Philippa Kaur

Apple fans can’t wait for February 2nd. That is when the tech giant’s latest gadget, a new augmented-reality (AR) headset called the Vision Pro, goes on sale. Some early reviewers complained that it caused headaches and had a two-hour battery life. Many potential buyers will be put off by the price tag of $3,499. Still, perhaps 200,000 have been pre-ordered, about 40% of what Apple had reportedly expected to sell this year. Tim Cook, Apple’s boss, has described trying the Vision Pro as an “aha moment”. “You only have a few of those in your lifetime,” he added.Aha or not, the Vision Pro is part of a trend. In September techies got excited about a new pair of smart glasses made by Meta, Facebook’s parent company, and Ray-Ban, an eyewear brand. The spectacles are controlled by voice and can play music, send texts and film everything you see. Two months later Humane, a startup founded by former Apple executives, launched the Pin, a brooch with which users interact by talking and gesticulating. In January the r1, a voice-controlled gizmo half the size of a smartphone, enthralled attendees at the Consumer Electronics Show in Las Vegas. Its maker, a startup called Rabbit, has sold nearly 100,000.What all these devices have in common is that they do away with screens, keyboards and mice. Thanks to “generative” artificial intelligence (AI), computers are getting good at listening to, reading and watching stuff—and understanding it. That means hardware can be controlled by voice, gesture or image rather than touch. AI is thus enabling new “form factors”—tech speak for gadgets in new shapes and sizes, just as the iPhone looked different from older handsets.Silicon Valley’s elite are cheering on the potential shift. They believe AI could create a new market for consumer hardware, replacing the smartphone as everyone’s essential device. Sam Altman, boss of OpenAI, the startup behind ChatGPT, is reportedly in talks to start a firm with Jony Ive, former head of design at Apple, to make a gadget purpose-built for AI. Satya Nadella, chief executive of Microsoft, an AI-ambitious tech titan, recently said that “once you have a new interface…new hardware is also possible.”image: The EconomistOne reason for all the excitement about new gadgets is that the old ones are looking unexciting. Last year 1.2bn smartphones were sold worldwide, down by 3% from the previous year and the lowest level for a decade, according to IDC, a research firm. PCs did even worse, declining by 15% in 2023 to 242m units. Cash-strapped consumers are opting for cheaper alternatives, such as second-hand devices, or holding on to their current ones for longer.The hope is that they may be persuaded to fork out for all-new gadgets because they offer something that old ones do not. AI could, for instance, make using devices more seamless and more personal. Users can tell or gesture to the r1 to hail a ride, order food or play music without the need to toggle between apps. It also learns from users’ previous actions. Until now people had to adapt to software, says Vinod Khosla, a veteran venture capitalist and early backer of Rabbit. In the r1, “the AI adapts to you.”New gadgets are also less finicky to develop and manufacture. Lior Susan of Eclipse, a venture-capital (VC) firm, says that ten years ago building a high-tech widget required hundreds of staff. Today he can do the same thing with about ten. Every step of the manufacturing process has become easier. Initial versions can be mocked up in design software. Rather than buying an industrial machine to make parts for a prototype, they can be ordered from 3D-printing firms like Shapeways. Sensors, batteries and chips can be bought off the shelf. Contract manufacturers, such as Foxconn, no longer insist on working only for big clients like Apple. Some offer dedicated services for hardware startups.The resulting crop of new AI-powered devices falls into two broad categories. The first is headsets for virtual or augmented reality (VR and AR). So far they have been most popular among gaming enthusiasts. Sales of VR headsets peaked at around 10m units in 2020 after the release of Meta’s Quest 2, estimates George Jijiashvili of Omdia, a research firm. He thinks the Vision Pro will breathe new life into the industry by making VR appealing to non-gamers. Promotional videos depict people using the Vision Pro to watch films, work or talk to friends.The second category consists of subtler gizmos. Some 540m “wearables” worth $68bn were shipped last year, according to IDC. Many already incorporate AI in one way or another. They include earphones (which account for 63% of the units sold), smartwatches (another 30%), wristbands such as the Whoop, a fitness tracker, and smart glasses, like Meta’s Ray-Bans (which together make up most of the rest). Humane’s Pin and AI pendants made by two startups, MyTab AI and Rewind AI, are the latest additions to this group.All these devices are nifty. Whether they are nifty enough to dislodge the smartphone and become the next big platform is another matter. For that to happen, consumers must take to them. This requires them, first, to look good—which some failed early efforts, such as the dorky Google Glass, did not. The r1 owes its sleek retro feel to Rabbit’s collaboration with Teenage Engineering, a Swedish design firm. Before its launch, Humane’s Pin appeared on a Paris catwalk at an event held by Coperni, a French fashion house. Meta’s glasses are a hit in part because Ray-Ban knows what makes shades stylish.Second, the new gadgets have to be useful in ways the old ones are not. Many hardware-makers are adding AI to existing devices. On January 31st Samsung started selling an AI smartphone that can do neat tricks such as summarising text-message threads. Microsoft’s next generation of laptops and tablets will reportedly include specialist AI chips and a new keyboard button to summon “Copilot”, its AI chatbot. Smart speakers, such as Amazon’s Alexa and Google’s Nest, and earphones, such as Apple’s AirPods, are getting revamped with AI features. These including chatbots and, with AirPods, the ability to let through necessary sounds and turn down volume when the wearer is speaking.To break through, the AI hardware will have to make life either much easier (for instance by booking a whole trip, flight, car and hotel included, with a single command) or much more marvellous (creating Mr Cook’s “aha moment”). Users will also expect them to perform more than a couple of functions. That means lots of apps. Meta’s latest VR headset, the Quest 3, offers 500 or so. The Vision Pro already boasts around 350 purpose-built apps, and can run the iPhone versions of most of the roughly 2m available in the App Store. Humane’s Pin, which doubles as a phone, claims to be doing away with apps, instead offering a range of “AI-powered services” from providers such as OpenAI and Google. Rabbit’s r1 piggybacks on smartphones’ existing app universe, at least for the time being.Third, although manufacturing things has got easier, managing supply chains remains the hardest part of running a hardware business, notes Shaun Maguire of Sequoia, another VC firm. Suppliers may take phone calls from smaller firms but some are still reluctant to give good prices to unproven newcomers with small orders.None of the available AI devices overcomes all three challenges. Those that look pretty, like the r1, the Pin or Meta’s Ray-Bans, seem to be peripherals more akin to AirPods than the iPhone. Independently useful ones like the Vision Pro or the Quest are dorkier than Google Glass, and much clunkier. In addition, developing apps for Apple’s headset is expensive, which is putting off developers, including some video-game studios, Netflix, Spotify and YouTube (which also happen to compete with Apple’s own video and music-streaming services). Production problems afflict just about everyone. Jesse Lyu, founder of Rabbit, says that it took his product becoming an overnight sensation for him to gain a bit more bargaining power over his suppliers. Even Apple, the master of supply chains, reportedly had to scale back initial plans to ship 1m Vision Pros this year because of the complex manufacturing involved.If some gadget-makers clear all three hurdles, they may stumble on another: keeping up with the breathtaking pace of AI advances. Apple took seven years to develop the Vision Pro, aeons in AI time. Even the next generation of Rabbit’s device, which Mr Khosla says will be ready as soon as this summer, may be outmoded by the time it gets into users’ hands. One of today’s AI gadgets may one day dethrone the smartphone. More likely, the winning form factor has yet to take shape. ■ More

“IT IS THE most advanced AI accelerator in the industry,” boasted Lisa Su, boss of Advanced Micro Devices (AMD), at the launch in December of its new MI300 chip. Ms Su rattled off a series of technical specifications: 153bn transistors, 192 gigabytes of memory and 5.3 terabytes per second of memory bandwidth. That is, respectively, about 2, 2.4 and 1.6 times more than the H100, the top-of-the-line artificial-intelligence chip made by Nvidia. That rival chipmaker’s prowess in the semiconductors fuelling the AI boom has, over the past year, turned it into America’s fifth-most-valuable company, with a market capitalisation of $1.5trn. Yet most experts agreed that the numbers and Ms Su weren’t lying: the MI300 does indeed outshine the H100. Investors liked it, too—AMD’s share price jumped by 10% the next day.On January 30th, in its quarterly earnings call, AMD announced that it expected to sell $3.5bn-worth of MI300s this year. It also reported strong revenues of $23bn in 2023, four times what they had been in 2014, when Ms Su became chief executive. Its market value is up 100-fold on her watch, to $280bn. Relative to forecast profits in the next 12 months, its valuation is richer even than Nvidia’s. Last year it displaced Intel, which once ruled American chipmaking, as the country’s second-most-valuable chip company. Now it is taking aim at the biggest.image: The EconomistSuch ambition would have seemed fanciful a decade ago. Back then, recalls Mark Papermaster, AMD’s technology chief, AMD was facing an “existential crisis”. In 2008 it had spun off its chip-fabrication business to focus on designing processors, outsourcing manufacturing to contract chipmakers such as TSMC of Taiwan. The idea was to be better able to compete on blueprints with Intel, whose vast fabrication capacity AMD could not hope to match. It didn’t work. Several of AMD’s chips flopped. Sales of its central processing units (CPUs), mostly for personal computers, were collapsing. In 2013 it sold and leased back its campus in Austin to raise cash. A year later Ms Su inherited a net-debt pile of more than $1bn, a net annual loss of $400m and a market capitalisation of less than $3bn, down from $20bn in 2006.Ms Su realised the only way for AMD to get back in the game was to steer it away from the sluggish PC market and focus on more promising areas like CPUs for data-centre servers and graphics processing units (GPUs, which make video-game visuals lifelike) for gaming consoles. She and Mr Papermaster took a gamble on a new CPU architecture designed to beat Intel not just on price, but also on performance.When the going got toughThe idea was to use a Lego-like approach to chip building. By breaking a chip up into smaller parts, AMD could mix and match blocks to assemble different types of chips, at a lower cost. When the first such composite chips were released in 2017, they were zippier and cheaper than rival offerings from Intel, possibly in part because Intel was distracted by its own problems (notably repeated manufacturing slip-ups as it moved to ever tinier transistors). In the past ten years AMD’s market share in lucrative server CPUs has gone from nothing to 30%, breaking Intel’s monopoly.Having faced down one giant, AMD now confronts another. The contest with Nvidia is different. For one thing, it is personal—Ms Su and Jensen Huang, Nvidia’s Taiwanese-born boss, are distant relatives. In contrast to Intel, Nvidia is, like AMD, a chip designer and thus less prone to production missteps. More importantly, the stakes are higher. Nvidia’s market value of $1.5trn is predicated on its dominance of the market for GPUs—not because of their usefulness in gaming but because they also happen to be the best type of chip to train AI models. Ms Su expects global sales of AI chips to reach $400bn by 2027, up from perhaps $40bn last year. Does she stand a chance against Nvidia?Nvidia is a formidable rival. Both its revenues and operating margins are nearly three times AMD’s. According to Jefferies, an investment bank, the company dominates the market for AI accelerator chips, accounting for 86% of such components sold globally; before the launch of the MI300, AMD barely registered. Nvidia also offers network gear that connects clusters of chips, and software, known as CUDA, to manage AI workloads. Nvidia has dominated AI chipmaking because it has offered the best chips, the best networking kit and the best software, notes Doug O’Laughlin of Fabricated Knowledge, a research firm.image: The EconomistAMD’s new processor shows it can compete with Nvidia on semiconductor hardware. This, Mr Papermaster says, is the result of a ten-year investment. AMD is spending nearly $6bn a year on research and development, nearly as much as its larger rival—and twice as much as a share of sales (see table). This has enabled it to adapt its Lego approach to GPUs. Combining a dozen blocks—or “chiplets”—into a single chip lets AMD put processors and memory close to each other, which boosts processing speed. In December OpenAI, maker of ChatGPT and the world’s hottest AI startup, said it would use the MI300s for some of its training.To outdo Nvidia on networking and software, AMD is teaming up with other firms. In December it announced a partnership with makers of networking gear, including the two largest, Broadcom and Cisco. It is also supporting an open-source initiative for chip-to-chip communication called Ultra Ethernet Consortium as an alternative to InfiniBand, a rival championed by Nvidia.Chomping at the byteNvidia’s lead in software will be harder to close. It has been investing in CUDA since the mid-2000s, well before the current AI wave. AI developers and researchers love the platform, which allows them to fine-tune the performance of Nvidia processors. AMD hopes to tempt customers away from Nvidia by making its software, ROCm, open source and providing tools to make the switch smoother, by translating CUDA programs into ROCm ones.Beating Nvidia at its own game will not be easy. Mr Huang’s firm is not standing still. It recently announced plans to bring out a new chip every year instead of every two years. The tech giants with the grandest AI ambitions—Alphabet, Amazon, Meta and Microsoft—are busily designing their own accelerator chips. Despite AMD’s robust sales, investors were disappointed with its forecast for MI300 shipments. Its share price dipped by 5% the day after it reported its latest results.Still, AMD has one big thing going for it. It is not Nvidia. AI companies are desperate for an alternative to its larger rival, whose dominant position lets it charge steep prices and, with demand outstripping supply, ration chips to buyers. Despite efforts to design their own hardware, big tech firms will rely on chipmakers for a while yet, and AMD gives them more options, notes Vivek Arya of Bank of America. Microsoft and Meta have already announced plans to use AMD’s GPUs in their data centres. And if Nvidia slips up, AMD will be there to pick up the pieces. Just ask Intel. ■ More

Jürgen Klopp is a football manager. That means there is a limit to how much he can teach corporate bosses about how to do their jobs. Managers in firms tend not to be parent substitutes to their charges, envelop people in bear hugs after a successful meeting or use the gegenpressing technique against rivals. But Mr Klopp has drawn back the veil on a crucial ingredient of success in almost every walk of life: energy.To general surprise Mr Klopp announced on January 26th that he would be leaving his job as manager of Liverpool Football Club later this year. His team is leading the English Premier League, the most-watched competition in the world’s most popular sport. His job is secure—his contract does not run out until 2026—and he claims still to love it. But after eight years in the role, and more in management, he is running out of energy. His resources are finite, he said. “I can’t do it on three wheels, I don’t want to be a passenger.”Mr Klopp is not the first high-profile person to make this kind of decision. Jacinda Ardern resigned as prime minister of New Zealand in January 2023, saying that she no longer had enough in the tank to do the job. Jeff Kindler cited the extreme demands of his role when he stopped being the boss of Pfizer, a drugmaker, in 2010, saying he was looking forward to recharging his batteries. But admissions like this are nonetheless rare from someone leading an organisation.For energy is one of those factors that reliably differentiates bosses from those below them. Ability, ambition and luck all play a big part in climbing the greasy pole. But energy plays an outsize role. High-achievers have done their email and a full workout before the sun rises. They don’t cancel breakfasts because they are feeling a bit tired; they certainly don’t admit to doing so. They are less likely to nod off in the middle of the afternoon. They get off the red-eye and work a normal day.And that is just on the way up. Talk to people who have made the leap into CEO roles and they will frequently comment on how intense the job is, how tough it is to switch off. Most organisations are pyramids. As decisions get tougher and more important, they land on an ever smaller number of individuals. And as these figures become more senior, the number of people who want to see them goes up.The boss has to show their face to employees regularly, and it cannot be the face of someone who looks like they haven’t slept for two weeks. They have to glad-hand the board, meet investors, attend endless networking events and make time for actual work. It is exhausting to contemplate, let alone do.The sheer physical demands of big jobs mean that certain types of people have an advantage over others. Not having too many other calls on your time helps, which tends to be bad news for women, who shoulder more chores and caregiving duties at home than men.Extroversion offers an edge in terms of oomph. A survey of CEO time use from 2017, conducted by Oriana Bandiera of the London School of Economics and her co-authors, found that bosses spend 70% of their time interacting with colleagues, clients and the like. If you are the kind of person who derives energy from spending time with other people, this is like being a phone on charge all the time. If you are introverted and find other people draining, your battery will be close to 1% and it is only a matter of time before you shut down completely.Some lucky people naturally have more zip. These are the mitochondrial CEOs who can get by on three hours’ sleep and do not know what it is like to grope for the snooze button. But if you haven’t won the biological lottery, you can still work out what reinvigorates and what enervates. That might mean exercise at dawn, power naps in the afternoon or just protecting your calendar; when he was running Amazon, Jeff Bezos would aim for eight hours’ shuteye a night and try not to schedule meetings before 10am. It means prioritising rest rather than getting by on less of it. In their book “The Mind of a Leader”, Rasmus Hougaard and Jacqueline Carter found that senior executives were likely to sleep more than non-executives.In admitting that his energy stores are now becoming depleted, Mr Klopp has offered an unusual reminder of how punishing leadership roles can be. His decision to hang up his Liverpool tracksuit brings to mind the aphorism of another great football manager, Sir Alex Ferguson. Hard work is a talent, Sir Alex liked to say. But it is also just hard. More

Handing over a family business to the next generation can be a dramatic process. If the company is big and progeny bountiful, the intrigue is followed with zeal by both the financial press and the tabloids. When 29-year-old Frédéric Arnault, the second-youngest of five scions of the LVMH luxury empire, took over its watch unit at the start of the year, speculation swirled about the succession plan being put in place by his billionaire father, Bernard Arnault. Yet many more heads of family firms face the opposite predicament: they have no heir at all.Legions of entrepreneurs born in rich countries during the two-decade baby boom starting in the 1940s are close to retirement age or past it. Some, like Giorgio Armani, the 89-year-old founder of the Italian fashion house, are childless. Others have offspring who want to chart their own career paths. Dalian Wanda, a sprawling Hong Kong conglomerate, faced a public headache when it turned out that the only son of the founder, Wang Jianlin, would not take over the company. Most heirless firms are not quite so large or well-known. But they are numerous. Owners aged 65 or over account for 23% of American firms with at least one employee, up from 20% in 2017. The share of German business-owners who are over 60 has climbed to 31%, three times the number two decades ago. Only one in ten is younger than 40. By 2025 almost 2.5m small and medium-sized businesses in Japan will have owners in their 70s or older, reckons the country’s economy ministry. Half of that group have made no plans for a handover.No owner likes to see a life’s work fall into desuetude. When otherwise successful companies fold without a new owner or are sold off piece by piece by inheritors, they also lose valuable know-how and intangible assets. Collectively, their disappearance into oblivion may be a drag on the broader economy’s productive potential. Fortunately for owners and governments, help is at hand thanks to a fast-growing industry of pseudo-heirs.The most established group of helpers, called search funds, is an offshoot of America’s private-equity industry. The first such fund was created in 1984 by a professor at Stanford University’s Graduate School of Business (GSB). Many are run by one or two MBAs in their early 30s—GSB graduates were historically particularly common. They raise capital from outside investors, identify one small or medium-sized company, typically worth less than $10m, buy it from their owners and take over as full-time chief executives.Search funds are now popping up across the Atlantic, where Europe’s ageing economies offer rich pickings. Arturo Alvarez, a Spanish search-fund founder, says he has looked at 3,000 companies in Spain and Portugal over the past two years or so, and has sat down for a conversation with about 400, of which he will pick just one. Jürgen Miller, an investor in search funds from Munich, notes that many of the more than 500,000 small and medium-sized firms in Germany’s formidable Mittelstand with annual sales of between €2m ($2.2m) and €50m are run by old-timers who might prefer to be soaking up the sun on Majorca.The next target may be Japan. In the past some Japanese founders with no male heir relied on the peculiar practice of adult adoption—a son-in-law or loyal employee can become the legal descendant of a business owner, avoiding gift taxes. Nowadays adopted daughters are acceptable, too. But relentless demographic trends are making such adoption ever harder. Japanese 70-somethings, of whom there are 16.4m, outnumber 20-somethings by four to three.Strangely, the world’s most demographically challenged big economy has so far not attracted many search funds. Some enterprising types are, however, profiting from its demographic cliff in other ways. M&A Research Institute, created in 2018 and listed in Tokyo in June 2022, is a succession broker. It uses clever machine-learning algorithms to match buyers, mostly private-equity firms or larger Japanese companies, and sellers. Two-thirds of its target businesses are worth less than $3.5m. The firm’s 32-year-old founder, Sagami Shunsaku, says that about four in five of the owners he encounters want to sell because they have no alternative plan for succession. Some are in their 90s.The pseudo-heir industry is still tiny. Between 1986 and 2021 search funds made deals worth just $2.3bn in total. But they are rising in popularity: a third of that figure was invested in 2020 and 2021 alone, with more almost certainly deployed since.And they are doing a roaring trade. According to one GSB study, the typical search fund boasts an annual internal rate of return (IRR)—the private-equity industry’s preferred performance measure, which calculates returns on deployed capital but ignores any uninvested money—of 35%. By comparison, conventional private-equity funds generate an IRR of around 15% over the past two decades. Jan Simon of IESE Business School in Spain (and an investor in search funds) says the outsize returns are due to a combination of little competition from bigger private-equity firms, which prefer much larger deals, and plenty of involvement by the young managing partners.The M&A Research Institute is similarly lucrative. Its operating profit more than doubled in the last financial year, to $32m. Its share price has risen by more than 450% since its listing; earlier this year Mr Sagami’s stake made him Japan’s youngest billionaire. He is already eyeing other rapidly greying places in Asia, such as Singapore. ■ More

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Tim Cook, boss of Apple, is having a rough start to 2024. In the past month his company has faced an unusual barrage of unpleasantness. A patent dispute forced it to remove features from two of its smartwatches. It found out that America’s Department of Justice (DoJ) would be suing it shortly over antitrust transgressions. It reported that it was losing market share in smartphones in China, its second-biggest market. Adding insult to injury, a few Wall Street analysts said something that would have been unthinkable until recently—that Apple’s shares were overvalued. On January 11th Microsoft, a rival tech titan, duly dethroned the iPhone-maker, temporarily, as the world’s most valuable company.The run of bad news may continue on February 1st, when Apple reports its latest quarterly earnings. Equity researchers estimate that its revenues barely grew in the last quarter of 2023, if at all. Then, on February 2nd, Apple will be tested once again. It will start shipping the Vision Pro, an augmented-reality (AR) headset that it has been working on—and talking up—for a few years. The high-end gadget, which will sell for $3,499, represents a big bet on a new technology “platform” that, Apple may be hoping, could one day replace the smartphone as the core of consumers’ digital experience—and the iPhone as the source of its maker’s riches. Early indications hint that Apple should worry about the device’s prospects. Netflix, Spotify and YouTube have announced that they will not make their popular streaming apps work on the headset. None said why. But it could be because they all compete with Apple’s own streaming services, and developing an AR app is likely to be costly.Mr Cook can brush off some of these worries. Despite everything, Apple’s share price has not moved meaningfully in January. A few days after being overtaken by Microsoft, it reclaimed its heavyweight stockmarket title—and its $3trn valuation. And if the Vision Pro’s launch is a flop, the short-term effect on Apple’s revenues will be nugatory, given the headset’s limited initial production.Nevertheless, Apple’s boss would be unwise to dismiss the new year’s niggles. For they point to larger challenges for the company. These fall into three broad categories: antitrust and legal issues; slowing iPhone sales; and growing geopolitical tensions. None of these is existential right now. But each carries with it a risk of causing a big upset. Could they cost Apple its position as the world’s most valuable company for longer than a week or so?image: The EconomistThough Apple’s market value has been among the world’s top ten since 2010, until a few years ago it traded at a low valuation relative to profits. It was thought of as a maker of hardware, a business that is more difficult to scale than software. For much of the 2010s its price-to-earnings (p/e) ratio, which captures investor’s expectations of future profits, was below 20, comparable to that of HPE or Lenovo, boring computer-makers with low growth and tight margins. It was also below the average for big American companies in the S&P 500 index (see chart 1).image: The EconomistThis started to change around 2019, notes Toni Sacconaghi of Bernstein, a broker. Revenue from Apple’s “services” business, which provides software to its devices’ 1bn or so users, began to grow. The two biggest parts of this category are an advertising business, which Bernstein puts at $24bn a year (including around $20bn a year from Google for making the search engine the default option on Apple’s devices), and the App Store (another $24bn). Services also includes Apple Music and Apple TV, its streaming offerings, as well as a fast-growing payments business. All told, revenues from services amount to $85bn a year, or a fifth of total sales. In 2016 they contributed just $24bn, or a tenth of overall revenues (see chart 2).This helped convince investors that Apple was no longer a stodgy hardware provider. It was a software platform, where new paying users could be added at little extra cost. That meant higher profits—the gross-profit margin for Apple’s services arm is 71%, compared with 37% for devices—and more recurring revenue. As services became a bigger part of the business, Apple’s overall profitability swelled, too, from 38% in 2018 to 44% last year. That was also aided by the fact it was selling more high-end, high-margin iPhone models. All of this helped lift Apple’s p/e ratio to around 30, comfortably above the S&P 500 average and higher than that of Alphabet (Google’s parent company), though still below Microsoft’s (38) and Amazon’s (72).One set of risks that could undo Apple’s p/e progress has to do with its legal headaches. Some, such as the patent problem, look like minor threats. In October the International Trade Commission ruled that Apple infringed patents related to an oxygen-measuring sensor that were owned by Masimo, a medical-device maker. Apple stopped selling the models which contained the offending technology. But on January 18th it started to sell them again, minus the disputed sensor.Apple’s bigger legal problems have to do with its services business. In March new rules will come into force in the EU, a huge market, that force Apple to allow apps to be installed on its devices without going through its App Store. That makes it harder for it to charge the 30% fee it levies on most in-app purchases (Apple has filed a lawsuit against the rules).In America, the DoJ is reportedly looking into whether Apple’s smartwatch works better with the iPhone than with other smartphones and why its messaging service is not available on rival devices. If, in a separate case against Google, the courts agree with the DoJ that its default-search deals with device-makers are anticompetitive, Apple could be deprived of roughly $20bn a year in virtually free money. As a result of a lawsuit filed in 2021 by Epic Games, a video-game developer, Apple has already had to change the way the App Store charges developers to sell apps there.The orb is in your courtApple is not defenceless in the legal battles. It quickly found a workaround to the Epic-induced changes to its App Store policy that lets it keep collecting hefty fees. A final ruling in the DoJ’s case against Google is probably years away. The same is true of its expected case against Apple. As with many antitrust cases against big tech, investors seem nonplussed.The company is more vulnerable to the second area of concern—its slowing core business. According to a poll of analysts, Apple sold about 220m iPhones last year, barely more than the 217m it shifted in 2017. In 2024 the number might not be much higher. For a while, Apple could offset the slowing volumes with higher prices. But annual revenue growth has slipped to 1% in the past three years, down from an average of 9% between 2012 and 2019.Some rivals are trying to eat into Apple’s market share in high-end devices by exploiting consumers’ appetite for ChatGPT-like “generative” artificial intelligence (AI). Samsung, a South Korean tech titan, said that it would launch a new range of AI-powered phones by the end of January. Flashy features will include real-time voice translation and turbocharged photo- and video-editing. The devices may be on sale eight months before Apple’s next iPhones. Apple, by contrast, has said little about its plans for the hottest thing in tech since, well, the iPhone. “We’re investing quite a bit,” Mr Cook noted cryptically on the company’s most recent earnings call.Apple is also being given a run for its money in China, the source of 17% of its overall revenues. According to Jefferies, an investment bank, Apple’s share of smartphones in the country declined last year. Meanwhile that of Huawei, a domestic tech champion, grew by around six percentage points. In August Huawei stunned industry-watchers—and America’s government, which has for years barred sales of American technology to the firm on national-security grounds—by launching the first 5G device containing advanced chips that were Chinese-made rather than imported. Patriotic shoppers in China snapped up the phone and, for good measure, other Huawei devices.When it comes to AI, worries about Apple’s progress may be overstated. Erik Woodring of Morgan Stanley, an investment bank, points to signs that the company is indeed investing quite a bit. In October the firm’s boffins and researchers at Columbia University jointly released an open-source AI model called Ferret. Two months later Apple published a paper about how such models could run on smartphones, which are much less powerful than the data centres typically used for the purpose. In January a South Korean tech blogger reported that an update to Apple’s operating system possibly as early as June would include AI enhancements for Siri, Apple’s robot assistant. Rumours swirl that Apple is planning to use generative AI in its own search engine.China represents a bigger threat—and not just because of a revitalised Huawei. Apple’s plans for future growth depend in large part on success in emerging markets, including the biggest one of all. Mr Cook kicked off Apple’s past three earnings calls by talking about the company’s sales outside the rich world. China was doubtless on his mind.Apple is also exposed to China risk through its supply chain. Despite much-publicised efforts to move some production to India, around 90% of iPhones are still manufactured in Chinese factories. So are most Mac computers and iPads. Mr Sacconaghi of Bernstein says that Apple will be hugely exposed to a serious geopolitical escalation, such as a conflict over Taiwan, for at least the next five years.Events short of a Chinese invasion of Taiwan could also hurt the company. The return of Donald Trump to the White House, a serious possibility now that he has all but wrapped up the Republican nomination, would almost certainly raise barriers to trade and heighten Sino-American tensions. Even if Joe Biden defeats Mr Trump in the presidential election in November, he is hardly a China dove. The Chinese government is beginning to hit back against American sanctions. It has already banned products made by Micron, a chipmaker from Idaho, from some infrastructure projects. In September reports surfaced of a ban on Apple products among government officials. Although the authorities later denied the claims, the episode put investors on edge.Any Chinese action that hurts Apple in China would hurt China, too. Apple says 3m people work in its supply chain. Many of those workers are Chinese. One analyst likens Apple’s position vis-à-vis China’s government to “mutually assured destruction”. The same could be said of the commercial balance between America and China. Try explaining that to Mr Trump. ■ More

The consecration of a Hindu temple in Ayodhya, the mythical birthplace of the god Ram, on January 22nd was a huge religious event in India. It carried political significance, too. It was presided over by the prime minister, Narendra Modi, and signalled the unofficial start to the campaign of his Bharatiya Janata Party (BJP) ahead of a general election in April and May. It also turned into a business jamboree. Attendees included a “Who’s Who” of India Inc, from the heads of the country’s mightiest conglomerates to founders of its sexiest startups. All came to pay tribute to Ram—but mostly to Mr Modi.Some corporate guests came because of genuine appreciation for his stewardship of the economy. Others showed up out of fear that if they didn’t, they and their businesses might find themselves fending off tax inspectors or struggling to secure business permits from a government that critics accuse of creeping authoritarianism. This odd mix of sentiment reflects the business world’s attitude towards India’s enigmatic strongman.image: The EconomistBusinesses certainly have a lot to be grateful for. During Mr Modi’s decade-long tenure GDP has grown faster than it has in most big countries. In the third quarter of 2023 it roared ahead by 7.6%, year on year. Foreign direct investment went from $24bn in the year before Mr Modi’s election in 2014 to more than double that on average in the past three financial years (see chart 1). On January 22nd India’s stockmarket overtook Hong Kong’s as the world’s fourth-biggest by market value.Not all of this is Mr Modi’s doing. India has, for example, benefited from Western firms’ efforts to diversify supply chains away from China. But bosses also credit his policies. The roll-out of a national digital-ID scheme has fuelled a boom in digital payments and e-commerce. A national goods-and-services tax (GST) has replaced a baffling patchwork of state levies. The financial sector went from crippled to sturdy in ten years and the government has turned talk of privatisation into (some) action, notably selling Air India, the long-suffering flag carrier.Economists debate the wisdom of protectionist bungs such as higher tariffs and “production-linked incentives” (PLIs) to promote manufacturing, on which the state is spending $26bn over five years—but businesses love them. Christopher Wood of Jefferies, an investment bank, forecasts that if the BJP lost the election, the stockmarket would drop by 30%.Industrialists aren’t shy about expressing their adulation. Two weeks before making the pilgrimage to Ayodhya, the heads of India’s three biggest conglomerates fawned on Mr Modi at a jamboree in his home state of Gujarat. Mukesh Ambani of Reliance Industries called Mr Modi “the most successful prime minister in India’s history”. Natarajan Chandrasekaran of Tata Sons spoke of Mr Modi’s “visionary leadership”. Gautam Adani of the Adani Group lauded him for setting “a benchmark for a more inclusive world order”. Lesser business figures zealously echo such sentiments, ideally within earshot of government officials.In private, the praise is more guarded. Corporate leaders value Mr Modi’s willingness to hear them out. He often turns up in person at business shindigs, which have mushroomed on his watch. Behind closed doors he meets not just big bosses but also lowlier executives. Regional and Indian heads of multinationals report that during such audiences he listens to them intently, asks clever questions and never comes across as distracted or bored. They feel free to give him their unadulterated opinions about policy, which he takes in even if he then feels free not to act on them.He is also perceived as personally incorruptible—a welcome exception to India’s venal politics. Some businesspeople grumble that the government makes life easier for national champions, such as Reliance and Adani Group. But they concede that these groups are putting money into areas such as telecoms, energy and infrastructure, all of which India needs, and that their relatively meagre financial returns do not scream cronyism. When prominent companies stumble because of mismanagement, Mr Modi does not intervene to save them from insolvency. That includes firms run by people seen to be close to him, such as Mr Ambani’s brother, Anil, who headed a rival conglomerate, and the Ruia family, owners of Essar Steel.Mr Modi has also, bosses acknowledge, opened doors for them abroad. He used his recent stint chairing the G20 club of big economies to promote himself—but also to promote his country. He has established stronger ties with America, Israel, Saudi Arabia and the United Arab Emirates. Indian financiers and executives say they can now get meetings with American, Arab and European bankers who a decade ago would have ignored their calls.image: The EconomistCriticisms come in more hushed tones. India’s GDP per person grew briskly under Mr Modi by emerging-world standards but had risen half as fast again under his predecessor, Manmohan Singh of the Congress party, who also ruled for ten years. Stockmarket returns, too, have been lower in the past decade than in the one before (see chart 2). India may be resurgent, but the official measure of business investment as share of GDP is not (see chart 3).image: The EconomistMany of Mr Modi’s most successful policies, such as the digital ID and the GST, were first put forward by Mr Singh’s government. Some taxes are lower but, with the exception of the GST, no less Byzantine. The 73-year-old prime minister has no obvious successor. Although he remains sprightly, his eventual departure could therefore lead to political instability of the sort that businesses prefer to avoid.Such concerns come up again and again in conversations with prominent business figures. None wants to be quoted. One reason for the public silence is as old as the Indian state: a rapport with the government can help businesses cut through impenetrable red tape; a lack of one can leave them at the mercy of bureaucrats. Another reason is new, specific to Mr Modi’s BJP, and uttered underbreath. Criticism, businesspeople whisper, can invite retribution. This may come in the form of a probe by the Department of Revenue, the Serious Fraud Investigation Office or the Central Bureau of Investigation. It may concern matters dating back years, which makes defending yourself harder and costlier. To many luminaries of India Inc, staying in the government’s good graces has gone from advisable to existential.Fear of no favourA tycoon last aired such concerns openly four years ago. Rahul Bajaj of the Bajaj Group, another conglomerate, told Amit Shah, Mr Modi’s home-affairs minister, “You are doing good work, but despite that we don’t have the confidence that you will appreciate it when we criticise you openly. Intolerance is in the air.” Under Mr Singh, by contrast, the government was fair game. Mr Shah responded that “there is no need for anybody to fear…we have done nothing to be concerned about [with respect to] any criticism”. “If anyone does criticise,” he added, “we will look at the merit…and make efforts to improve ourselves.”Bajaj died in 2022, aged 83. No other corporate grandee has publicly echoed him since. In the eyes of his fellow industrialists, Mr Modi and his government are still doing good work. But intolerance is still in the air, too. ■ More