Mad Hedge Technology Letter
July 3, 2024
Fiat Lux
Featured Trade:
(SHOULD I INVEST IN AI CHIPS OR AI SERVERS?)
(SMCI), (NVDA), (DELL)
The AI server market is booming and so are the AI chip markets.
I’ll talk about 2 prestigious companies right in the mix of things.
For long-term portfolios, it’s essential to not miss out on these supercharge growth companies.
I just don’t think that average investors will be able to make up the performance if they miss the boat of these 2 companies. The law of large numbers will just put you too far behind.
All the hot new money is going into AI which adds to the momentum of the share price trajectories.
Even the old money, after not being convinced by Bitcoin, is starting to come around to AI partly because most of the companies involved in AI are publicly listed companies on the New York Stock Exchange.
It makes it a lot easier when the source of exponential growth isn’t on some alternative exchange in some alternate currency in some backwater jurisdiction.
With a few clicks and moving a few dollars here and there, investors can be part of the AI future whether it be in AI chips or AI servers like the companies I am about to talk about.
What up with Nvidia?
Nvidia (NVDA) dominates an impressive 94% of the AI chip market. It’s basically a monopoly or close to it.
Revenue is rising a stunning 262% year over year.
Even more interesting, emerging growth avenues in the nascent AI market indicate that Nvidia could end up doing even better than that.
For instance, governments are also betting the ranch on AI and this stable source of revenue will highly likely grow substantially for the foreseeable future.
Nvidia's customer base is diversifying beyond the major cloud infrastructure providers that have been deploying its chips in large numbers to train and deploy AI models.
Spending on AI chips is expected to grow more than 10-fold over the next decade, generating $341 billion in revenue in 2033 compared to $23 billion last year.
Nvidia should remain the Tom Brady of AI stocks as the race to develop AI applications by companies and governments alike has created a secular growth opportunity.
What about Super Micro Computer?
Supermicro's future prospects are attached to some extent with that of Nvidia’s.
Data center operators require server rack solutions of the type that Supermicro sells to mount the processors sold by Nvidia and other chipmakers.
Revenue jumped 200% year over year and Supermicro isn't all that far behind Nvidia when it comes to how AI has supercharged its fortunes.
I expect its top line to nearly double over the next couple of years.
Demand for AI servers is expected to expand at a compound annual rate of 25% through 2029.
Supermicro is growing at a faster pace than the AI server market right now. As it turns out, its growth is faster than that of more established companies such as Dell.
How to invest?
Supermicro is cheaper than Nvidia and Nvidia’s run-up to a more than $3 trillion market valuation has got to scare some people with sticker shock.
People with a time advantage of more than a few years should invest in Super Micro, whereas investors looking for that quick sugar high should buy the dips in Nvidia.
In short, anyone under the age of 40 and many years in front of them should invest long-term in Super Micro at a market cap of $50 billion. With Nvidia, I could easily see its market cap climbing to $4 trillion soon, but a wicked pullback would mean its market cap going from $4 to $3 trillion.
Either way, these are two tech firms with great prospects in the current and future.
“Freedom is never more than one generation away from extinction. We didn't pass it to our children in the bloodstream. It must be fought for, protected, and handed on for them to do the same.” – Said Former US President Ronald Reagan
(GENERATIVE AI WILL BE A $100 BILLION DOLLAR + ANNUAL BOOST TO THE AUSTRALIAN ECONOMY BY 2030)
July 3, 2024
Hello everyone,
AI will generate profits in the trillions globally over the coming years. But the sector will need a skilled workforce to see industries transformed.
There are already 33,000 workers in Australia that work directly in AI or use AI as part of their main job, according to CEO Damian Kassabgi, at Tech Council of Australia. Kassabgi believes that number is expected to grow by 200,000 by 2030.
In 2014, there were 800 jobs related to AI.
Overall, Australia needs to train and educate an entire new AI specialist workforce to meet the current and future operational needs of the industry. Schools, universities, technical colleges, and private training providers will all play a role in developing these skills. The training imperative relates to young and old workers at all stages of learning. This will require a mix of strategies catering to the unique needs of individuals.
We are in the early stages of the AI boom. Through innovation, companies will become more productive and more efficient by virtue of AI tools.
The potential growth in the area is so great that analysts and experts believe AI could contribute $115 billion annually to Australia’s economy.
These three areas are where AI investment will be focused in Australia.
The revolutionary AI boom will require lots of power.
Companies that will power this sector are a buy-and-hold.
Eaton Corp. (ETN)
I first recommended Eaton Corp. on April 22, 2024. The price then was $303.02.
Artificial Intelligence requires vast amounts of data processing to function – and data processing requires electricity. The power management company Eaton (ETN) is set to benefit from heightened demand for the setup and upgrade of electrical grids as more data centers are required. Eaton is well-positioned thanks to its scale, size, equipment, and inventory. Shares of the U.S. power management company have been a little rocky over recent days but remain up nearly 30% year-to-date and 54.4% in the last 12 months. Of 25 analysts covering the stock, 17 give it a buy or overweight rating, according to FactSet data. They give it an upside potential of around 11%.
QI CORNER
Something to think about
Cheers,
Jacquie
Global Market Comments
July 3, 2024
Fiat Lux
Featured Trade:
(MY OLD PAL, LEONARDO FIBONACCI),
(TESTIMONIAL)
Mad Hedge Biotech and Healthcare Letter
July 2, 2024
Fiat Lux
Featured Trade:
(TWO-STEPPING TO A CANCER CURE)
(GILD), (AZN), (RHHBY), (PFE), (MRK)
I was at a biotech conference in San Francisco, nursing a cup of black coffee and trying not to fall asleep during yet another startup pitch.
Suddenly, I overhear a conversation that makes me perk up faster than if someone had mentioned a 50% off sale on vintage aircraft parts.
"Did you hear about TwoStep Therapeutics?" someone whispered. "They've got Bertozzi, Cochran, and Levy on board."
Now, I've been following the biotech scene longer than I've been flying planes, and those names made my ears perk up faster than an air traffic controller during a thunderstorm. I nearly choked on my coffee trying to catch every word.
As it turns out, TwoStep Therapeutics isn't just another flash-in-the-pan biotech startup. These folks are diving headfirst into the shark-infested waters of immunotherapy and antibody-drug conjugates (ADCs).
And let me tell you, they're not packing pool noodles – they're armed to the teeth with intellectual firepower.
Now, I've seen more biotech startups than there are hedge funds in Connecticut, but this one's got my attention. Why? They're not here to do the same old cancer-fighting waltz.
Instead, they're attempting to solve a Rubik's Cube of cancer treatment – and they might just have the brainpower to do it.
Let's talk about that brainpower for a moment. TwoStep's advisory board reads like a "Who's Who" of biotech brilliance.
We're talking Nobel laureate Carolyn Bertozzi, Stanford's Jennifer Cochran, and Ronald Levy – the wizard behind rituximab. It's as if they raided the faculty lounge at Stanford and offered stock options instead of tenure.
That means TwoStep's not just another me-too biotech. They're cooking up a platform of peptide conjugates that can bind to five different tumor-associated integrins.
In layman's terms? They're building a cancer-fighting multi-tool that makes current treatments look like plastic sporks.
CEO Caitlyn Miller isn't just another lab coat with a PowerPoint presentation either. She's got skin in the game – or rather, genes.
Her stepfather battled oral cancer for 14 years before passing away. I don’t need to tell you, but that's the kind of motivation you just can't buy.
Now, before you start salivating over potential returns faster than Pavlov's dogs at dinnertime, remember: This is early-stage biotech.
We're talking more risk than a game of Russian roulette with five bullets. But for those of you with iron stomachs and a penchant for moonshots, TwoStep might be worth a spot on your watchlist.
Their $6.5 million seed round is chump change in biotech land, but it's not about the size of the boat, it's the motion of the ocean. And with backers like NFX and Alexandria Venture Investments, they've got some serious propulsion.
TwoStep isn't going after the low-hanging fruit either. They're not interested in well-trodden paths like bladder or breast cancer.
No sir, they're setting their sights on tough customers like head and neck and colon cancer. It's a gutsy move, but in biotech, sometimes you've got to swing for the fences.
It's worth noting, though, that TwoStep isn't alone in this high-stakes game.
Big pharma's been falling over themselves to get a piece of this action. Gilead Sciences (GILD) shelled out big bucks for Immunomedics to get their hands on Trodelvy.
AstraZeneca (AZN) has been playing in this sandbox for a while with Enhertu. Even the Swiss giant Roche (RHHBY) is in on the game, not to mention Pfizer (PFE) and Merck (MRK).
So, there you have it. TwoStep Therapeutics: the new enfant terrible of the biotech world, armed with more brainpower than a MENSA convention and ambitions that could make Elon Musk blush.
Will they revolutionize cancer treatment or become another cautionary tale in biotech textbooks?
The jury's still out, but one thing's for sure – watching this unfold will be more entertaining than a CNBC stock ticker on stimulus check day.
Global Market Comments
July 2, 2024
Fiat Lux
Featured Trade:
(HOW MY MAD HEDGE AI MARKET TIMING ALGORITHM WORKS)
Since we have just taken in a large number of new subscribers from around the world, I will go through the basics of my Mad Hedge AI Market Timing Index one more time.
I have tried to make this as easy to use as possible, even devoid of the thought process.
When the index is reading 20 or below, you only consider “BUY” ideas. When it reads over 80, it’s time to “SELL.” Everything in between is a varying shade of grey. Most of the time, the index fluctuates between 20-80, which means there is absolutely nothing to do.
To identify a coming market reversal, it’s good to see the index chop around for at least a few weeks at an extreme reading. Look at the three-year chart of the Mad Hedge Market Timing Index.
After three years of battle testing, the algorithm has earned its stripes. I started posting it at the top of every newsletter and Trade Alert several years ago and will continue to do so in the future.
Once I implemented my proprietary Mad Hedge Market Timing Index in October 2016, the average annualized performance of my Trade Alert service soared to an eye-popping 44.54%.
As a result, new subscribers have been beating down the doors trying to get in.
Let me list the high points of having a friendly algorithm looking over your shoulder on every trade.
*Algorithms have become so dominant in the market, accounting for up to 90% of total trading volume, that you should never trade without one
*It does the work of a seasoned 100-man research department in seconds
*It runs in real-time and optimizes returns with the addition of every new data point far faster than any human can. Image a trading strategy that upgrades itself 30 times a day!
*It is artificial intelligence-driven and self-learning.
*Don’t go to a gunfight with a knife. If you are trading against algos alone, you WILL lose!
*Algorithms provide you with a defined systematic trading discipline that will enhance your profits.
And here’s the amazing thing. My Mad Hedge Market Timing Index correctly predicted the outcome of the presidential election, while I got it dead wrong.
You saw this in stocks like US Steel, which took off like a scalded chimp the week before the election.
When my and the Market Timing Index’s views sharply diverge, I go into cash rather than bet against it.
Since then, my Trade Alert performance has been on an absolute tear. In 2017, we earned an eye-popping 57.39%. In 2018, I clocked 23.67% while the Dow Average was down 8%, a beat of 31%. So far in 2024, we are up 20%.
Here are just a handful of some of the elements that the Mad Hedge Market Timing Index analyzes in real-time, 24/7.
50 and 200-day moving averages across all markets and industries
The Volatility Index (VIX)
The junk bond (JNK)/US Treasury bond spread (TLT)
Stocks hitting 52-day highs versus 52-day lows
McClellan Volume Summation Index
20-day stock bond performance spread
5-day put/call ratio
Stocks with rising versus falling volume
Relative Strength Indicator
12-month US GDP Trend
Case Shiller S&P 500 National Home Price Index
Of course, the Trade Alert service is not entirely algorithm-driven. It is just one tool to use among many others.
Yes, 50 years of experience trading the markets is still worth quite a lot.
I plan to constantly revise and upgrade the algorithm that drives the Mad Hedge Market Timing Index continuously as new data sets become available.
It Seems I’m Not the Only One Using Algorithms
(CMPS), (MNMD), (ATAI), (GOOGL), (MSFT), (AI), (NVDA), (ADBE)
As we celebrate our nation's independence this week, I've stumbled upon a fusion that's more explosive than my Aunt Mildred's famous five-alarm chili.
I’m talking about microdosing and artificial intelligence – two fields that, at first glance, have about as much in common as a Wall Street trader and a Woodstock attendee. Now, I've seen more market trends than I've had hot dogs at July 4th barbecues, but this one's got me intrigued.
Microdosing, for the uninitiated, is like giving your brain a soft reboot – not the full "turn it off and on again" that most of us need on Monday mornings. It's taking tiny doses of psychedelics, presumably to boost creativity. However, if you ask me, nothing boosts creativity quite like staring at a sea of red in your portfolio.
But here's where it gets as wild as my hair after a flight in my old Cessna: The big brains in Silicon Valley are thinking that AI could benefit from a little "microdosing," too.
They're suggesting that AI "hallucinations" - those quirky outputs that usually make about as much sense as congressional budgets - might actually be the secret recipe behind machine creativity. Even OpenAI's Sam Altman is hopping on this bandwagon.
The numbers are enough to make you feel like you've accidentally doubled your microdose. The psychedelic market is projected to hit $10.75 billion by 2027, while the AI market could reach a brain-melting $1.59 trillion by 2030. That's more zeros than I see in my brokerage account, even on a good day. And get this: the AI market is expected to grow faster than a teenager's shoe size, with a CAGR of 37.3% from 2023 to 2030.
So, who's leading this parade? We've got Compass Pathways (CMPS), MindMed (MNMD), and ATAI Life Sciences (ATAI) in the psychedelic corner, their stock charts looking like they've been drawn by someone on an actual trip.
On the AI side, there's Nvidia (NVDA), whose chips are hotter than the grill at your cookout this week. Their Q2 2024 revenue jumped 101% year-over-year – needles to say, that's growth that'll make your sparklers look dim.
Meanwhile, Alphabet (GOOGL) and Microsoft (MSFT) have been throwing more money at AI than a drunken sailor at his first rodeo.
Google's parent company invested a whopping $31.5 billion in AI R&D in 2023 alone. As for Microsoft, it’s not just twiddling its thumbs. Their Intelligent Cloud segment, which includes Azure AI, raked in $67.6 billion in 2023.
Let's also not forget the little firecrackers like C3.ai (AI) and Adobe (ADBE). C3.ai lit up the scene with a 38% revenue increase in fiscal year 2023, hitting $308 million. Adobe's cooking up a storm too, with $17.61 billion in revenue for fiscal year 2023.
Now, before you start throwing money at these stocks, remember: this is riskier than trying to steal a hot dog from a hungry bear. For one, the regulatory landscape is murky. You know how the fun police always show up just when the party's getting good? Well, guess what? As AI gets smarter than a whip and starts cranking out creative content like a patriotic anthem factory, the regulators are gonna come knocking faster than neighbors complaining about loud fireworks.
Then, there’s the possibility that these AI "hallucinations" could be more unpredictable than my Cousin Vinny after his third martini. There's a chance these digital daydreams could cook up content more misleading than a politician's campaign promise.
The bottom line is this: investing in AI is like planting a tree – you won't be enjoying the shade tomorrow. But this cocktail of AI and microdosing? It could be the Boston Tea Party of investments – risky, revolutionary, and with the potential for immense rewards. Or, it could fizzle out like a misfired bottle rocket.
Either way, it's shaping up to be one hell of a spectacle. I say we add these companies to our watchlist and wait for more updates. We wouldn't want to miss out on the main event, would we?