iPhone 15, the Google Experiment, and the Arm IPO: Huge Tech Week

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present your self. Subsequent week, the tech sector is heading in the direction of a harmonic convergence of the primary order, with three main information tales converging in a means that would change the dynamics of the tech sector in thrilling and sudden methods.

And inside a couple of days,

apple

An up to date iPhone shall be launched; Lastly, the Division of Justice will deliver the antitrust case it introduced towards Google three years in the past to trial. UK-based chip design agency Arm Holdings is more likely to go public.

Every occasion carries potential features for traders, together with important dangers.

Simply one other cellphone: On Tuesday, Apple (inventory image: AAPL) will maintain its annual fall launch occasion, dubbed “Wonderlust” this 12 months. The occasion will virtually actually give attention to the debut of the iPhone 15. (Analysts are additionally anticipating new Apple Watches and certain up to date AirPods.) Nobody is anticipating an iPhone overhaul — essentially the most notable change is more likely to be the swap from Apple’s proprietary Lightning . Connectors of essentially the most broadly used USB-C normal. There shall be up to date processors, improved cameras, thinner bezels, and some different tweaks. Costs are anticipated to rise above iPhone 14 ranges. Bulls anticipate a rise in iPhone gross sales from prospects who change older telephones — Wedbush analyst Dan Ives estimates {that a} quarter of the 1.2 billion iPhone set up base is at the least 4 years previous.

However there are causes to be involved. Shopper spending shouldn’t be robust in any respect, and cellphone gross sales have been declining for a number of months. In response to Counterpoint Analysis, international smartphone shipments had been down 9% within the June quarter in comparison with a 12 months in the past. In the meantime, Apple is going through a double whammy in China, the place the brand new Huawei Mate 60 Professional smartphone seems to be taking a stake from Apple. Even worse, the Wall Road Journal reported final week that China has banned using iPhones and different foreign-branded telephones by authorities officers.

Eric Woodring, an analyst at Morgan Stanley, says the 6% drop in Apple shares as a consequence of considerations about China is exaggerated. However he factors out that market considerations transcend the destiny of the iPhone 15.

“It’s attainable that China is on its solution to turning into extra nationalistic, a transfer that will jeopardize greater than $30 billion in working earnings if China determined to restrict Apple’s entry to the Chinese language market,” Woodring wrote. He sees such a bleak final result as unlikely, given the massive position Apple performs within the Chinese language financial system. Tuesday’s launch will not settle something, however it is going to be adopted by a pointy give attention to early gross sales tempo.

arms race:

SoftBank Group

SFTBY purchased chip design agency Arm Holdings in 2016 for $32 billion. In 2021, SoftBank agreed to promote Arm to

nvidia

(NVDA) for $40 billion in money and inventory, earlier than the deal collapsed underneath scrutiny from regulators. SoftBank instantly started planning for an preliminary public providing. Final week, Arm set a worth vary of $47 to $52 per share for the pending deal, implying a valuation of round $50 billion. The IPO is predicted to be priced on Wednesday evening, with Arm beginning buying and selling on the Nasdaq on Thursday.

SoftBank’s valuation hopes are bold. Arm’s income was flat final 12 months, at $2.7 billion. The highest of the value vary implies a valuation of almost 20 occasions delayed income, which is greater than virtually every other know-how firm. Arm reaches worth consistent with AI big Nvidia, however no development. It stretches.

And there’s a trump card: the outsized position that China performs in Arm’s destiny. Arm depends on China greater than Apple, which accounts for 25% of its income. China-related dangers occupy three full pages in Arm’s IPO prospectus.

There isn’t a doubt that Arm is a crucial participant within the international chip market, as virtually each smartphone makes use of a chip designed by Arm. There’s a lengthy record of tech corporations, together with Apple, Google, Intel, Nvidia,

samsung
,

And

Taiwan Semiconductor

– Excited by buying IPO shares, in line with Arm’s prospectus. However Arm’s publicity to China could unnerve traders. The most important threat is that the IPO’s poor efficiency may stop different tech corporations from going public this 12 months.

Trying to find justice: Three years in the past, the Division of Justice sued Google, arguing that…

the alphabet

GOOGL has an unlawful monopoly on the Web search market. That case will go to trial in federal court docket in Washington, D.C., on Tuesday. In its 2020 criticism, the federal government mentioned Google used “anti-competitive ways” to take care of and increase its near-monopoly place in Web search and search promoting. Google referred to as the lawsuit “deeply flawed”.

One of many principal points at trial is more likely to be Google’s longstanding place as Apple’s search supplier for iPhones and its Safari browser. Any try to disengage could possibly be a blessing

Microsoft
,

which powers the Bing search engine. How ridiculous is that this?

One other chance is for a court docket to order an finish to the unique relationship between Apple and Google, prompting Apple to develop its personal search engine. Now, that will be a very massive story.

write to Eric J. Savitz at eric.savitz@barrons.com