Mad Hedge Technology Alerts!
Readers who missed out on stocks like social media platforms like Facebook (META) now have a chance to grab a pillar of social media in American society.
Reddit (RDDT) went public yesterday and jumped 48% by the end of the trading day cementing its place as a top player of social media stocks in Silicon Valley.
The valuation now is $8 billion and we are just getting started as tech IPOs reverse from its recent dormant activity.
The strong showing by Reddit, along with AI-focused semiconductor connectivity company Astera Labs whose shares have gained 78% since its IPO Tuesday, provides a promising backdrop for other IPO candidates such as Microsoft-backed data security startup Rubrik and health-care payments company Waystar Technologies.
Reddit’s most loyal users were able to buy 8% of the shares at the IPO price, an opportunity typically reserved for institutional investors, and saw a total return in the aggregate of about $29 million by day’s end.
Reddit’s more than two-year slog to listing reflects the ups and downs of the market, beginning with its initial confidential filing in 2021 when IPOs on US exchanges set an all-time record of $339 billion.
Reddit’s listing pushes the total raised by IPOs via US exchanges this year to about $8.8 billion. That’s an increase of around 152% at this point in 2023.
One benefit of Reddit’s slow route to the public market is that enthusiasm for the AI revolution has continued to mount.
The potential of AI was at the center of Reddit’s proposed value proposition to investors, as companies eye the record-setting rallies in stocks like chipmaker Nvidia Corp.
Pay for growth, and for Reddit, which accelerated growth in the past six months, it just makes a strong case that it should be at a premium multiple.
Reddit said it’s in the early stages of allowing third parties to license access to data on the platform, including to coach up artificial intelligence models.
The company said that in January it entered into data licensing arrangements with an aggregate contract value of $203 million and terms ranging from two to three years. It expects a minimum of $66.4 million of revenue from those agreements this year, according to the filings.
Reddit also has announced a deal with Google, allowing Google’s AI products to use Reddit data to improve their technology. Large language models often need vast troves of human-generated content to improve.
Founded in 2005, Reddit averaged 73.1 million daily active unique visitors in the fourth quarter, according to its filings. The company reported a net loss of $91 million on revenue of $804 million in 2023, compared with a net loss of about $159 million on revenue of $667 million a year earlier.
It’s clear to me that there is a solid road map to monetizing Reddit’s platform whether it is licensing in-house data for AI large language models.
Reddit is an extremely rich and diverse social platform in which contributors discuss many topics.
As long as the over 73 million subscribers maintain their engagement, it’s easy to see how the tech company maintains its growth trajectory.
I do believe that subscriber growth will continue and the low-hanging fruit is that 100 million subscriber numbers.
Over time, this platform is a gold mine for AI algorithms to integrate with and that shouldn’t be diminished.
I would invest long-term only on big dips.
Mad Hedge Technology Letter
March 20, 2024
Fiat Lux
Featured Trade:
(A NEW SET OF CHIPS ARE COMING)
(NVDA)
The accolades keep raining down on Nvidia (NVDA) CEO Jensen Huang. I even heard one person say he is the new Steve Jobs.
Those are quite lofty compliments for a guy who has been under the radar for quite a long time. However, he can’t hide anymore as NVDA’s share price has skyrocketed and the valuation today stands at over $2.2 trillion.
NVDA should be at the heart and core of every tech portfolio. They are critical to the facilitation of AI in the present and the future. So when he talks publicly, people listen and that’s what just happened.
Jensen Huang described what he sees ahead for artificial intelligence and Nvidia. He believes it is something so vast and transformative that computing and how we use it will never be the same.
Huang gave the keynote address on Monday to open Nvidia's GTC 2024 conference. Huang focused on what he insisted was the coming transformative influence that his company's Blackwell program of chips and related systems would have on technology and artificial intelligence at the first level and the entire economy beyond.
The audience at the SAP Center in San Jose was waiting for his every word.
Huang focused on Nvidia's new generation of chips and the two factors that make AI work: the training (or programming) that enables the semiconductors to receive data, recognize and organize it, and send it back out to a client in usable form; and the brute computing power to make it all happen.
Nvidia's influence on artificial intelligence is already substantial, thanks to its H100 GPU chips and related products which power most AI applications now.
The Blackwell platform, expected to be available toward the end of 2024, will use a new series of chips, the B200 family, combined with new components and software to get the most out of the chips.
The goal is to let a user pack more training onto chips so these chips and the components built around them can recognize data more quickly.
The chips are supposed to access more inference — the capacity to know how to analyze the data to produce usable conclusions to queries and questions.
Blackwell is supposed to offer 4 times the capacity of Nvidia's wildly popular A100 chip to program the training aspects in the chips themselves and 30 times the inference output.
Add more of these chips into the system, and you can gather more data and translate it into more usable information almost instantaneously.
Nvidia is developing other equally fast components into the platform system so that the information flows in and out swiftly and, as importantly, smoothly, all the while using a lot less power.
Many can see how these cut across a slew of industries by making them more productive and efficient. The head and brains of an operation for most corporations will be an algorithm facilitated by an Nvidia chip.
The demand for these products will be out of the roof coming from industries like logistics, industrial, transport, consumer products, finance, and so on.
Nvidia will supercharge business everywhere.
I will keep tabs on how the Blackwell platform performs, but it is hard to envision it failing because Nvidia’s reputation precedes itself.
This also could trigger another leg to the bull market in tech stocks.
