Business News - S Chronicles

1 Magnificent Seven Stock to Buy Hand Over Fist in March and 1 to Avoid Like the Plague

Business News / Ashley Cornell, email: [email protected]

It was another brilliant start to the year for Wall Street. After the Dow Jones Industrial Average, S&P 500And Nasdaq Composite have all climbed to record highs in 2024.

While there were select strengths that fueled this rally in the broader market, Wall Street's gains rest primarily on the shoulders of the Magnificent Seven.

Two red dice labeled

Image source: Getty Images.

Shares of the “Magnificent Seven” have pushed the broader market higher

When I say “Magnificent Seven,” I am referring to seven of the largest and most influential companies that have significantly outperformed the S&P 500 benchmark over an extended period of time. These seven stocks are (in descending order of market cap):

Microsoft (MSFT -2.96%)
Apple (AAPL -2.84%)
Nvidia (NVDA 0.86%)
Amazon (AMZN -1.95%)
alphabet (GOOGL -0.51%) (GOOG -0.31%)
Metaplatforms (META -1.60%)
Tesla (TSLA -3.93%)

As mentioned, these stocks have been moving around the S&P 500 for quite some time.

MSFT chart

MSFT data from YCharts.

But what they have really brought to investors are sustainable competitive advantages, if not completely impenetrable moats, in various aspects of their operations.

Microsoft's Windows remains the world's leading desktop operating system, while Azure accounts for a quarter of global spending on cloud infrastructure services (as of September 30, 2023).
Apple's continued innovation has given the iPhone a commanding market share lead among smartphones in the United States. The former largest company in the world also has the most extensive share buyback program in the world.
Nvidia has become the infrastructure foundation of the artificial intelligence (AI) movement. Its A100 and H100 graphics processing units (GPUs) could account for up to 90% of GPUs used in AI-accelerated data centers this year.
Amazon's online marketplace accounted for nearly 38% of online retail sales in the U.S. last year. Additionally, Amazon Web Services surpasses Microsoft's Azure as the world's leading provider of cloud infrastructure services.
Alphabet's Google is a virtual monopolist and had a nearly 92% share of global Internet searches in February. Google Cloud is now the world's third largest cloud infrastructure provider and YouTube is the second most visited social website.
Meta Platforms monitors major social media assets including Facebook, WhatsApp and Instagram. Meta's family of apps attracted nearly 4 billion monthly active users in the December quarter.
Tesla is North America's leading electric vehicle (EV) manufacturer and the first automaker to develop from the ground up to mass production in over half a century. It is also the only pure-play electric vehicle manufacturer that generates a recurring profit based on generally accepted accounting principles (GAAP).

Despite these clearly defined competitive advantages, the outlook for these seven companies could be very different. As March begins, one Magnificent Seven stock stands out as a hidden bargain, while another high-flyer is likely facing increasing headwinds.

The “Magnificent Seven” stock should be bought immediately in March: Alphabet

Among the seven long-term outperformers listed above, Alphabet is the most attractive Magnificent Seven stock for opportunistic investors in March.

If there's one thing Alphabet can be accused of, it's that it's a cyclical company. Last year, advertising accounted for 76% of the company's $86.3 billion in net sales. If the U.S. economy were to slip into a recession, it's practically a given that companies would cut their advertising budgets. Currently, some money-based metrics and forecast indicators suggest that the likelihood of an economic downturn in the not-too-distant future is high.

However, economic cycles are not uniform. While no recession has lasted longer than 18 months since the end of World War II, there have been two periods of growth that lasted longer than a decade. Advertising-driven companies like Alphabet (and Meta, since we're talking about the Magnificent Seven) are primed for a long-term uptrend as the US economy expands.

There's no question that Alphabet's Internet search segment, Google, is the foundation. With nearly 92% of global searches, Google is the undisputed company that businesses will look to when it comes to placing ads to target consumers. In most cases, Alphabet is likely to have exceptional ad pricing power.

But as I've noted in the past, Alphabet's growth story is about much more than just being the dominant Internet search engine. Google Cloud has captured about 10% of the global cloud infrastructure services market. Enterprise spending on cloud services is still at a relatively early stage, suggesting that this segment can sustain double-digit growth.

Additionally, Google Cloud achieved its first year of operating profits in 2023 after several years of losses. Cloud services consistently generate higher margins than advertising, suggesting Alphabet's cash flow growth will accelerate in the coming years.

YouTube is a beast too. Daily views of Shorts (short videos often lasting less than 60 seconds) launched in 2021 have catapulted from 6.5 billion in early 2021 to over 50 billion in early 2023. This should help the company attract advertisers as well as increase high-margin YouTube subscriptions.

Finally, Alphabet remains historically cheap. Because Alphabet reinvests much of its operating income, cash flow is the best metric for valuing the company. Investors can currently buy Alphabet shares for just over 12 times next year's cash flow estimates, a 31% discount to the five-year cash flow multiple.

An engineer checks switches and cables on a server tower at a corporate data center.

Image source: Getty Images.

The Magnificent Seven stock should be avoided like the plague in March: Nvidia

However, not every Magnificent Seven stock is primed for lasting fame. Of the seven most influential companies that have lifted and changed Wall Street over the past year, it's semiconductor stock Nvidia that should be avoided like the plague.

To be fair, Nvidia has numerous competitive advantages in the AI space. The GPU shortage has driven up prices for its A100 and H100 chips, which in turn allowed the company to more than double its sales last year. While Nvidia's rise has been meteoric, the company will face plenty of headwinds.

One of Nvidia's biggest problems is itself. As supply chain issues ease and Nvidia expands production of its A100 and H100 GPUs to meet greater demand, GPU shortages will ease. The majority of Nvidia's revenue increases last year were driven by price-related shortages, as evidenced by its cost of sales falling in the first six months of fiscal 2024 (ending Jan. 28). If Nvidia expands production, it will likely cannibalize its own margins.

Nvidia will also face competition from all sides. modern micro devices accelerates the launch of its MI300X AI GPU while Intel is expected to begin fulfilling orders for its Gaudi3 AI GPU later this year.

The real concern is that many of Nvidia's largest customers are also developing their own chips for AI data centers. These include Microsoft, Meta Platforms, Amazon and Alphabet, which account for almost 40% of Nvidia's revenue. Not only are these four companies highly unlikely to continue Nvidia's recent purchasing activity, but the AI chips they develop will also reduce future dependence on the current AI boss.

Regulators aren't doing Nvidia any favors either. On two separate occasions, US regulators have restricted the export of powerful AI chips to China. These include AI GPUs that Nvidia developed specifically for the world's second-largest economy after regulators initially cracked down on exports. Regulators could hand Nvidia billions of dollars in lost revenue every quarter.

Chasing corporate insiders' money is another reason to avoid Nvidia like the plague. Although there has been a lot of selling, there hasn't been a single insider purchase in more than three years. Insiders buy for one reason only: they believe the stock will go up. If they don't add anything, why should you?

Perhaps the biggest concern for Nvidia and its shareholders, however, is that every forward-looking investment trend over the past 30 years has experienced an initial bubble. Investors often overestimate the introduction of new technologies and innovations; and it once again seems to be happening in real time.

Nvidia is valued at nearly 34 times trailing 12-month sales, which is similar to a valuation Cisco systems during the peak of the dot-com bubble. This makes Nvidia an interesting story stock, but one that should be avoided like the plague for investment purposes in March.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool's board of directors. Sean Williams has held positions at Alphabet, Amazon, Intel and Meta Platforms. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, Cisco Systems, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool recommends Intel and recommends the following options: long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, long January 2026 $395 calls on Microsoft, short February 2024 $47 calls on Intel and January 2026 short $405 calls on Microsoft. The Motley Fool has a disclosure policy.

1 Magnificent Seven Stock to Buy Hand Over Fist in March and 1 to Avoid Like the Plague Read More »

OpenAI says Elon Musk tried to merge it with Tesla

Business News / Ashley Cornell, email: [email protected]

OpenAI said in its first public comments on Elon Musk's lawsuit against the influential artificial intelligence research lab that Mr. Musk tried to convert the lab from a nonprofit to a for-profit operation before leaving the organization in early 2018.

The comments, in a blog post published Tuesday evening, are part of an escalating feud between Mr. Musk and OpenAI, which is now at the forefront of an industry-wide AI boom. The company said it intended to dismiss all claims in Mr. Musk's lawsuit.

Mr. Musk filed a lawsuit on Friday against OpenAI and its chief executive Sam Altman, accusing them of breaching a contract by putting profits and commercial interests ahead of building AI for the public good. He said that when the AI lab entered into a multibillion-dollar partnership with tech giant Microsoft, it abandoned its founding promise to carefully develop AI and share it freely with the public.

(The New York Times sued OpenAI and its partner Microsoft in December for copyright infringement of news content related to AI systems.)

Mr. Musk helped found OpenAI as a nonprofit organization with Mr. Altman in 2015; Greg Brockman, former chief technology officer of payments company Stripe; and several AI researchers. Before the lab was announced, Mr. Altman and Mr. Brockman planned to raise about $100 million, but Mr. Musk said they should tell the press and public that it was raising $1 billion and that he would raise the additional funds will provide, according to a contemporary email included in the blog post.

Mr. Musk did not immediately respond to a request for comment.

“We need to set a much larger amount than $100 million to avoid sounding hopeless,” he wrote in the email. “I will cover everything that others don’t.”

The nonprofit has raised less than $45 million from Mr. Musk and more than $90 million from other donors, OpenAI said in its blog post.

The company said that Mr. Musk was among the OpenAI executives who realized in early 2017 that if the lab remained a nonprofit, it would not be able to raise the money needed to achieve its lofty goal of achieving artificial general intelligence (AGI ) to build a machine that can do everything the human brain can do.

“It was clear to all of us that we would need much more capital to succeed in our mission – billions of dollars per year, which was far more than any of us, especially Elon, thought we could raise as a nonprofit .” says the blog post.

When Mr. Musk and the other OpenAI founders agreed to form a for-profit company, Mr. Musk said he wanted a majority of the company's equity, initial control of the board and the chief executive position, OpenAI said. Amid the discussions, he withheld funding from the nonprofit, OpenAI said.

The other founders couldn't agree to his terms because they felt giving one person absolute control of the organization was contrary to their mission, OpenAI said. According to another email included in the blog post, Mr. Musk then suggested connecting OpenAI to his electric car maker Tesla.

“Tesla is the only way that can hold a candle to Google. Even then, the likelihood of counterbalancing Google is slim. It is simply not zero,” the email said.

With his lawsuit, Mr. Musk argued that OpenAI violated its original mission by no longer sharing its underlying technology with the public, known as “open sourcing.”

OpenAI's blog post also included an email in which Mr. Musk appeared to acknowledge that as the company gets closer to launching AGI, it would have to start holding back the technology to prevent it from causing harm.

OpenAI says Elon Musk tried to merge it with Tesla Read More »

How each technical “gatekeeper” responds to the DMA

Business News / Ashley Cornell, email: [email protected]

March 6 marks a long-awaited moment of change: it is the deadline for the tech industry's biggest gatekeepers to comply with the European Union's Digital Markets Act (DMA). The DMA requires high-performing companies to enable greater interoperability and avoid favoritism for their own digital services. It has led to disputes over which services should be included, sparked excitement among smaller competitors and led to changes in the way companies handle fundamental parts of their business. And in March 2024, the rules will come into force after years of debate.

The EU has designated six companies as gatekeepers, which it defines as large digital platforms that provide “core” services such as app stores, search engines and web browsers. The DMA's restrictions apply to specific services within these companies: Alphabet, Amazon, Apple, ByteDance, Meta and Microsoft. Here's what everyone has done to meet these demands – and combat them.

What does the DMA require?

By March 6, the six designated gatekeepers must comply with the DMA rules for the 22 covered services identified by the European Commission. By March 7, these companies must submit compliance reports to the EU explaining how they intend to comply with the rules. European officials will later assess these plans in workshops with each of the covered companies.

More generally, certain platforms need to take proactive measures that the EU believes will make digital markets fairer and more open. For example, gatekeepers must allow third-party companies to collaborate with their services, they cannot favor their own products in rankings over those of competitors, and they cannot make app store access for third-party developers conditional on using their payment systems or other services.

What is a Gatekeeper?

The European Commission considers a platform to be a gatekeeper if it meets two conditions. First, it must have an annual EU turnover of at least 7.5 billion euros in each of the last three financial years or an average market capitalization of 75 billion euros in the last financial year, while making its core platform available to at least three EU member states. Second, it must operate a core platform with at least 45 million monthly active users in the EU and more than 10,000 annual active EU business users in each of the last three financial years.

The Commission has identified specific services for each of the designated gatekeepers that it considers to be subject to the DMA rules. Gatekeepers who do not follow the rules can face fines of up to 10 percent of global sales, and up to 20 percent for repeat violations.

How does each gatekeeper respond?

alphabet

Alphabet has a sprawling empire, ranging from a dominant search engine to a major web browser to a popular mobile operating system, with many services linked together to increase their power. This means it has the broadest range of services covered under the DMA:

Google Play
Google Maps
Google Shopping
Google search
Youtube
The Android operating system
Alphabet's online advertising system
Google Chrome

As a result, the company announced a series of changes in January and March that affect everything from data sharing to search results for EU users. Highlights include:

Choice screens – one to select a default browser on Android devices and one to select a default search engine in the cross-platform Chrome browser – are coming to the European Economic Area (EEA) after March 6th.
More links to competing sites when you search Google for things like flights and hotels, including a dedicated section for comparison sites. Google will also remove some of its own widgets, such as the Google Flights box.
An opt-out of some data sharing across YouTube, search, advertising services, Google Play, Chrome, Google Shopping and Google Maps. Users' decisions will take effect on March 6th.
A new data portability API for developers, built on top of the Google Takeout service, allowing users to move data from Google services.
The option for Play Store app developers to redirect EEA users outside of their apps to promote alternative payment offerings, part of a broader overhaul of Android payments in Europe.

The company has long been a target of EU antitrust attacks, and some of these changes reflect previous concessions. Chrome on Android, for example, already offered search engine selection screens following a previous lawsuit.

Alphabet's proposed changes have sparked resentment among certain competitors, particularly smaller, specialized search platforms. Online review platform Yelp recently claimed that the search changes not only “violated the DMA's ban on self-preferencing, but actually increase the rate at which users stay within Google's walled garden,” said Megan Gray, a former attorney for rival search engine DuckDuckGo , has called into question the entire concept of choice screens as an effective tool for promoting competition. And Epic CEO Tim Sweeney, whose company is suing Google for antitrust violations in the US, has done so protested vigorously to its Android payment framework. So we probably haven't seen the end of questions about Alphabet's dominance yet – but the company has staked out its baseline.

Apple

Apple is one of the most prominent DMA targets thanks to its expansive mobile walled garden. The iOS operating system, the Safari web browser, and the App Store are all referred to as “core platform services,” and much of the discussion has been about how wide they need to be opened up.

On January 25, the company announced that it would introduce several changes in the iOS 17.4 update to comply with new EU rules, including:

Allows iOS apps to be distributed through third-party marketplaces, undermining the Apple App Store's monopoly over iPhone apps.
A new framework and APIs that enable third-party marketplace developers to manage app installations and updates.
Support for third-party browser engines that aren't based on WebKit, the engine that powers Apple's own Safari browser, and a new prompt screen that encourages iOS users to choose a default browser.
Opening the iPhone's NFC systems to enable the use of contactless payment services in banking and wallet apps in addition to Apple Pay.

This does not mean that these changes are made voluntarily. Apple has fiercely contested its services falling under the DMA, arguing that rather than a single platform, it actually operates five separate app stores (which would conveniently be small enough to avoid the EU regulation). Although this move was unsuccessful, it did convince the EU Commission that iMessage did not qualify as a gatekeeper service, thereby circumventing requirements to make it interoperable with other messaging platforms.

The changes rolling out to European users in iOS 17.4, particularly support for third-party app stores, are intended to address long-standing complaints about Apple's insular ecosystem. But numerous developers and critics have called them inadequate or even “malicious compliance.” Apple's new rules require App Store alternatives to either pay a core technology fee of €0.50 (~54 cents USD) for apps with more than 1 million downloads or adhere to the 15 to 30 percent cut that the company offers currently collects.

Given this, companies are not exactly ready to accept Apple's offer. A handful of third-party app marketplaces have been announced by Epic, MacPaw and Mobivention, but only the latter claims it will be available to iOS users on March 7, right after the DMA takes effect. Although rival web browser vendors like Google and Mozilla appear to be experimenting with new iOS browsers, neither company has officially announced when these apps will be available.

Amazon

Amazon's retail power is based on a complex data collection system and a massive third-party marketplace that some say gives sellers an unfair advantage. It has two services that fall under the DMA: its online marketplace and its advertising business.

The e-commerce giant has detailed some of the changes it is making to the way companies manage their ads and how customers control them. The company has already started asking customers who visit its EU store for permission to collect their data for personalized ads. As noted on this support page, acceptance or rejection of these Terms affects Amazon's ability to provide information about its entertainment services, including Amazon Prime Video, IMDb and Twitch, as well as its smart home devices, Kindle e-commerce Collect readers and app stores, operating systems and Fire tablets. This could make it more difficult for Amazon to sell and display personalized ads to users in the EU.

Additionally, Amazon has committed to providing advertisers and publishers with campaigns in the EU with “new, enhanced reports” that they can access via Amazon’s website. These reports provide more detailed information about how much an advertiser pays for ads and how much a publisher receives from ads displayed on a third-party website or app. The company is also launching a new “clean room” for advertisers with campaigns in the EU, allowing them to “independently verify the success and impact of their campaigns in a privacy-safe, cloud-based environment.”

However, Amazon has not yet detailed what kind of changes – if any – it is making to ensure its marketplace promotes competition under the DMA. The rules could mean the company can't give its brands preferential treatment in search results or copy third-party products, something Amazon has been accused of doing in the past. And Amazon has long been the subject of antitrust scrutiny in the EU, where regulators accused it of misusing seller data to stay ahead of competitors. The company settled those fees in 2022 and promised to stop using non-public data and make it easier for more sellers to appear in its Featured Listing box (formerly called the Buy Box), where products receive high visibility .

Microsoft

Microsoft's Windows operating system falls under the DMA regulations, and that changes the way the company promotes, or causes users to avoid, numerous other apps and services included within it.

To meet the requirements, the software giant had to make a number of changes, including the ability to disable built-in Bing web search, offer a new option to uninstall its Edge browser, and even allow companies like Google to add their own custom website searches in Windows. These options are available to users in EEA markets – this includes the EU countries as well as Iceland, Liechtenstein and Norway.

Microsoft will allow Windows computers in EEA markets to remove Bing results from Windows Search, potentially allowing Google to list its own search results here instead. Third parties like Google can also add feeds to the Windows Widget board. As part of the DMA rules to make it easier to uninstall pre-installed apps, Windows 11 users can also uninstall the Camera, Cortana, and Photos apps.

All of these changes have already rolled out to computers in the EEA, preparing Microsoft for compliance day. We'll now wait to see if Google decides to release its own add-in for Google search results in the Windows search interface. There could also potentially be a number of Windows widgets providers soon.

The EU initially listed a number of other Microsoft tools as gatekeeper services. But Microsoft successfully appealed Edge, Bing and Microsoft Advertising to be spared from the DMA after regulators agreed with Microsoft's argument that these services did not qualify – Microsoft argues that they are in fact “acting as challengers in the marketplace.” .

Byte Dance

Chinese giant ByteDance is so far the only non-American company designated as a gatekeeper under the DMA, and only has one covered service: the social network TikTok.

ByteDance shared earlier this week how TikTok plans to comply with the DMA. The platform has launched an API that allows European users to transfer their data to other apps that have registered with TikTok to use the tool. Registered developers can port posts, followers, and other activity from TikTok into their own apps with users' permission. TikTok said it has also improved its “Download your Data” tool, which allows individual users to export and download their posts and other information. And there will be “enhanced data portability solutions” for business accounts.

However, these changes come as the company challenges its designation as a gatekeeper, claiming that TikTok is, on the contrary, “arguably the most capable challenger to more established platform companies.” She argues that the Commission based its analysis on ByteDance's global market capitalization, which the company says reflects businesses that do not even operate in Europe, and that TikTok itself does not meet the required revenue threshold.

ByteDance's inclusion here has a unique political dimension and runs counter to some critics' arguments that the EU is unfairly targeting American companies. (A second non-U.S. company, Samsung, was initially named but was later removed from the gatekeeper list.) California Democrat Lou Correa, the ranking member on the U.S. House antitrust subcommittee, led a letter late last year with more than 20 non-partisan colleagues criticizing the “clear orientation of EU policy towards US companies, especially within the framework of the DMA”. Lawmakers criticized the fact that the European Commission did not designate Chinese firms such as Huawei, Tencent and Alibaba as gatekeepers “despite the fact that they compete aggressively with U.S. firms in the EU and other markets.”

Adi Robertson, Lauren Feiner, Jess Weatherbed, Tom Warren and Emma Roth contributed to this piece.

How each technical “gatekeeper” responds to the DMA Read More »

Crypto funding rates reset after Bitcoin’s sharp drop from $69,000

Business News / Ashley Cornell, email: [email protected]

Bitcoin's (BTC) overnight pullback from new record highs has removed excess leverage from the market and normalized funding rates in the crypto perpetual futures market.

The leading cryptocurrency by market value fell 10% to $59,700 after hitting a new lifetime high above $69,000. The correction resulted in the forced closure of $1 billion worth of leveraged perpetual futures bets in the digital asset markets.

The CoinDesk 20 Index (CD20), a broader market indicator, rose to a high of $2,627 on Tuesday and has since fallen back to $2,496.

Since then, annual funding rates, or the cost of holding leveraged bets in perpetual futures pegged to the top 25 cryptocurrencies, have declined to less than 20%, a significant decline from the triple-digit numbers observed a few days ago.

In other words, the overheated perpetual futures market has cooled, opening the door for a prolonged rise to record highs. Funding rates rose above 100% earlier this week as Bitcoin's strong bullish momentum caused investors to jump in with both feet and use leveraged products to maximize profits.

Exchanges use the funding rate mechanism to align perpetual bond prices with spot prices. A positive funding rate indicates that perpetual bonds are trading at a premium to the spot price, indicating increased demand for bullish bets. Therefore, a high funding rate such as that seen earlier this week is said to reflect excessive optimism often seen during interim market highs.

Velo Data's chart shows that funding rates for the top 25 cryptocurrencies ranged from slightly positive to 150% or more over the past week.

The current value for most coins is below 20%.

According to John Glover, chief investment officer at Ledn, the market could continue to deleverage in the coming weeks, potentially pushing Bitcoin price back to $40,000.

“The euphoria surrounding the recent rise in BTC prices is very reminiscent of the last time we traded at $65,000. While many people will point out that the sell-off that followed after November 2021 (and previously after April 2021) was due to bad market participants, I would argue that it may have been brought about by the bad market participants “that people were too heavily indebted and had unrealistic expectations of linear appreciation to $100,000,” Glover said in an email.

“I believe we are in the same situation again and will see a correction back to the mid-to-low $40,000s in the coming weeks.” It always looks bullish at the peak,” Glover added.

Crypto funding rates reset after Bitcoin’s sharp drop from $69,000 Read More »

BlackCat Ransomware Group Implodes After Apparent $22 Million Payment by Change Healthcare – Cancer Over Security

Business News / Ashley Cornell, email: [email protected]

There is evidence that the US healthcare giant Change healthcare made a $22 million extortion payment to the infamous man Black cat Ransomware group (also known as “ALPHV“) as the company struggles to bring its services back online while a cyberattack has crippled prescription drug services nationwide for weeks. However, the cybercriminal, who claims to have given BlackCat access to Change's network, says the crime gang cheated them out of their share of the ransom and that they still have the sensitive data that Change is allegedly paying the group to destroy have. Meanwhile, the subsidiary's disclosure appears to have prompted BlackCat to cease operations entirely.

BlackCat Ransomware Group Implodes After Apparent 22 Million Payment by

Image: Varonis.

In the third week of February, a cyberattack at Change Healthcare crippled critical healthcare services as the company's systems were taken offline. It soon emerged that BlackCat was behind the attack, which disrupted the delivery of prescription drugs to hospitals and pharmacies across the country for nearly two weeks.

On March 1, a cryptocurrency address that security researchers had already attributed to BlackCat received a single transaction worth about $22 million. On March 3, a BlackCat partner posted a complaint on the exclusive Russian-language ransomware forum ramp Change Healthcare paid a $22 million ransom for a decryption key and prevented four terabytes of stolen data from being published online.

The partner claimed that BlackCat/ALPHV accepted the $22 million payment but never paid him his share of the ransom. BlackCat is known as a “ransomware-as-service” collective, meaning they rely on freelancers or partners to infect new networks with their ransomware. And these partners, in turn, earn commissions of 60 to 90 percent of the ransom amount paid.

“But after receiving the payment, the ALPHV team decided to block our account and continued to lie and hesitate when we contacted the ALPHV administrator,” wrote the Notchy affiliate. “Unfortunately for Change Healthcare, their data [is] still with us.”

Change Healthcare has neither confirmed nor denied the payment and responded to multiple media outlets with a similar, non-denying statement: The company is focused on its investigation and restoring services.

Given that Change Healthcare paid to prevent their data from being made public, that strategy appears to have failed: Notchy said the list of affected Change Healthcare partners from which they had stolen sensitive data was included Medicare and a variety of other large insurance and pharmacy networks.

On the bright side, Notchy's complaint appeared to be the final nail in the coffin for the BlackCat ransomware group, which was infiltrated by the FBI and foreign law enforcement partners in late December 2023. As part of this operation, the government seized BlackCat's website and released a decryption tool to help victims restore their systems.

BlackCat responded by regrouping and increasing affiliate commissions to up to 90 percent. The ransomware group also said it would officially lift any restrictions or deterrents against attacks on hospitals and healthcare providers.

However, instead of responding that they would compensate and appease Notchy, a BlackCat representative said today that the group was shutting down and that it had already found a buyer for its ransomware source code.

1709710585 524 BlackCat Ransomware Group Implodes After Apparent 22 Million Payment by

The seizure notice is now displayed on the BlackCat darknet website.

“There’s no point in apologizing,” wrote RAMP member “Ransom.” “Yes, we knew about the problem and tried to solve it. We told the partner to wait. We could send you our private chat logs in which we are shocked by everything that is happening and try to solve the problem with the transactions by charging a higher fee, but that makes no sense because we have decided to abandon the project completely close. We can officially say we were screwed by the government.”

An FBI seizure notice is now posted on BlackCat's website, but several researchers noted that this image appears to have simply been cut and pasted from the notice the FBI left behind when it raided the BlackCat network in December. The FBI did not respond to requests for comment.

Fabian WosarHead of ransomware research at the security company Emsisoftsaid it appears BlackCat executives are trying to run an “exit scam” against partners by withholding many ransomware payment commissions at once and shutting down the service.

“ALPHV/BlackCat has not been confiscated,” Wosar wrote on Twitter/X today. “They cheat on their partners. It is obvious when checking the source code of their new takedown notice.”

Dmitry SmilyanetsA researcher at security firm Recorded Future said the BlackCat exit scam was particularly dangerous because the partner still had all of the stolen data and could still demand additional payment or reveal the information themselves.

“The partners still have that data and are angry that they didn’t receive that money,” Smilyanets told Wired.com. “It's a good lesson for everyone. You can't trust criminals; Your word is worth nothing.”

1709710587 359 BlackCat Ransomware Group Implodes After Apparent 22 Million Payment by

BlackCat's apparent demise comes hot on the heels of the implosion of another major ransomware group – LockBit, a ransomware gang estimated to have extorted over $120 million in payments from more than 2,000 victims worldwide. On February 20, LockBit's website was seized by the FBI and the UK's National Crime Agency (NCA) after months of infiltrating the group.

LockBit also attempted to restore its reputation on cybercrime forums by resurfacing on a new dark web site and threatening to release data from a number of major companies hacked by the group in the weeks and days leading up to the FBI attack became.

But LockBit now appears to have lost any credibility the group once had. For example, after a highly publicized attack on the government of Fulton County, Georgia, LockBit threatened to release Fulton County's data unless a ransom was paid by February 29. But when February 29 rolled around, LockBit simply deleted the listing for Fulton County from its website, along with those of several financial organizations that had previously been extorted by the group.

Fulton County held a press conference to say that neither LockBit nor anyone else had paid a ransom on their behalf, and that they, like everyone else, were in the dark as to why LockBit never followed through on its threat to release the data circle. Experts told KrebsOnSecurity that LockBit likely shied away because it was a bluff and that the FBI likely took that data away from them in their raid.

Smilyanets' comments are backed up by revelations first published by Recorded Future last month. The company quoted an NCA official as saying that LockBit never deleted the data after paying a ransom, even though that was the only reason many of its victims paid.

“If we do not provide you with decryption programs or delete your data after payment, no one will pay us in the future,” LockBit extortion notes usually say.

Hopefully, more and more companies will understand that paying cybercriminals to delete stolen data is a completely hopeless endeavor.

BlackCat Ransomware Group Implodes After Apparent $22 Million Payment by Change Healthcare – Cancer Over Security Read More »

OpenAI defends itself after lawsuit against Musk: Tesla CEO “sued us when we started making significant progress”

Business News / Ashley Cornell, email: [email protected]

Sam Altman, CEO of Open AI

OpenAI CEO Sam Altman was named in a lawsuit filed last week by Tesla CEO Elon Musk. Getty

OpenAI hit back at Elon Musk in a blog post published on its website on Tuesday, responding to a lawsuit from one of its co-founders and former patrons.

Musk filed the lawsuit last week in San Francisco against the company, Chief Executive Sam Altman and President Greg Brockman, claiming the company had deviated from its mission of building responsible AI. In the post, OpenAI said Musk reacted strongly after he unsuccessfully tried to make the company part of Tesla Inc.

“We are saddened that things have come to this with someone we deeply admired,” OpenAI wrote, “someone who inspired us to aim higher, then told us we would fail, launched a competitor, and then sued us as we began development.” without him, “make significant progress toward OpenAI’s mission.”

Tesla's billionaire CEO, co-founder of OpenAI, who is no longer involved in the company, claims in his lawsuit that the startup's close relationship with Microsoft Corp. undermined its original mission to develop open source technology free from undue corporate influence.

“To this day, OpenAI Inc.'s website continues to assert that its charter is to ensure that AGI 'benefits all of humanity,'” the lawsuit says. “But in reality, OpenAI Inc. has transformed itself into a closed-source, de facto subsidiary of the largest technology company in the world: Microsoft.”

AGI, or artificial general intelligence, refers to a type of AI that doesn't yet exist but could theoretically do a variety of tasks better than humans.

Musk is suing, among other things, for breach of contract, breach of fiduciary duty and allegations of unfair business practices. He first filed the lawsuit in 2019 as a donor to the nonprofit's parent organization, seeking to force San Francisco-based OpenAI to stop personally supporting Microsoft and Altman.

OpenAI did not comment publicly on Musk's lawsuit when it was originally filed on February 29. However, in an internal memo reviewed by Bloomberg, the company said it “categorically disagrees” with the lawsuit.

OpenAI defends itself after lawsuit against Musk: Tesla CEO “sued us when we started making significant progress” Read More »

Target launches new paid membership program, Target Circle 360, with same-day delivery and other perks

Business News / Ashley Cornell, email: [email protected]

MINNEAPOLIS, Minn. — Target, looking for ways to reverse sluggish sales, is moving into Amazon territory: the paid membership game.

The Minneapolis discount retailer said Tuesday that its new paid program, called Target Circle 360, will offer unlimited free same-day delivery in just one hour on orders over $35 and free two-day shipping.

It launches with a special offer for new members for $49 per year from April 7th to May 18th. After that, it costs $99 per year. However, Target Circle credit card holders can sign up for the lower rate at any time.

The company said its current Target Circle program has more than 100 million members who shop and spend more than five times more than non-members.

The launch of a new paid program was one of several moves announced at Target's annual investor meeting aimed at boosting sales and traffic. The retailer also said it would renew its stores and expand its highly successful own brands. And over the next decade, the chain will build more than 300 new stores.

The meeting came as recent financial results show Target shoppers remain cautious about spending on consumer goods as they are pressured by inflation and high borrowing and credit card costs. The company reported its first annual sales decline in seven years, down 1.7%.

Target posted a 58% rise in fourth-quarter profit, handily beating Wall Street expectations, as the retailer cut costs and maintained lean inventory during the critical holiday season.

MORE: CVS will close dozens of Target pharmacies

CVS will close some Target pharmacies

Sales increased slightly in the last quarter compared to the previous year and also exceeded forecasts. But comparable sales – those from stores or digital channels that have been in operation for at least 12 months – fell 4.4%. However, the declines slowed compared to the previous two quarters.

Target gave a cautious outlook for sales and profit, suggesting that sales will not recover quickly. Still, shares rose 12%, or $18.09, to close at $168.58.

“This is a unique moment to clarify our growth plan,” Target CEO Brian Cornell told investors at the meeting in Manhattan. “We will concentrate with all our efforts on gaining market share.”

Target is more vulnerable than Walmart and other large discount retailers. More than half of annual sales come from necessities such as toys, fashion and electronic devices, things that many Americans are wary of.

Even luxury buyers have remained discerning. Upscale department store Nordstrom reported fourth-quarter sales results Tuesday that beat analysts' expectations, but said sales could decline in the current year.

But Target has also stumbled because of its own mistakes. For several quarters, the company had to correct its inventory levels after being overwhelmed with overstocked warehouses in the summer of 2022. The oversupply of inventory forced it to discount heavily to sell out these goods.

Target has tried to find the right balance between offering value and enriching its stores with trendy goods. Last month, the retailer launched a new collection called Dealworthy, which features nearly 400 everyday basics like socks and small gadgets starting at less than $1, with most items priced under $10.

At the same time, Target's deal last year with designer Kendra Scott to offer exclusive collections of earrings and necklaces was well received by shoppers. This also applies to his new kitchenware brand under the discounter's own label Figmint.

As for its loyalty programs, Target said it sees a need to make the free Target Circle program more user-friendly. This means members see offers automatically applied during checkout, so they don't have to search for or add individual offers.

Target also renamed its Target RedCard credit card program to Target Circle to make it easier for credit card holders to access Target Circle benefits such as an additional 5% immediate discount on Target Circle offers. Additionally, credit card holders have 30 days to return an item, in addition to the regular 90-day period.

By comparison, an Amazon Prime membership launched in 2005 now costs $15 per month or $139 per year and includes free streaming of Amazon Videos, among other perks. With Walmart's paid membership program Walmart Plus, launched in 2020, members get free shipping for $12.95 per month or $98 per year.

Target told investors it was considering adding a range of perks to its paid program, but it wanted to listen to what shoppers want.

Asked how Target could compete with Amazon's Prime membership giant, Cornell told The Associated Press, “It's not like we're starting from scratch.” He noted that the company leverages the “power of the Target brand and the brand Target Circle”.

Target reported net income of $1.38 billion, or $2.98 per share, for the three-month period ended Feb. 3. In the same period last year it was $876 million, or $1.89 per share. Last quarter's final results significantly beat estimates of $2.42 per share, according to FactSet.

Revenue rose 1.7% to $31.92 billion, above forecasts of $31.83 billion.

Traffic both in-store and online fell 1.7% overall last quarter, but that was an improvement from the 4.1% decline in the third quarter.

For the current quarter, Target expects comparable sales to decline between 3% and 5%, in line with analyst estimates of 3.6%. Adjusted earnings per share are expected to be between $1.70 and $2.10. Analysts expect $2.08 per share.

For the full year, Target expects comparable sales to increase by an unchanged 2%. Adjusted earnings per share are expected to be between $8.60 and $9.60, Target said. Analysts expect $9.15 per share, according to FactSet.

Target launches new paid membership program, Target Circle 360, with same-day delivery and other perks Read More »

Apple: iPhone sales in China fall while Huawei rises, a report says

Business News / Ashley Cornell, email: [email protected]

By Mariko Oi
Business reporter

March 6, 2024, 02:18 GMT

Updated 34 minutes ago

Image source: Getty Images

Sales of Apple's iPhone in China fell 24% in the first six weeks of 2024 compared to a year ago, according to research firm Counterpoint.

This comes as the US tech giant faces stiff competition from local rivals in the country.

During the same period, Chinese company Huawei recorded a 64% increase in sales in its home market, the report said.

Apple and Huawei did not immediately respond to BBC requests for comment.

Aside from a resurgence in Huawei sales at the pricier end of China's phone market, Apple has also been “pushed into the middle due to aggressive pricing from the likes of Oppo, Vivo and Xiaomi,” wrote Counterpoint Research's Mengmeng Zhang.

China, one of Apple's largest markets, also saw a 7% decline in overall smartphone sales over the same period, the report said.

Huawei struggled with US sanctions for years, but sales increased after the release of the Mate 60 series of 5G smartphones in August.

This came as a big surprise as the Chinese company was cut off from key chips and technologies required for 5G mobile internet.

According to the report, Honor, the smartphone brand that was spun off from Huawei in 2020, was the only other top five brand to see an increase in sales in China during the period.

Sales of Vivo, Xiaomi and Oppo also fell in the first six weeks of the year, Counterpoint said.

The report also said that Apple's share of the Chinese smartphone market fell to 15.7% from 19% last year, dropping the company from second place to fourth place.

Meanwhile, Huawei moved into second place as its market share rose to 16.5% from 9.4% a year ago.

Despite a 15% decline in sales last year, Vivo remained China's top-selling smartphone maker, Counterpoint said.

Apple began offering discounts on its official websites in China last month before subsidizing certain iPhone models through its flagship stores on Alibaba's marketplace platform Tmall last week.

The company said sales in China were $20.82 billion (£16.4 billion) in the final three months of 2023, up from $23.9 billion a year earlier.

Apple shares fell 2.8% in New York trading on Tuesday.

Apple: iPhone sales in China fall while Huawei rises, a report says Read More »