolving dynamics in tech investments and the strategic shifts companies are making to strengthen their AI capabilities within regulatory constraints.

In an antitrust lawsuit by the US, Apple is accused of creating a monopolistic ecosystem, leveraging its iPhone and services like the App Store, Apple Pay, and its streaming services to exclude competitors and stifle innovation. This comes at a challenging time for Apple, as its fourth-quarter sales in China, a key market, have declined, contributing to an overall 8% drop in its shares since the beginning of 2024. The lawsuit critiques Apple’s practices tracing back to Steve Jobs, aiming to dismantle barriers to competition in future technologies and services. Apple’s response underscores the existential threat this case poses to its identity and market strategy, emphasizing the potential for a 2% to 4% negative impact on earnings if the DoJ’s desired changes are enforced. With Apple holding approximately 20% of the global smartphone market but a dominant 70% by revenue in the US’s high-end smartphones market, the lawsuit not only challenges Apple’s market practices but also its very foundation of innovation and growth amidst intensifying legal and competitive pressures.

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