Global Market Comments
September 5, 2024
Fiat Lux
Featured Trade:
(COFFEE WITH RAY KURZWEIL)
(GOOG)
(AI), (AMZN), (GOOG), (MSFT), (ACN), (BAH), (MTCH), (PLTR), (SPLK), (SNOW)
The other day, I overheard my kids explaining AI to their friends using the video game they’re playing.
By the time they finished, I realized two things: One, I'm never going to understand Fortnite. Two, if a preteen gets the potential of AI, we'd better pay attention.
Now, you might be thinking, “John, haven't we heard enough about AI?” Well, let me ask you this: Have you ever had enough money? Didn't think so.
So, as I was saying, the AI market is set to explode from a measly $136 billion last year to a mind-boggling $827 billion by 2030.
And here's the thing - we're still in the early innings of this game. It's like we've just finished the national anthem and the first pitch hasn't even been thrown. And in this ballgame, I've got my eye on a player that might just hit it out of the park: C3.ai (AI).
Now, before you roll your eyes at another ".ai" company, hear me out. This isn't just another tech firm slapping "AI" onto its name to ride the hype wave.
C3.ai is positioning itself as a one-stop-shop in the AI world. They're not just selling software; they're selling the picks and shovels for the AI gold rush.
And let me tell you, in a gold rush, you want to be the one selling the tools, not the one with blisters on your hands from digging. Let’s look at the company’s recent performance, shall we?
Based on their reports, C3.ai’s revenue jumped 16% to $310.6 million in fiscal 2024. I know that 16% might not sound like much to you youngsters used to seeing crypto coins go up 1,000% overnight, but in the real world of enterprise software, that's solid growth.
And they're projecting $382.5 million for the current fiscal year - a 23% increase.
Now, here's where things get interesting: C3.ai's customer agreements surged by 52% to 191, thanks largely to their powerhouse partner network.
This network features big names like Amazon (AMZN), Alphabet (GOOG), Microsoft (MSFT), Accenture (ACN), and Booz Allen Hamilton (BAH), which helped drive much of this growth.
In fact, 115 of those agreements came through these partners, marking a 62% jump from last year.
That's like your Tinder (MTCH) matches suddenly going through the roof (yes, I know how it works, I'm not living under a rock) — it means you're doing something right.
Next, let's talk valuation. C3.ai is trading at 9 times sales. Is that cheap? Not by your grandfather's standards. But we're not buying IBM here, folks.
We're buying a ticket to the AI revolution. And compared to some of the frothy valuations I've seen in my time, it's not that outrageous.
Sure, they're not profitable…yet. But neither was Amazon for years, and look how that turned out.
Actually, the Street expects C3.ai's bottom line to grow at a 51% clip for the next five years. That's the kind of growth that can turn a modest investment into a down payment on that beach house in Malibu you've been eyeing.
But let's not get ahead of ourselves. While the growth story is compelling, there are some wrinkles to consider. That is, C3.ai remains a speculative play at this point.
Right now, I’m treating C3.ai like that brilliant but erratic friend from college - tons of potential, but you're never quite sure if they're going to end up as a tech billionaire or living in their parents' basement.
For one, I know that C3.ai’s transition to a pay-per-use model is smart. But, it's also disruptive. Because while their subscription revenue growth of 41% is impressive, it's also volatile.
If you review their reports, it’s easy to spot that this shift might be causing some growing pains. Just look at their latest fiscal quarter.
While C3.ai’s revenue grew 20% annually, its operating costs also jumped by 11%. That's not exactly the kind of cost control that gets investors excited.
And let's not forget the competition. This is the world of AI, where everyone and their grandmother is trying to get a piece of the pie. That means C3.ai needs to keep innovating faster than its peers just to stay ahead.
There's also the question of valuation. When compared to peers like Palantir (PLTR), Snowflake (SNOW), and Splunk (SPLK), C3.ai is trading at a premium. This suggests that a lot of the growth potential might already be baked into the stock price.
And, of course, let's not forget about those earnings estimates. For the current fiscal year, analysts are expecting a loss of $0.54 per share.
The next fiscal year looks better with an expected loss of $0.23 per share - an improvement of 56.7%, but still in the red.
So, what's the play here? Well, if you've got the stomach for it, C3.ai could be a worthy addition to the speculative portion of your portfolio. It's not for your widow and orphan money, mind you.
But for those of you looking to spice up your investments with a dash of AI hot sauce, C3.ai might just fit the bill.
Mad Hedge Technology Letter
September 4, 2024
Fiat Lux
Featured Trade:
(FEDS KNOCK THE WIND OUT OF TECH)
(AI), (NVDA), (MSFT), (META)
The U.S. Federal government just took the air out of the tech market rally in the short term.
Good thing the market usually has a short memory.
Mr. Market did not expect the US Justice Department to barge in and subpoena Nvidia (NVDA).
Nvidia is the gem of the tech industry and the leader of the cutting-edge generative artificial intelligence sub-sector.
To take out Nvidia and destroy it, the tech market would be valued at significantly less than it is today.
Not to mention we are just 2 months away from the U.S. election, this sounds and feels like a bold political move behind the scenes.
Why not wait until after the election?
As it stands, the timing is pretty terrible for tech stocks as the amount of catalysts to take us to new highs has disappeared.
The past earnings seasons were nothing stellar and many tech companies sold off on poor forward guidance.
It is no joke that we have been waiting for over 4 years for the recession that still hasn’t come.
However, it seriously looks like we won’t be able to kick the can down the road anymore and the job market is starting to fall apart to the point where we will need rate cuts.
The DOJ believes Nvidia is too dominant and appears to look like a monopoly and the government is inching closer to filing a formal complaint.
Antitrust officials are concerned that Nvidia is making it harder to switch to other suppliers and penalizes buyers that don’t exclusively use its artificial intelligence chips.
Nvidia has drawn regulatory scrutiny since becoming the world’s most valuable chipmaker and a key beneficiary of the AI spending boom. Sales have been more than doubling each quarter.
Regulators also are digging into whether Nvidia gives preferential supply and pricing to customers who use its technology exclusively or buy its complete systems.
Nvidia Chief Executive Officer Jensen Huang said he prioritizes customers who can make use of his products in ready-to-go data centers as soon as he provides them, a policy designed to prevent stockpiling and speed up the broader adoption of AI.
Microsoft (MSFT) and Meta (META) spend more than 40% of their budget on hardware on the chipmaker’s gear. During the peak of shortages of Nvidia’s H100 accelerator, individual components were retailing for as much as $90,000 each.
There also are broader regulatory questions about Nvidia’s practices. Access to AI capabilities has become a key focus for governments around the world, with the technology becoming increasingly vital to economic strength and national security.
If NVDA shares drop to anything close to the $100 level, I do believe that is a great entry point to add to shares.
Much of the bad news has been priced in and at the end of the day, even if NVDA is broken up, it will happen 10 years later.
As for the larger tech story, September could be a weak month for tech stocks and it is a seasonably slow month.
However, the infrastructure build for AI data centers relentlessly continues, and from my channel checks, I see tech firms increasing their purchases of Nvidia AI chips.
This bodes well for the future and explains why sales keep doubling and doubling like it never ends.
“I've actually not read any books on time management.” – Said Elon Musk
(HEDGE AGAINST MARKET RISKS WITH GOLD & SILVER)
September 4, 2024
Hello everyone.
Let’s get real. August, September & October are usually very tricky months for the stock market. Or to put it another way, the market is usually awful and moody during these months. So, expect quite a bit of turbulence during this time.
The market could pull back 7-10% during this time. The U.S. election is coming up and the Fed meets in mid-September to deliver rate cuts or not. The environment makes people nervous. And people become cautious at this time.
The release of the non-farm payrolls data this Friday could cause a lot of volatility. If the August data comes in hotter than expected, September rate cut expectations might be quickly marked down.
Still, markets are pricing in a 67% likelihood that the Federal Reserve will cut by a quarter percentage point in September, according to the CME FedWatch Tool.
Stock up on Gold as a hedge against geopolitical and financial risks.
Going into year-end and well into 2025, we should see gold rally toward $3,000, particularly with the near 100% certainty (depending on data) that the Fed will cut rates in September, and possibly again later in the year.
Investment bank analysts at Goldman Sachs point out that emerging market countries are continuing to buy gold – with purchases tripling since the middle of 2022 amid fears of U.S. financial sanctions and a mountain of sovereign debt.
China is weighing on crude oil and copper prices. Its weak real estate sector provides only limited upside for steel, which presents challenges for iron ore prices. But this “winter season” cannot last forever. According to BHP’s CEO, we could start to see a turnaround in China’s real estate sector within the next 12 months.
Analysts at Goldman expect copper to average about $10,100 per metric ton in 2025, well above this year’s average of $9,231.
Goldman’s view long term is that metals important for the energy transition away from fossil fuels, such as copper, will ultimately reach scarcity pricing as demand grows, investment declines, and inventories fall.
Recommendation: Scale into gold and silver stocks on down days over the next eight weeks, particularly if you have no holdings in this sector.
You should be looking at (GLD), (GDX), (WPM), (SLV), (GOLD), & (NEM).
================================================
If you have good profits from any LEAPS recommended earlier this year or last year, consider taking profits.
QI CORNER
Cheers
Jacquie
Global Market Comments
September 4, 2024
Fiat Lux
Featured Trade:
(I HAVE A NEW OPENING FOR THE MAD HEDGE FUND TRADER CONCIERGE SERVICE)
(TESTIMONIAL)
Mad Hedge Biotech and Healthcare Letter
September 3, 2024
Fiat Lux
Featured Trade:
(ROLLING THE DICE ON BIOTECH)
(RHHBY), (VNDA), (ZVRA), (HALO), (BMY), (GILD)
Remember when you'd jump into a hot tub and the water was just right? That's what the biotech sector feels like right now - it's warming up and ready for a splash.
After years of treading water, biotech stocks are showing signs of life. High interest rates and cash crunches have kept this sector on the sidelines, but the game is changing.
September 2024 is shaping up to be a blockbuster month for the sector, with FDA decisions that could send stocks soaring - or sinking.
First up, Roche Holding AG (RHHBY) is waiting on pins and needles for the FDA's verdict on Ocrevus SC. This isn't just another drug - it's a new way to deliver their multiple sclerosis cash cow.
If the FDA gives the green light on September 13, Roche could be looking at a bigger slice of the MS pie. Why? Because this new version doesn't need fancy IV setups, opening doors to treatment centers that were previously off-limits.
But Roche isn't the only one with butterflies in its stomach.
Vanda Pharmaceuticals (VNDA) is hoping to make history on September 18 with Tradipitant. This drug aims to tackle gastroparesis, a condition that's been stuck in treatment limbo for four decades. If Tradipitant gets the nod, Vanda could find itself as the big fish in a very lucrative pond.
And let's not forget about the underdogs.
Zevra Therapeutics (ZVRA) is crossing its fingers for Arimoclomol. This potential game-changer targets Niemann-Pick disease type C, a rare brain disorder that's been waiting for its medical knight in shining armor. September 21 could be that day.
These approvals aren't just good news for the companies involved. They're like a shot of adrenaline for the whole biotech sector. Investors love nothing more than seeing potential turn into profit.
But it's not all about solo acts in biotech. These days, it's all about partnerships.
Take Halozyme Therapeutics (HALO), for instance. They've buddied up with Roche to develop Ocrevus SC, bringing their ENHANZE technology to the party.
These kinds of collaborations are golddust for smaller biotech firms. They get access to resources and markets they could only dream of on their own, making them much more attractive to investors with deep pockets.
Speaking of deep pockets, big pharma companies are on the prowl, and several biotech firms are looking mighty tasty.
Bristol-Myers Squibb (BMY) just showed us how it's done by snatching up Karuna Therapeutics. Why? Two words: KarXT.
This antipsychotic drug is currently under FDA review for schizophrenia, and if approved, it could be another lucrative revenue stream. This kind of deal is a win-win. The big fish gets new toys for its pipeline, and the smaller fish gets a cushy new home.
Now, let's talk about the elephant in the room - interest rates.
Biotech companies and high interest rates go together like oil and water. These firms need cash like plants need water, and high rates make that cash harder to come by.
But here's the thing: the Federal Reserve is hinting at rate cuts.
For biotech, that's like Christmas coming early. Lower rates mean easier borrowing and easier borrowing means more research, more trials, and potentially more breakthroughs.
So if rates drop, don't be surprised to see biotech stocks shoot up faster than a rocket.
But it's not just about drugs in the pipeline. The biotech sector is also home to some serious innovation.
Take gene editing and CRISPR. This isn't your grandpa's genetics - it's like we've found the “track changes” function for DNA.
The market for this molecular magic is set to explode from $4 billion in 2024 to a whopping $17.8 billion by 2034. That's a 16.1% annual growth rate, for those of you keeping score at home.
With this technology, I’m not just talking about curing rare diseases here. I’m talking about the possibility of having your own home testing kits that could make your 23andMe results look like a fortune cookie.
And then there’s personalized medicine, which is turning healthcare into a bespoke tailor shop. Your DNA is becoming the blueprint for your treatments, and the market is following suit.
We're looking at a jump from $300 billion in 2021 to $869.5 billion by 2031. Why the boom? Well, sequencing your DNA used to cost more than a mansion.
Now it's cheaper than a decent night out in New York - from over $1 million in 2007 to about $600 today.
Stem cells and regenerative medicine are also getting investors hot under the collar. We're talking about potentially regrowing organs or giving Parkinson's the boot.
This market is set to grow at a spicy 9.74% annually from 2023 to 2030. Basically, it’s like we're entering the age of biological LEGO.
And let's not forget AI - the new brainiac in the lab. It's turning drug discovery into a high-speed chess game, with the AI market in healthcare expected to hit $95.65 billion by 2028.
With the innovations from this tech, scientists could have supercomputers as their lab partners – ones that never need coffee breaks and can crunch data faster than you can say "blockbuster drug."
Given all these possibilities, I think it’s a good time to talk about strategy. After all, investing in biotech isn't one-size-fits-all. It's more like a buffet - you pick what suits your taste and risk appetite.
For the adrenaline junkies who like to walk the tightrope without a net, there's the high-risk, growth investor approach. These brave souls get their kicks from cutting-edge stuff like gene editing and personalized medicine, often diving into early-stage biotech firms working on the next big breakthrough.
It's not for the faint of heart - these stocks can swing wilder than a monkey on espresso. But when they hit, oh boy, do they hit.
Just look at the personalized medicine market - it's set to explode from $300 billion in 2021 to a mind-boggling $869.5 billion by 2031. That's the kind of growth that could make your portfolio do backflips, assuming you can stomach the ride.
On the other side of the petri dish, we've got the value and low-risk investors. These are the steady hands who prefer their biotech stocks aged like fine wine and served with a side of sleep-easy. They're eyeing established companies with robust pipelines, diverse portfolios of approved drugs, and ongoing trials.
Think Roche with its Ocrevus SC, or old guards like Gilead Sciences (GILD) that have weathered more storms than a lighthouse.
These investors are the tortoises in the biotech race - slow and steady, but with a knack for crossing the finish line, often with a healthy dividend check in hand. They might not make headlines, but they're more likely to let you sleep soundly while your portfolio does the heavy lifting.
No matter which style you choose, one thing is undeniable: the biotech sector is like a sleeping giant, and it's starting to stir. The question is, will you heed the wake-up call or sleep through the alarm?
Global Market Comments
September 3, 2024
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD or THE HIDDEN AI IN YOUR LIFE),
(SPX), (NVDA), (CSCO), (LEN), (DHI), (KBH), (SMCI), (BRK/B), (META), (AAPL), (GOOGL), (TSLA), (JNK), (HYG), (FXA), (FXE), (FXB), (FXC), (EEM), (IWM)
