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Tech Stocks This Week: Apple's Big Event and Microsoft's Acquisition

By Daniel Sparks – Sep 14, 2018 at 6:33PM

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Apple updates iPhone and Apple Watch as Microsoft goes deeper with AI.

With the most recent earnings season now in the rearview mirror, there was still plenty of news this week thanks to two tech giants: Apple (AAPL 0.70%) and Microsoft (MSFT 1.97%). The two companies made headlines as Apple unveiled new products and Microsoft made an important acquisition.

Here's a look at both of these stories.

Apple marketing chief Phil Schiller reveals the iPhone XR

iPhone XR. Image source: Apple.

Apple announces new iPhones and a new Apple Watch

After a big year for iPhone, with trailing-12-month iPhone revenue up 13% year over year, Apple has its work cut out for it to continue growing the important segment. To keep up its growth, the company is betting on its all-screen iPhone X-like design, bigger displays, and more choices for customers.

Replacing the iPhone X is Apple's new flagship lineup: the iPhone XS and XS Max. With a 5.8-inch display for the iPhone XS and a new 6.5-inch display for the XS Max, the smaller iPhone starts at $999, and the larger device starts at $1,099. A fully loaded XS Max with 512GB of storage sells for a staggering $1,449 -- Apple's highest-priced iPhone yet. 

However, Apple also launched a new smartphone to appeal to customers unwilling to spend $1,000 on a new smartphone. The iPhone XR features a 6.1-inch LCD display (the iPhone Xs and Xs Max have Super Retina OLED displays) and starts at $749 -- an aggressive price point for an Apple smartphone with such a large display.

Giving consumers more color options, the iPhone XS and XS Max are available in space gray, silver, and gold, and the iPhone XR is available in six different colors.

Apple also launched a new version of its Apple Watch, giving Apple's fast-growing "other products" segment a fresh catalyst. Trailing-12-month other products revenue is up 37% year over year.

Apple Watch Series 4

Apple Watch Series 4. Image source: Apple.

Microsoft bets on AI

News broke on Thursday that Microsoft acquired AI-focused start-up Lobe for an undisclosed sum.

"Lobe's simple visual interface lets people easily create intelligent apps that can understand hand gestures, hear music, read handwriting, and more," said Microsoft chief technology officer Kevin Scott in a blog post about the acquisition.

AI's importance to big tech companies like Apple, Microsoft, and Alphabet (GOOG 1.96%) (GOOGL 2.16%) -- the parent company of Google -- has come into the spotlight recently with growing uses for intelligent assistants. Indeed, in Alphabet's most recent earnings call, Google CEO Sundar Pichai kicked off his prepared remarks by saying, "The common thread you'll hear on today's call is the benefit of machine learning and AI and how it's improving our products and generating great results for our users and partners." While Alphabet integrates AI in obvious areas like Google Assistant, Google News, and Google Maps, AI is also increasingly being deployed across less obvious applications like Google Photos and Gmail.

As tech companies race to utilize AI across their offerings, acquisitions are just as much about talent acquisition as they are about the products and services these companies make. With Microsoft's acquisition of Lobe, the company is getting Lobe CEO Adam Menges, a veteran machine-learning engineer who was once a product manager at Apple.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool's board of directors. LinkedIn is owned by Microsoft. Daniel Sparks owns shares of Apple. The Motley Fool owns shares of and recommends Alphabet (A and C shares) and Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.

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