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Widespread layoffs within the Tesla unit are a blow to efforts to build out a national charging network

Tesla’s TSLA -1.06%decrease; red down pointing triangle move this week to lay off much of the team responsible for creating the largest and most successful electric-vehicle charging network in the U.S. threw the industry into a state of shock and confusion.

The layoffs halted construction work at a dozen Supercharger sites in Texas. In New York, property owners in negotiations with Tesla were told the company was withdrawing from discussions about adding chargers to their sites.

The upheaval comes as the EV industry struggles with sluggish sales growth and a bumpy rollout of a national highway-charging network.

The Tesla layoffs were sweeping and included employees in the sales force to those overseeing the construction of charging sites, according to people familiar with the decision. Contractors and executives at other automakers that have partnered with Tesla on charging described widespread confusion over the future of Tesla’s charging business.

Some of those laid off woke up Tuesday morning to find themselves locked out of the company computer system and learned about the layoffs in messages to their personal email accounts.

“Dear Employee,” the message began. “As you know, we recently announced a significant decision that impacts the entire organization, and you directly.”

The Information earlier reported that Chief Executive Elon Musk, in an internal email sent late Monday, said he would dismiss everyone in the Supercharger group, and its senior director Rebecca Tinucci was leaving the company.

The world’s most-valuable automaker last week said its first-quarter profit plunged to its lowest level since 2021. Tesla plans to slash more than 10% of its global workforce amid broader cooling in consumer demand for electric vehicles.

Tesla has long been the bright spot in a messy charging world, outbuilding and outperforming other companies to create the closest thing the U.S. has to a national highway network, considered the linchpin to greater EV adoption. A Tesla pullback in EV charging could slow the entire U.S. market.

Tesla has been opening up its network to other kinds of cars and chasing—and winning—public funding for chargers, a boon to the Biden administration’s plans to build out national charging infrastructure. States have started to release the first wave of around $5 billion for a highway network, approved in the 2021 federal infrastructure law.

The layoffs caught some employees by surprise. One person who was laid off said that while it was understood the company was in a precarious position, the charging business had been viewed as a priority among employees.

Tesla shares fell nearly 2% in Wednesday morning trading after declining 5.6% Tuesday.

The departures also baffled the charging industry.

After Tesla opened its charging to other cars, major automakers spent last summer announcing a switch to the Tesla-designed charging connector and signing agreements to allow their customers access to the Tesla Supercharger network.

“This is by all accounts a dramatic move,” said Nick Nigro, founder of Atlas Public Policy. Tesla should “take things more carefully in the future because increasing amounts of people are dependent on them. In the case of infrastructure projects, there’s lots of sites that are under development, including those that federal awards are attached to.”

On Tuesday, Musk posted on X, “Tesla still plans to grow the Supercharger network, just at a slower pace for new locations and more focus on 100% uptime and expansion of existing locations.”

The charging pullback is the latest blow to waning growth in EV sales.

At the start of last year, automakers were having a hard time keeping up with demand for EVs, but the well of willing consumers proved more shallow than expected. An early wave of adopters made their purchases and by last summer, dealers began warning of unsold electric vehicles clogging their lots. Within months automakers were scaling down their plans for EVs and adding hybrids to their lineups as those rose in popularity.

At least some of the reason for EV hesitancy is the nation’s fledgling charging network. The ability to repower cars in about 30 minutes and let drivers hopscotch from charger to charger across the country is considered essential to putting EV drivers at ease.

Tesla is known for building charging stations cheaper and faster than competitors. Its installations are up around 19% this year through March, to 1,526 charging ports, according to the firm EVAdoption. That is more than four times as many pieces of equipment as the nearest charging provider.

Andres Pinter, co-CEO of Bullet EV Charging Solutions, a subcontractor building a dozen Supercharger sites in Texas for Tesla, said all 20 of its contacts at Tesla had been laid off. Pinter has received a series of bounceback emails—“This email address is no longer valid. Any future emails sent to this address will not be received”—but no other communication from the company. He halted construction work at the sites for now.

A Tesla slowdown could also leave a gap in the market for others to fill. Other companies building charging networks might look to capitalize on the pullback, said Carleen Cullen, co-founder and executive director of Cool the Earth, which advocates for EV adoption and improvements in charging reliability.

“With upgrades making stations more reliable, Tesla’s slow-walk approach may cause short-term market upheaval, but it will result in a healthier competitive landscape,” Cullen said.

Ecommerce company’s operating income more than triples as Amazon Web Services and adverts provide a boost

Demand for artificial intelligence bolstered sales growth in Amazon’s cloud computing division at the start of the year, the company said on Tuesday, as executives laid out plans to spend huge sums to support the fast-growing technology.

The acceleration in sales at Amazon Web Services, a critical profit driver for the ecommerce group, came as businesses spent more on cloud computing services, including new generative AI tools. Overall, AWS is “now at a $100bn annual revenue run rate”, said chief executive Andy Jassy.

AWS sales rose 17 per cent year on year to $25bn during the first three months of 2024, ahead of forecasts for $24.5bn and faster than the 13 per cent rise recorded in the previous quarter.

The division’s margins also widened to 38 per cent, compared with 30 per cent in the previous quarter. Generative AI is “now a multibillion-dollar revenue run rate business for us”, said chief financial officer Brian Olsavsky.

Amazon has been vying with cloud computing rivals Microsoft and Google parent Alphabet for dominance in generative AI, which has fuelled spending on infrastructure, such as data centres, to support the technology that Big Tech hopes will boost their fortunes.

Plans to invest billions in AI have come under Wall Street’s microscope during the latest round of earnings from the tech companies, with investors hoping to see signs of early pay-offs and assess the implications for margins.

Olsavsky said on Tuesday that Amazon expected its capital expenditures this year to increase “meaningfully” compared with $48.4bn in 2023, primarily to support growth in cloud and AI. Amazon invested $14.9bn in property and equipment during the latest quarter, which would be “the low” for the year, he said.

Microsoft last week outlined similar plans to invest billions in the technology, noting that its “near-term AI demand is a bit higher than our available capacity.”

Swami Sivasubramanian, vice-president for data and machine learning at AWS, told the Financial Times that Amazon was not facing the same constraints, adding that it was “rapidly scaling our capabilities”.

Jassy noted that Amazon’s security capabilities provided a compelling reason for businesses with sensitive data to choose AWS, in what appeared to be a veiled dig at rival Microsoft, which is facing growing scrutiny about the security of its systems following a series of incidents, including an attack by Russian state-sponsored hackers that broke into its network.

“Not all the providers have the same track record . . . We have a meaningful edge,” said Jassy.

While Microsoft said last week that AI demand had boosted sales at its Azure cloud platform by 7 percentage points in the first three months of the year, Amazon did not disclose how demand for the technology had contributed to sales at AWS.

In addition to growing the cloud business, Amazon has been on a drive in recent quarters to cut costs and expand margins across its sprawling empire that includes retail, grocery, healthcare and video streaming. Those efforts helped the company more than triple its operating income in the three months to March 31, which rose to $15.3bn compared with forecasts for $11bn.

Executives have sought to make more profitable use of existing businesses, such as its Prime Video streaming service, which launched an ad-supported tier this year. Revenue at the high-margin advertising business overall — which is driven predominantly by adverts linked to its ecommerce segment — rose 24 per cent to $11.8bn during the quarter.

Amazon’s logistics-as-a-service offering — which allows other retailers to use the company’s huge transport, storage and delivery network — was also “growing very significantly”, said Jassy.

Amazon’s overall net sales were $143.3bn, up 13 per cent from the year before and above forecasts for $142.5bn. Net income was $10.4bn, well ahead of forecasts for $8.7bn.

The company’s first US “Big Spring Sale” sales event lifted its retail sales during the quarter, while overall sales benefited from an extra day during the quarter thanks to the leap year. However, guidance for total second-quarter net sales came in below expectations, with Amazon predicting between $144bn and $149bn compared with analysts’ forecasts of $150bn.

Shares in Amazon, which have risen by about 17 per cent this year, rose 1.2 per cent in after-hours trading.

What Google Investors Should Really Be Cheering

Google's new office at St. John's Terminal in New York City. Photo via AP.

Last week’s rally in stock of Google parent Alphabet was attributed to the company’s introduction of a dividend, its big improvement in its operating profit margin and faster growth at Google Cloud. But investors might have been also responding to another piece of good news that got little attention: Google has managed to lower the cost of showing artificial intelligence–generated answers to queries 80% over the last year, according to Alphabet CEO Sundar Pichai.

Pichai’s revelation may have more significance than anything else coming out of the Google earnings figures. Its search engine accounts for half of the company’s revenue and a big portion of its profits. But when Microsoft in early 2023 added an AI chatbot and responses that summarized information from the web to its Bing search engine, investors fretted that Google would have to spend heavily to defend its market share, undermining its overall profits.

The Takeaway

• Google slashed cost of AI-generated search by 80%

• Success relieves worries AI would hurt search profit margins

• Google put AI veterans in charge of search unit

Pichai’s comments, combined with the fact that Google’s share of the search market has barely budged over the past year, suggests those worries were unfounded. “People questioned whether these things would be costly to serve, and we are very, very confident we can manage the cost of how to serve these queries,” Pichai said on the earnings call last week.

Google began rolling out AI-generated search results to a group of users who had opted in last May. Instead of showing links where users can find the answer to a question, the feature generates a response based on information from the web. (Users can still scroll down to find links or to click on sources the AI response cites.)

In March, Google began adding AI responses to all searches, although the company has said it expects only a small percentage of users to see the new results at first. Google has reason to move cautiously, given the high cost of running AI models. Last year, Alphabet board chair John Hennessy told Reuters the cost of providing responses with an AI chatbot could be 10 times greater than that of a traditional Google search.

Pichai said Google drove down costs with “hardware, engineering and technical breakthroughs,” a reference to its Gemini AI model and custom AI chips that helped it achieve the savings. A person who has worked on search at Google said the company experimented with using different-size AI models to answer different types of queries. A smaller version of Gemini, which would use less computing power, might answer a relatively simple query. More-sophisticated queries would be routed to Gemini Ultra, the company’s flagship model, which is more expensive to use.

In addition to achieving cost reductions, Google has also tried to make the feature more efficient by triggering it only when the company thinks it would be better than a traditional set of search results, this person said. For example, asking Google for the weather wouldn’t bring up an AI result, but a more-complex query, like how to change a tire, might.

Even an 80% cost reduction would still make the AI searches pricier than normal search results. Nonetheless, the big cost reduction could translate to billions of dollars in savings in the long run if Google decides to introduce its AI features more widely.

Indicating how much of a priority Google has put on AI, the company shook up its search unit in March, elevating AI veterans. It put Liz Reid, who had overseen the development of new generative AI features, in charge of different search teams. Google also elevated Cheenu Venkatachary, an executive with expertise in large language models, to the role of head of search quality and ranking, replacing longtime executive Pandu Nayak. Hema Budaraju, a senior director of product in the search unit, leads product work on Search Generative Experience.

In addition to staff in the search unit, employees from DeepMind, Google’s AI research unit, have played a significant role in improving AI-generated search results in recent months—for instance, making them more accurate, said the person who has worked at Google.

Revenue Questions

Even as Google has brought down the costs of AI-generated search, the question of how to make money from AI remains unanswered. One major question is how Google will integrate ads into the AI-generated results. A year ago, when it previewed a pilot of Search Generative Experience, Google outlined ways the AI search feature could integrate ads, but it’s unclear how far along those efforts are.

For some searches, Google shows traditional ads that sometimes run above AI-generated results. Type in “how to buy a bracelet” and the top results are a group of ads, followed a little way down by the AI-generated explanation.

Pichai revealed another positive sign that emerged from the initial use of AI-powered search: Google was noticing that people who used AI-powered search actually searched more. That’s a good indication for Google’s search ads business, as getting users to search more provides more opportunities to show ads.

Internally, staff have discussed the impact that the AI-generated responses will have on display advertising on websites, according to two people who have worked at Google. Because these responses summarize an answer more succinctly than traditional search—which surfaces links to articles that might provide the answer—someone searching for information may not need to click through to another page to get more details. That could hurt revenue for some website publishers who rely on traffic from the search engine for display ad impressions.

Google has been under pressure for more than a year to strike a balance between cutting costs while rolling out new products that leverage advanced AI. The improvements in efficiency for Search Generative Experience have come alongside a massive increase in capital expenditures. On Thursday, Google said capex had doubled to $12 billion compared to a year ago, mostly because of investments in technical infrastructure for AI.

Still, Google is also hoping its investments in training Gemini will lead to new revenue streams—for example, via subscriptions to an advanced version of its ChatGPT competitor and selling access to the model through Google Cloud.

LG has become the first TV maker to add native support for Dolby Atmos in the Apple Music app on its TVs. The new feature has arrived through a software update to the Apple Music app on LG TVs, bringing a more immersive surround sound experience to LG users on compatible TV sets. It is unclear exactly which TVs are supported, but at a minimum certain 2020 models and later appear to have received the update.

Apple Music Dolby Atmos comes to LG TVs

From FlatpanelsHD:

FlatpanelsHD has confirmed that it works on an LG GX OLED model from 2020, suggesting compatibility with all Dolby Atmos-compatible LG TV models from 2020 onwards. At this time, we cannot confirm whether it also works on older LG TV models. LG has supported Dolby Atmos in TVs since the 2017 generation.

Previously, Dolby Atmos was only available for Apple Music when used through an Apple TV 4K or other compatible hardware, but now on supported TVs LG users can enjoy upgraded sound with no additional hardware necessary. Expect to see other TV makers follow suit in the future as Apple enables more devices to support Dolby Atmos natively through Apple Music.

This move continues Apple’s trend of gradually improving its service offerings on non-Apple platforms. The tvOS versions of apps like Apple Music and Apple TV, found exclusively on the Apple TV 4K, still offer key value by being more integrated into the broader Apple ecosystem. Nevertheless, it’s encouraging to see the company invest in their service apps on third-party platforms rather than pushing everyone to its own hardware solutions.

Mayor Eric Adams warned Wednesday that “outside agitators” had descended on Columbia University’s campus to radicalize students — as more than 100 pro-terror protesters were cuffed and hauled away by the NYPD overnight in a “massive operation.”

In total, 109 people were nabbed at the Ivy League campus after the NYPD responded to Columbia’s request to help oust a destructive mob that had illegally taken over the Hamilton Hall academic building late Tuesday, Adams and police said.

Cops are processing those arrests to “distinguish between who were actually students and who were not supposed to be on the grounds,” the mayor said at a news conference.

Hizzoner blamed the on-campus chaos on agitators who have a “history of escalating situations and trying to create chaos” instead of protesting peacefully.

“There were individuals on the campus who should not have been there. They were people who are professionals and we saw evidence of training,” Adams said.

“I know that there are those who attempting to say, ‘Well, the majority of people may have been students.’ You don’t have to be the majority to influence and co-op an operation. That is what this about.

“This is a global problem that young people are being influenced by those who are professionals at radicalizing our children and I’m not going to allow that to happen as the mayor of the city of New York.”

Separately, 173 protesters were arrested during violent scenes at the City College of New York campus overnight, police said.

Preliminary charges from both Columbia and City College range from trespass, criminal mischief and burglary, according to cops.

Adams said the NYPD was brought in Tuesday night to quell the unrest at Columbia after the administration acknowledged “outside agitators were on their grounds training and really co-opting this movement.”

“We went in and conducted an operation to allow the university to remove those who have turned the peaceful protest into a place where antisemitism and anti-Israeli attitudes were based.”

It comes as the CUNY Gaza Solidarity Encampment group called for protesters to rally outside 1 Police Plaza on Wednesday in support of the dozens of protesters who remain locked up.

Just moments after being cut loose, one of the protesters claimed to reporters that he and his fellow cellmates had been denied water and weren’t allowed to use the bathroom overnight.

“I really needed to pee the whole damn time,” Fernando Bobis, 42, said.

Bobis, a Columbia grad who practices medicine in Washington Heights, said he was among those arrested at City College after earlier protesting at the Ivy League campus.

“Five and 1/2 hours in a holding cell with no bathroom, no water, no food. I had a hard time checking my insulin to make sure I was okay. I’m Type 1 diabetic,” he said.

Terms of takeover bid to create Spanish banking giant set out during public holiday

Spanish bank BBVA has offered a 30 per cent price premium to TSB-owner Banco Sabadell in a takeover bid that values its local rival at more than €12bn.

Disclosing the details on Wednesday of an offer it made the previous day, BBVA said a combination of the two lenders would create “one of Europe’s largest and most robust financial entities”.

With BBVA’s market capitalisation at just under €60bn, a successful deal would create a combined group close in value to Santander at €73bn.

There was no share price reaction to the details of the bid because Spanish markets were closed for a public holiday. Sabadell said on Tuesday that its board would “properly analyse all aspects of the proposal”.

BBVA said Sabadell shareholders would own 16 per cent of the combined entity. It is offering one newly issued BBVA share for every 4.83 Sabadell shares, valuing Sabadell at €12.3bn. That represented a premium of 30 per cent above closing prices on Monday and of 50 per cent above weighted average prices in the past three months, BBVA said.

Its greater scale “would allow the new entity to face the structural challenges of the sector in better conditions and reach a greater number of clients, efficiently addressing investment needs associated with digital transformation”, BBVA said.

Sabadell has a big roster of small business clients while BBVA is strong in retail banking and serving big corporate clients.

Referring to its target’s ownership of UK high street bank TSB, BBVA said: “Banco Sabadell’s presence in the UK would add to BBVA’s global scale and its leadership in Mexico, Turkey and South America.”

Michael Christodoulou, analyst at Berenberg, said before the details were revealed: “A potential deal between the two banks would make strategic sense, in our view. However, we believe that the immediate financial benefits from a deal may be modest.”

The two banks attempted to strike a deal four years ago at the height of the pandemic, but merger talks between the pair broke down after two weeks following disagreements over pricing.

The deal would bring together the third and fourth largest banks in the Spanish market, creating a lender with the biggest domestic balance sheet.

The combined group would account for 21 per cent of Spanish mortgages and 23 per cent of deposits, up from BBVA’s current share of 13 per cent and 14 per cent, respectively.

The two banks account for a combined 18 per cent of branches in Spain, just behind CaixaBank’s 20 per cent.

“We can see the merits for such a deal from the vantage of BBVA,” said Iñigo Vega, analyst at Jefferies, but he added it was unclear whether deal terms could be agreed.

Analysts have noted that a deal would dilute BBVA’s emerging market exposure, which accounts for 84 per cent of its earnings, according to Citigroup.

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