'Nowadays, people know the price of everything and the value of nothing,' said Irish playwright, poet, and novelist, Oscar Wilde.
(MSFT), (GOOGL), (AMZN), (INTC), (AMD), (GE), (NEE), (BEP), (FSLR), (GCTAF)
In today’s technological renaissance, artificial intelligence (AI) is the crown jewel, poised to redefine a myriad of sectors. At the vanguard of this revolution is Microsoft (MSFT), a beacon of innovation, masterfully weaving together the threads of AI and nuclear fusion. These days, the tech giant is tackling head-on one of the most formidable challenges in AI: its voracious appetite for energy.
The proliferation of AI in our daily lives, exemplified by tools like OpenAI's ChatGPT, is leading to an unprecedented surge in energy demand. A study from the University of Washington lays bare the facts: hundreds of millions of queries on ChatGPT can guzzle up to 1 gigawatt-hour a day, equivalent to the energy consumption of 33,000 US households. This burgeoning demand for energy in the AI sector is sounding alarm bells about its long-term sustainability.
Microsoft, with its strategic foresight, is not turning a blind eye to this issue. The company’s partnerships and investments are a testament to its commitment to finding sustainable solutions.
Its collaboration with OpenAI and the power purchase agreement with Helion Energy, which aims to harness nuclear fusion for energy by 2028, are pivotal moves. These are not mere ventures into sustainable energy; they are strategic investments ensuring the longevity and responsibility of AI’s power consumption.
Now, let’s shift our focus to the stock market and the investment opportunities that are unfolding. The tech-heavy Nasdaq (^IXIC) has witnessed a staggering 26% increase year to date, fueled largely by the buzz surrounding AI-related stocks. This underscores the profound impact AI is having on stock market investing. However, as expected, this impressive growth is not without its challenges.
The heart of advanced computing processes, data center electricity usage, has seen substantial growth. From 2010-2018, it increased by about 6%, and in 2022, global data center electricity consumption accounted for approximately 1.3% of global electricity demand.
In real-life terms, this is comparable to the energy consumption of a small city's worth of homes running 24/7.
The shift in data centers from simpler processors (CPUs) to more advanced and energy-intensive graphics processing units (GPUs) is a significant factor in this increased energy demand. GPUs, now the backbone of AI infrastructure, consume 10 to 15 times more power per processing cycle than CPUs.
This creates opportunities for companies like Intel (INTC), investing heavily in AI-compatible processors, and AMD (AMD), known for its high-performance computing and graphics technologies.
This transition, akin to moving from a versatile office worker (CPU) to a specialized assembly line (GPU), is crucial for the development and maintenance of sophisticated AI models but raises serious questions about the sustainability of such rapid growth.
So, what does this all mean for investors? Microsoft’s foray into AI and nuclear energy is a clear signal to investors about the transformative potential of a company that is not just riding the wave of AI but actively shaping its trajectory. Its focus on nuclear fusion shines a spotlight on companies in the energy sector, particularly those involved in nuclear technology and renewable energy.
For example, General Electric (GE) and NextEra Energy (NEE), both with significant investments in nuclear and renewable energy, could see a boost as the industry gains momentum.
With Microsoft's investment in nuclear fusion, companies involved in nuclear energy and related technologies could become more attractive. Brookfield Renewable Partners (BEP) and Orano SA, a company specializing in nuclear fuel cycle products and services, are examples of companies in this sector.
Other tech giants with substantial investments in AI are likely to follow in Microsoft’s footsteps, seeking sustainable energy solutions for their AI operations. Major cloud providers, including Google Cloud (GOOGL), Microsoft Azure, and Amazon Web Services (AMZN), are already playing their part. They are investing heavily in renewable energy to offset their annual electricity consumption and have made net-zero pledges, committing to balance their carbon emissions with carbon removal.
So, companies that provide sustainable technology solutions and services also stand to gain as Microsoft and other tech giants seek to reduce their environmental footprint. First Solar (FSLR), a leading global provider of comprehensive photovoltaic solar systems, and Siemens Gamesa (GCTAF), a major player in the wind energy sector, are examples of companies in this space.
In essence, Microsoft's strategic integration of AI and nuclear energy is creating a domino effect, positively impacting a wide array of sectors and companies. This translates to a diversified portfolio of opportunities, ranging from tech giants and energy companies to startups and businesses focusing on sustainable solutions.
The future is unfolding fast, and the investment landscape is ripe with possibilities for those ready to seize them. Don’t get left behind.
(THIS AI STOCK IS GAINING ATTENTION)
November 1, 2023
Hello everyone,
Welcome to November.
Wall Street is upbeat about an AI stock called Arista.
On Monday, the company earnings exceeded Wall Street expectations on both the top and bottom lines.
Earnings: $1.83/share
Revenue: $1.51
Analysts forecast:
Earnings: $1.58/share
Revenue: $1.48 billion
Arista also issued high-than-expected forward guidance, calling for fourth-quarter revenue in the range of $1.5 billion to $1.55 billion.
Arista’s focus is low-latency networks between clients and the cloud for large-scale data centres, exposing the company to growing investor interest in AI.
The stock is up 63% in 2023.
Analysts believe the company could be the top player in the Ethernet application of AI. Morgan Stanley and Wells Fargo, among others applauded the company report and highlighted the company’s potential AI catalyst for growth heading into 2024.
Morgan Stanley’s Meta Marshall believes growth will accelerate from the adoption of 800G Ethernet transceivers for data centres. Marshall upgraded Arista to overweight and gave the stock a price target of $220 which is more than 25% upside from Monday’s $175.72 close.
Market Update
U.S. 10-year Yields
We have been consolidating since reaching 5.0210% on October 23rd. But we may have another leg up before exhaustion.
Possible targets: 5.25/5.33%
Support lies in the low/mid 4.80%’s.
Happy Wednesday to you all.
Cheers
Jacquie
Mad Hedge Technology Letter
November 1, 2023
Fiat Lux
Featured Trade:
(BYD IS HERE TO STAY)
(BYDDY), (TSLA), (EV)
Tesla’s (TSLA) recent underperformance is a canary in the coal mine of what could become of the global EV industry.
EV makers better watch out because the race to zero is coming for all of them.
It could be yet another tech industry captured by the Chinese. The Chinese are quickly rising up the food chain of technological capabilities and these new developments are sure to rattle the White House.
I remember years ago when the Chinese tried their best at smartphones, they were terrible, but fast forward to today, and now they compare close to the iPhone with much better pricing.
Now, the Chinese are coming after electric cars and I also remember touring EVs in China in 2007 and they again were pretty terrible.
However, fast forward to today, and yet again they have achieved major inroads in terms of quality and reach. BYD Company Limited (BYDDY) even produces something comparable to Tesla which is no small feat.
Tesla’s disappointing third-quarter deliveries highlight the panic state side where the first mover advantage has served CEO Elon Musk well but eroded lately.
Tesla sold 435,000 electric cars last quarter, while BYD sold 431,000 battery-powered electric cars over the same period.
Expect BYD to surge past Tesla in delivered electric cars soon because they have access to a vastly bigger market while the Chinese communist party is doing everything to ruin American corporate business in the Middle Kingdom.
BYD is already far ahead when it comes to total sales. Including hybrids, BYD sold over 800,000 cars last quarter, almost twice as much as Tesla.
The Chinese company sold 1.8 million cars last year, over 911,000 of which were BEVs. Tesla, which only sells BEVs, sold 1.3 million cars.
Musk had previously warned that planned upgrades to manufacturing plants around the world may lead to lower deliveries for the rest of the year.
Tesla is also facing sluggish demand, forcing it to launch aggressive price wars in both China and the U.S.
BYD has surged ahead of its competitors in China by selling more affordable electric vehicles, unlike the premium models sold by Tesla and other EV companies like Nio and XPeng. BYD recently unseated Volkswagen as China’s top-selling car brand.
The company is expanding outside of China and is now the top-selling EV brand in markets like Thailand, Israel, and Singapore. It’s even expanding into more developed markets like Japan and Europe.
Watch out for China’s BYD to hijack Western markets moving forward including Europe, Canada, the United States, and the UK.
It’s finally time to stop ignoring that China does a good job producing EVs and other hard-to-manufacture technology.
My guess is that China will also surpass the United States in semiconductor chip technology, although that will take longer to achieve.
The Pentagon has sounded the alarm bells after noticing huge improvements in chip know-how by the Chinese.
Competition is finally here for Musk after so many years of taking a free ride in the US and it’s about time. Now the rubber finally meets the road.
Readers with a high threshold of risk tolerance should look at BYD’s ADR (BYD) if shares experience a big dip then allocating a small portion of a portfolio to this equity makes sense.
Don’t forget there is now a high probability of Tesla losing its Shanghai factory in China once China seizes American businesses on the mainland. It doesn’t matter how much Musk kowtows to the communist party because this issue is far bigger than him or the EV business.
That threat has gone from almost 0 just recently to becoming somewhat plausible although still quite low. The tech world is accelerating at warp speed in 2023.
Global Market Comments
November 31, 2023
Fiat Lux
Featured Trade:
(WHERE THE ECONOMIST BIG MAC INDEX FINDS CURRENCY VALUE),
(FXF), (FXE), (FXA), (FXE), (CYB)
(THE FALLING MARKET FOR KIDS)
With interest rates and inflation topic number one of the day, everyone has their favorite inflation indicator. The Fed has its, you have yours, and well, I have mine.
My former employer, The Economist, once the ever-tolerant editor of my flabby, disjointed, and juvenile prose (Thanks Peter and Marjorie), has released its “Big Mac” index of international currency valuations.
Although initially launched as a joke four decades ago, I have followed it religiously and found it an amazingly accurate predictor of future economic success. The index counts the cost of McDonald’s (MCD) premium sandwich around the world, ranging from $7.20 in Norway to $1.78 in Argentina, and comes up with a measure of currency under and over valuation.
What are its conclusions today? The Swiss franc (FXF), the Brazilian real, and the Euro (FXE) are overvalued, while the the Chinese Yuan (CYB), and the Thai Baht are cheap.
I couldn’t agree more with many of these conclusions. It’s as if the august weekly publication was tapping The Diary of the Mad Hedge Fund Trader for ideas.
I am no longer the frequent consumer of Big Macs that I once was, as my metabolism has slowed to such an extent that in eating one, you might as well tape it to my hip. Better to use it as an economic forecasting tool, than a speedy lunch.
