Three Things (4/29)

Apple intensifies talks with OpenAI

Apple recently renewed talks with OpenAI about integrating the startup’s generative artificial intelligence into the iPhone. Just last month, Apple was also said to be in discussion with Google to license their Gemini chatbot for new iPhone features coming towards the end of 2024. Apple is clearly weighing all its options for outsourcing automation, but shareholders are questioning why Apple doesn’t utilize proprietary AI given they pride themselves on innovation.

Siri has historically had its shortcomings, and it is possible a partnership with OpenAI or Google would give Apple time to work on its own AI models. Apple has been slower than competitors (Microsoft and Google) to roll out plans for including AI in its widely used consumer products and for good reason. While every mega tech giant is racing to keep up, we believe Apple is under acute pressure since the updates will be directly scrutinized by consumers everywhere. Its ability to properly execute on an AI plan for its iPhones will determine its success through 2024.

Alphabet’s first ever dividend

Alphabet reported its first-quarter earnings on Thursday, April 25th after market close, and results topped the street’s estimates with cosmic profits coming from the cloud division. Investors sent the stock up ~14% in early trading after the company announced its first dividend of $0.20 per share.

Companies issue dividends to their shareholders most often to show financial stability and to attract or retain investors. Dividends are typically issued quarterly as a cash payout or sometimes as a stock dividend, and the companies rewarding investors tend to be larger, established, and already experiencing steady growth. Alphabet is the second big tech company to announce the initiation of a dividend this year, after Meta in February. After a banner year for these two magnificent seven companies, we think the dividend demonstrates their aptitude for continued stable growth.

Walgreens opens gene therapy pharmacy

Walgreens announced plans to open a new pharmacy dedicated to bringing emerging cell and gene therapies to patients with conditions like cancer, cystic fibrosis, and Crohn’s disease. Walgreens expects the facility in Pittsburgh to attract drugmakers because the lack of 'pharmacy benefit manager', or middleman between the drug manufacturer and pharmacy, allows Walgreens to work with all customers.

The facility is one part of the company’s greater strategy to invest in its pharmacy and increase cash flows. Walgreens is trying to enter the expanding market for cell and gene therapies after the surge in approval of these drugs. They plan to play a role in the supply chain, logistics, and financing, and while investments will be costly, the new facility should put them at the forefront of a developing market where they could reap the benefits as a first mover.

Disclosures:

As of the date of publishing, META, GOOGL, AAPL, and MSFT are holdings in Titan's Flagship strategy.

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