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Apple’s iPhone Sales Slide, but Investors Still Expect AI Rally

Company is preparing to release ‘Apple Intelligence’ in the fall, which investors hope will lead users to upgrade their phones

Apple’s AAPL -1.68%decrease; red down pointing triangle iPhone revenue fell for a second consecutive quarter, a soft demand signal investors hope will turn around once the company releases new AI features in the fall.

For its quarter ended in June, iPhone sales declined nearly 1% from the prior year to about $39.3 billion and overall Apple revenue increased about 5% to $85.8 billion. Both figures beat Wall Street expectations.

Apple has also been trying to catch up to rivals in the artificial-intelligence arms race, unveiling an array of new AI tools in June that investors hope will encourage users to upgrade their iPhones. Microsoft, Meta Platforms and Alphabet have spent billions on so-called generative AI, spurred on by the release of startup OpenAI’s ChatGPT software released in late 2022.

The world’s biggest technology companies have yet to unveil a strategy that points to reliable AI-infused profits in the near future, especially as many have ramped up spending. Apple’s AI strategy, as outlined by the company, so far has come at a far lower cost compared with peers but depends significantly on whether customers will be convinced to buy new phones.

“We think Apple Intelligence will provide yet another compelling reason for customers to upgrade,” said Apple Chief Financial Officer Luca Maestri in an interview.

Apple’s shares were roughly flat in after-hours trading following the earnings announcement.

Revenue in the Greater China region fell by more than 6% from the prior year to $14.7 billion. China, Apple’s third largest regional market, has been an area of concern among investors in recent quarters. Domestic smartphone champion Huawei recently has made major inroads into Apple’s core market of high-end smartphones.

In the June quarter, iPhone sales in China fell 5.7% over the prior year as domestic vendors like Huawei continued to gain share, according to research firm Counterpoint.

The company’s services unit, which includes App Store revenue and streaming services, provided a cushion for declining iPhones sales, with sales increasing by more than 14% to $24.2 billion.

Although overall iPhone and China sales have lagged, many investors remain optimistic about the company’s prospects in the next year, believing the company’s AI plans will spark a rally. Apple also said sales rose in the period for iPads and Macs.

“The next important moment for Apple is how well the AI launch goes,” said Charles Rinehart, chief investment officer at Johnson Investment Counsel, an Apple shareholder.

Many Apple customers are also due for an iPhone upgrade, with 2021 being a strong year for iPhone purchases. “Apple has the wind at their back,” Rinehart said.

At its developer conference in June, Apple announced Apple Intelligence, its system for deeply embedding generative artificial-intelligence features into its operating system and improving Siri voice assistant. For some more advanced capabilities, Apple is partnering with external generative AI providers, with OpenAI’s ChatGPT as the first partner.

Analysts expect the new AI features to help reinvigorate iPhone sales. They will only be available to the iPhone 15 Pro, the company’s most premium iPhone model. Apple is expected to release its coming iPhone models in September.

The release of the new tools has taken longer than expected. Earlier this week, the company said that the initial batch of new AI features won’t be ready for the September release of the next iPhone operating system, iOS 18. Instead, it will be available in iOS 18.1, expected a few weeks later.

Other AI features, such as the ChatGPT integration, won’t be available until later this year or even next year, potentially delaying the iPhone sales boost Apple might receive from the new features.

Apple said it expects overall sales for the current quarter ending in September to grow roughly the same as the June quarter, slightly higher than analysts’ estimates.

Olympics chiefs blame ‘misleading information’ for women’s boxing row

IOC defends decision to include two competitors barred by international federation after opponent abandons fight

The International Olympic Committee has defended its decision to allow two boxers to compete in Paris who had previously been disqualified from the sport’s world championships for failing to meet gender eligibility requirements, saying an escalating row had been fuelled by “misleading information”.

The IOC’s decision to permit Algeria’s Imane Khelif to participate in the women’s welterweight category at the Olympic Games has drawn criticism from Italy’s Prime Minister Giorgia Meloni. Earlier on Thursday, Khelif’s Italian opponent withdrew from their match less than a minute after it had begun.

Khelif competed at the Tokyo Games in 2021, but was one of two boxers barred from last year’s world championships by the International Boxing Association for not meeting eligibility criteria to compete as a woman, along with Taiwan’s Lin Yu-ting. However, both athletes were cleared to compete in Paris by the IOC. Lin, the featherweight world champion in 2022, is due to fight on Friday.

Complicating matters is the fact that the IBA, the body that disqualified Lin and Khelif, was itself suspended by the IOC in 2019 as the international governing body of the amateur version of the sport, because of concerns about its finances, ethics and governance.

The IOC has since assumed interim authority over boxing at the Olympics, and defended its position on Thursday evening, saying the two athletes in question had been “victims of a sudden and arbitrary decision by the IBA”. 

“We have seen in reports misleading information about two female athletes competing at the Olympic Games Paris 2024,” the IOC said. “The current aggression against these two athletes is based entirely on this arbitrary decision, which was taken without any proper procedure — especially considering that these athletes had been competing in top-level competition for many years.”

Within the Olympic world, the international governing bodies of each sport determines their own respective rules on athlete qualification, including gender eligibility. World Athletics, the governing body of track and field, changed its rules in recent years to limit the disciplines in which athletes could compete who have differences in sex development, such as the South African middle-distance runner Caster Semenya.

Earlier this week, the IBA said it had barred the two boxers from competing after a “meticulous review”, adding: “The decision . . . was extremely important and necessary to uphold the level of fairness and utmost integrity of the competition.” It said the precise nature of the tests conducted during the review were “confidential”, but that both boxers did not have a “testosterone examination” last year.

Earlier on Thursday, Meloni criticised the IOC for what she said was a failure to protect female athletes and safeguard the competition. “With the levels of testosterone in the Algerian athlete’s blood, the competition does not seem fair,” Meloni, who was in Paris to support Italian competitors, told reporters after Khelif’s fight against Angela Carini. 

The Italian boxer told reporters that she had withdrawn from Thursday’s match “to safeguard my life”, after Khelif delivered a blow that injured her nose.

The IOC and IBA have been at loggerheads for years over other issues, including the IBA’s move in May to offer prize money to gold medallists in Paris. In response, the IOC reiterated concerns it had about the IBA’s financial ties to Russian energy producer Gazprom. “As always with the IBA, it is unclear where the money is coming from,” the IOC said at the time.

Because of the row between the two bodies, boxing has not yet been included in the programme for the Los Angeles Games in 2028, despite being part of every Summer Olympics, bar one, since 1904.

BNP Paribas in talks to buy Axa’s asset management arm for €5.1bn

French bank seeks greater scale for its investment business

French insurer Axa has entered exclusive talks to sell its investment management arm to BNP Paribas for €5.1bn in a deal that would create one of the largest industry players in Europe.

The anticipated transaction would create a business within the French bank with €1.5tn of assets under management, which would continue to provide investment services to Axa under a long-term partnership. 

If finalised, the deal would mark the latest example of consolidation in the European asset management industry as companies seek acquisitions to boost their scale and access new growth areas.

BNP chief executive Jean-Laurent Bonnafé said its asset management business would have a “critical size in public and alternative assets”, allowing it to “serve its customer base of insurers, pension funds, banking networks and distributors more efficiently”.

Amundi will remain Europe’s largest pure play investment management business. It has almost €2.2tn in assets under management.

Axa said the move to sell its asset management arm was intended to simplify operations and focus on its core insurance business.

Thomas Buberl, Axa chief executive, said the decision had been made “in the context of a rapidly consolidating and highly competitive asset management industry”.

He added the proposed deal would create a “global asset manager with a wider product offering and a mutual objective to further their leading position in responsible investing”.

Under the anticipated terms of the deal with BNP, the insurer would receive cash proceeds of €5.1bn for its investment management arm, plus €0.3bn for the linked sale of Select, an Axa unit providing fund services.

The planned acquisition is a major one for BNP, which has built up a war chest from the $16.3bn sale of Bank of the West in the US, announced in 2021.

BNP has partly used the proceeds for share buybacks and had previously signalled an appetite for small deals.

Axa said part of the proceeds from the sale of its investment management arm would be used on share buybacks.

The disposal is expected to result in a €2.2bn one off net income gain for Axa, but also reduce underlying earnings by €0.4bn on an annual basis. 

Axa released its half-year results for 2024, reporting that asset management revenue rose 5 per cent compared with the same period in 2023, driven by higher management and performance fees.

Revenue from property and casualty insurance increased 7 per cent. Net income rose 5 per cent to €4bn.

US probes Nvidia’s acquisition of Israeli AI start-up

Department of Justice has increased scrutiny of the chipmaker’s power in the emerging sector

The US Department of Justice is investigating Nvidia’s acquisition of Run:ai, an Israeli artificial intelligence start-up, for potential antitrust violations, said a person familiar with discussions the DoJ has had with third parties.

The DoJ has asked market participants about the competitive impact of the transaction, which Nvidia announced in April. The price was not disclosed but a report from TechCrunch estimated it at $700mn.

The scope of the probe remains unclear, the person said. But the DoJ has enquired about matters including whether the deal could quash emerging competition in the up-and-coming sector and entrench Nvidia’s dominant market position.

Nvidia on Thursday said the company “wins on merit” and “scrupulously adher[es] to all laws”.

“We’ll continue to support aspiring innovators in every industry and market and are happy to provide any information regulators need,” it added.

Run:ai did not immediately respond to a request for comment. The justice department declined to comment.

The investigation comes as US regulators and enforcers have heightened scrutiny of anti-competitive behaviour in AI, particularly where it dovetails with Big Tech giants such as Nvidia.

Jonathan Kanter, head of the DoJ’s antitrust division, in June told the Financial Times he was examining “monopoly choke points” in areas including the data used to train large language models as well as access to essential hardware such as graphics processing unit chips. He added the GPUs needed to train LLMs had become a “scarce resource”.

Nvidia dominates sales of the most advanced GPUs. Run:ai, which had an existing collaboration with the tech giant, has developed a platform that optimises the use of GPUs.

As part of the probe, which was first reported by Politico, the DoJ is seeking information on how Nvidia decides the allocation of its chips, the person said.

Government lawyers are also enquiring about Nvidia’s software platform, Cuda, which enables chips originally designed for graphics to speed up AI applications and is seen by industry figures as one of Nvidia’s most critical tools.

The DoJ and the US Federal Trade Commission, a competition regulator, in June reached an agreement that divided antitrust oversight of critical AI players. The DoJ will spearhead probes into Nvidia, while the FTC will oversee the assessment of Microsoft and OpenAI, the start-up behind ChatGPT.

Beijing’s diplomatic offensive against US posture seen as blunting criticism of its own arms build-up

China has launched a diplomatic offensive against the US nuclear weapons posture as it rapidly strengthens its own nuclear capabilities.

Beijing, the only one of the five permanent members of the UN Security Council that has committed to not using nuclear weapons first, has called in Geneva for the others to match that pledge and has also denounced Washington’s arrangements for deterring attacks on its allies.

In its formal proposal, China said a nuclear “no first use” policy was “increasingly becoming an important consensus and priority” in international arms control. But officials of the US and allied nations and analysts said Beijing’s proposal and censure of the US and its allies were an attempt to blunt western criticism of its own nuclear arms build-up.

China submitted a draft text for a treaty or declaration on “no first use” by P5 Security Council members to a committee that is meeting in Geneva until Friday to prepare a review conference for the Treaty on the Non-Proliferation of Nuclear Weapons.

Beijing also called the protection the US offers European allies under nuclear sharing arrangements in Nato and Asian allies under its nuclear umbrella “serious violations” of the NPT and demanded that they be abolished.

The push comes as China is expanding its arsenal of nuclear warheads and modernising the forces for delivering them — moves some foreign officials believe could transform the country into a nuclear power on par with the US and Russia.

The Pentagon forecasts China’s arsenal will grow to more than 1,000 operational nuclear warheads by 2030, double the current estimated number and four times what it estimated before the build-up began about six years ago.

Beijing has in recent years also been building missile silos and deploying more submarines that can carry nuclear warheads — giving it greater capacity to launch nuclear weapons on short notice rather than just as a retaliatory strike after being hit.

Those changes triggered debate among Chinese and foreign nuclear experts whether the country might shift from its own commitment to “no first use” and strategy of securing its defence with a minimum nuclear deterrent to a more assertive posture.

Such suspicions have been fuelled by a lack of transparency as Beijing refuses to participate in arms control mechanisms that include limiting or verifying its own arsenal.

Last month, China suspended low-level discussions on nuclear arms control with the US, the first such exchanges in five years.

“By emphasising its unconditional NFU declaration, China aims to deflect international pressure to join official nuclear arms control talks. Beijing also gains moral high ground by promoting NFU globally, aware of the challenges other nuclear states face in adopting such a policy,” said Zhao Tong, senior fellow at the Carnegie think-tank.

Washington said Beijing’s “rapid and opaque build-up” of a more versatile nuclear arsenal called into question the objectives behind its proposal, especially as it refused meaningful discussions about arms control, risk reduction or even its own no first use policy.

“In this context, [China’s] proposal, which followed its cessation of bilateral consultations, appears likely to be an attempt to deflect responsibility for its unwillingness to engage in substantive discussions,” a state department spokesperson said.

Lyle Morris, senior fellow at the Asia Society Policy Institute’s Center for China Analysis, said the US would “never agree” to China’s no first use proposal “due to its desire to flexibly respond to nuclear threats to Washington and our allies”.

“Given our extended nuclear commitment to allies, it doesn’t make political sense for Washington to make such a concession, especially given the opaque nature of China’s nuclear build-up,” said Morris, a former country director for China in the office of the US defence secretary.

Analysts said the P5 members UK and France were equally unlikely to agree because the ability to respond to a conventional attack with nuclear weapons was even more important to them due to their weaker conventional capabilities compared with the US.

“This is unfortunate, as a positive response to the Chinese proposal, even if falling short of outright endorsement, would isolate Russia and be seen as a positive step by the non-nuclear NPT parties,” said David Cullen, director of the Nuclear Information Service, a UK-based non-profit group.

After China first floated the NFU treaty idea in February, Russia, the final P5 member, said the initiative needed to be “looked at in the general context of military-political realities and in connection with other significant factors that affect international security and strategic stability”.

Moscow’s response indicated the proposal was incompatible with Russian doctrine, which allows for nuclear first use in response to a conventional attack that “threatens the very security of the state”, said William Alberque, a visiting fellow at the Stimson Center in Washington.

Russia has made thinly veiled hints at potential nuclear use throughout its full-scale invasion of Ukraine to deter western countries from arming Kyiv with advanced weaponry.

But analysts believe China’s nuclear diplomacy push is playing well among many countries beyond the permanent Security Council members. “It is an effort to buy some goodwill from the international community, and frankly, it’s working,” said David Santoro, president of the Pacific Forum, a policy research institute in Hawaii and co-organiser of an unofficial US-China nuclear policy dialogue.

“Most countries are worried about Russia and North Korea. But there is little discussion about China’s nuclear expansion,” Santoro said about the Geneva meeting. “So they’re doing really well: building up their arsenal but getting no heat for it.”