Will A.I. Save Us?

Anti-A.I. physicist Professor Stephen Hawking was a staunch supporter of preserving human interests against the future existential threat from machines and artificial intelligence (A.I.).

He was diagnosed with motor neuron disease, more commonly known as Lou Gehrig’s disease in 1963 at the age of 21 and sadly passed away March 14, 2018 at the age of 76.

Famed for his work on black holes, Professor Hawking represented the human quest to maintain its superiority against quickly advancing artificial acculturation.

His passing was a huge loss for mankind as his voice was a deterrent to A.I.’s relentless march to supremacy. He was one of the few who had the authority to opine on these issues.

Gone is a voice of reason.

Critics have argued that living with A.I. poses a red alert threat to privacy, security, and society as a whole. Unfortunately, those most credible and knowledgeable about A.I. are tech firms.

They have shown that policing themselves on this front is remarkably unproductive.

Mark Zuckerberg, CEO of Facebook (FB), has labeled naysayers as “irresponsible” and dismissed the threat. After failing to prevent Russian interference in the last election, he is exhibiting the same defensive posture translating into a de facto admission of guilt. His track record of shirking accountability is becoming a trend leading him to allow politicians to post untrue marketing material for the 2020 U.S. election.

Share prices will materially nosedive if A.I. is stonewalled and development stunted. Many CEOs who stake careers on doubling or tripling down on A.I. cannot see it die out. There is too much money to lose – even for Mark.

The world will see major improvements in the quality of life in the next 10 years. But there is another side to the coin which Zuckerberg and company refuse to delve into…the dark side of technology.

Tesla’s (TSLA) CEO Elon Musk has shared his anxiety about robots flipping the script on humans. Elon acknowledges that A.I. and autonomous vehicles are important factors in the battle for new technology. The winner is yet to be determined as China has bet the ranch with unlimited resources from the help of Chairman Xi and state sponsored institutions.

The quagmire with China has been squarely centered around the great race for technological supremacy.

A.I. is the ultimate X factor in this race and whoever can harness and develop the fastest will win.

Musk has hinted that robots and humans could merge into one species in the future. Is this the next point of competition among tech companies? The future is murky at best.

Hawking’s premise that evolution has inbuilt greed can be found in the underpinnings of America’s economic miracle.

Wall Street has bred a culture that is entirely self-serving regardless of the bigger system in which it finds itself.

Most of us are participating in this perpetual money game chase because our system treats it as a natural part of life. A.I. will help a select few do well in this paper chase to the detriment of the majority.

Quarterly earnings performance is paramount for CEOs. Return value back to shareholders or face the sack in the morning. It’s impossible to convince anyone that America’s capitalist model is deteriorating in the greatest bull market of all time.

Wall Street has an insatiable hunger for cutting-edge technology from companies that sequentially beat earnings and raise guidance. Flourishing technology companies enrich the participants creating a Teflon-like resistance to downside market risk.

The issue with Professor Hawking’s work is that his timeframe is too far in the future. Professor Hawking was probably correct, but it will take 25 years to prove it.

The world is quickly changing as science fiction becomes reality.

People on Wall Street are a product of the system in place and earn a tremendous amount of money because they proficiently execute a specialized job. Traders are busy focusing on how to move ahead of the next guy.

Firms building autonomous cars are free to operate as is. Hyper-accelerating technology spurs on the development of A.I., machine learning, and enhanced algorithms. Record profits will topple and investors will funnel investments back into an even narrower grouping of technology stocks after the weak hands are flushed out.

Professor Hawking said we need to explore our technological capabilities to the fullest in order to avoid extinction. In 2018, exploring these new capabilities still equals monetizing through the medium of products and services.

This is all bullish for equities as the leading companies associated with A.I. to reap the benefits.

And let me remind you that technology is still the least regulated industry on the planet even with all the recent hoopla.

It is having its cake and is eating it too. Hence, technology is starting to cross over into other industries demonstrating the powerful footprint tech has extracted in economics and the stock market.

The only solution is keeping companies accountable by a function of law or creating a third-party task force to regulate A.I.

In 2019, the thought of overseeing robots sounds crazy.

The future will be here sooner than you think.

 

October 23, 2019 – Quote of the Day

“The greatest enemy of knowledge is not ignorance, it is the illusion of knowledge,” said the late Professor Stephen Hawking.

October 21, 2019 – Quote of the Day

“Life is not fair; get used to it,” said the founder of Microsoft Bill Gates.

 

October 16, 2019 – Quote of the Day

“Capitalism has worked very well. Anyone who wants to move to North Korea is welcome.” – Said Founder and Former CEO of Microsoft Bill Gates

 

 

Gillette’s Marketing Flub

The pitfalls of getting it wrong can bring you tears.

Proctor and Gamble (PG) got a taste of precisely that.

We underestimate the power of digital marketing and how it can make or break a company’s fortune.

Even many small businesses rely on media platforms such as YouTube, Patreon, Snapchat, Twitter and so on to disseminate their message and nurture their brands.

But what if it goes badly wrong?

The story of personal grooming brand Gillette is a stark warning for companies to stay in their lanes and not reach too far when it comes to their digital marketing campaigns.

Once companies start diving into delicate social issues, they risk alienating half or more of their targeted audience.

In January, Gillette debuted a short film in part of continuing their woke campaign with a self-titled phrase called “toxic masculinity.”

To see the short video please, click here.

Gillette’s underlying message suggested that men in general pose a deep problem in society.

Their self-coined phrase “toxic masculinity” rolls through clips of portraying a young boy being bullied by other boys, sexual harassment, catcalling, and a man speaking over a woman in a meeting highlighting the disappointment in the male gender.

Instantly, the backlash from Gillette’s core demographic, men who shave, were heard from in full force with many shouting from the rooftops for a boycott on Gillette’s and even Procter and Gamble’s products.

Gillette didn’t blink and doubled down on their woke campaign rolling out a “fat acceptance” ad.

They did not stop there and tripled down distributing an ad depicting a father’s first time teaching his female-to-male transgender child how to shave.

Gillette were defiant in their beliefs and felt an obligation to dip into social discourse and take a stand for what they think is the right message to sell razors.

Just a mere seven months after Gillette’s social justice campaign began, Gillette’s parent company Procter & Gamble took an eye-popping $8 billion write-down citing a painful charge for Gillette’s personal grooming division.

The company would have produced net profits without this ghastly charge.

Granted that Gillette was already having a tough time selling more razors as a combination of trends and demographics decrease the volume of male shaving, but the exacerbation of underperformance was purely due to the revolt against the digital marketing campaign which drove away their core customer.

Gillette’s excuse was currency fluctuations and increasing competition but that can in no way explain the giant uptick in customer deterioration.

Management’s strategy of profiting from woke capitalism on the back of the #MeToo movement blew up in their face and many men chose to respond with their wallets.

This also represents the viral nature of digital marketing in 2019 and it really works both ways.

It also indicates how powerful these tech platforms are as the cradle of human discourse and underscores how reliant even the largest of corporations are on digital marketing through the likes of Instagram, Facebook, Google, Amazon and the who’s who of Silicon Valley.

Why Steve Jobs is Turning Over in His Grave

When will CEO of Apple Tim Cook get fired?

I feel like a broken record.

Another product show comes and goes with him STILL selling a bunch of iPhones.

He is the most uncreative CEO that exists in a company where the utmost creativity is demanded.

He is starting to make a mockery and drag Apple’s reputation through the mud.

I believe that Apple is on a suicide mission ruining its brand that took founder Steve Jobs decades to craft.

What we got was the iPhone 11 Pro with three cameras on the back, is Cook going to be around for iPhone 15 or 16?

The world and the people that can afford an iPhone are already tapped out with iPhones, iPods, iPads, and devices.

These same consumers won’t buy 5 iPhones to use at the same time.

The Apple Watch Series 5 with an always-on display has been a nice bump in revenue but that’s it, just a nice bump and will never go viral.

Since Cook is having problems selling $1,000 Apple devices, he has chosen to sacrifice margin and go down market.

How Steve Jobs would be turning in his grave if he heard that!

The new Apple+ video streaming service will debut in November at a price of just $5 per month–or free for a year with the purchase of any of Apple’s phones, computers, tablets, or set-top boxes.

Viewers will have access to just a dozen or so made-for-Apple+ shows that Apple is producing.

Sounds quite pitiful if you compare it with Netflix.

I understand that Cook is spurning revenue in the short run with low prices but to what end?

If Cook brings back the same playbook of selling the next iPhone, at some point, he will be blustered by shareholders who finally come to the same conclusion as me.

The lower margin business will be the catalyst to Cook’s firing once Apple’s margins go down the toilet.

At some point, he will have to come up with the product that will reinvent the world and my bet is he will utterly fall flat on his face.

We are talking about the CEO of Apple here and not the boss of some local car repair shop.

Apple will sell the new iPhone 11 for $700 instead of $750 and this decision will bring the average selling price (ASP)’s down.

Let’s welcome their new business in switching out old iPhones, another damning development in this company that used to be the most exciting business in the world.

Apple will also roll out a trade-in initiative that offers current iPhone owners money in credits for handing over their old phone when they buy a new one.

A two-year old iPhone X is worth up to $400 and an iPhone 7 fetches $150.

The trade-in program is a desperate reaction to falling iPhone sales.

If the company hired a visionary like Twitter’s Jack Dorsey or Tesla’s Elon Musk, Apple shares would trade twice as high than the $225 today and wouldn’t have gone flat for the past year.

In Cook’s defense, the sequel to Steve Job’s main act was going to be a rough one to match in success and potency and it is clear that Cook is in over his head.

It’s odd that I am the only one that sees it.

Another View of the Antitrust Assault

The big story here is that regulation is creeping closer careening towards us as if we had always expected it.

The ramifications are massive and, at a bare minimum, investors can expect the kibosh to be put on FANG stocks.

That doesn’t mean they will fall off a cliff, but the upside in the short-run is capped and appears as if this will be the base case scenario.

Investors will need to filter out the cadence to be able to hear the true chords.

There will still be many twists and turns in this on-going saga.

The Federal Trade Commission fining Facebook (FB) over privacy issues earlier this year was just the tip of the iceberg.

The government is launching a multi-pronged barrage on big tech that will include 48 state attorney generals with only California and Alabama abstaining.

Our vilified big tech companies are now confronted with two Congressional, six state and local, and eight federal investigations.

Nothing is cut and dry as judges could apply anti-trust law in different ways.

States could also go at them alone if they feel justice is not served.

The only winner here are lawyers that will earn a windfall in these proceedings.

Even if the larger society generally understands how harmful these platforms are, it does not necessarily mean the government’s case will hold up in a court of law.

It is absolutely true that social media platforms have had severe unintended consequences that have devastated the harmony of American society and culture as a whole.

But that doesn’t mean it is illegal.

Another unintended consequence is tainting the reputations of big tech and it will be meaningfully harder to hire the best of breed moving forward causing companies to relatively overpay for premium talent.

It is no surprise that millennials desire to work for companies that are a net positive social contributor and not the other way around.

It is becoming increasingly exhausting identifying new Millenial staff who immediately know their job would be to exploit consumers by culling highly targeted and personal data.

The contagion doesn’t just stop there, these big tech companies have become a nightmare to work for in their current state as the avalanche of criticism from media, society, and the state have caused management to lead in a schizophrenic and paranoid way with a siege mentality.

Would you be scared out of your mind if you knew what you were involved in could eventually be brought up in a court of law or even imprison you?

The paranoia has surfaced in the email communications with companies such as Facebook and Alphabet banning all political and societal discourse.

I will argue that Facebook has more to lose than Alphabet.

Alphabet provides real services while Facebook is built out of thin air.

I can pinpoint YouTube and Google Maps as ultimate winners if these two are spun out into their own entities.

The fact of big tech being cash cows means there is a great deal at stake in these rulings for the consumers, shareholder, employees, and the entire world.  

 

Meet Your Next-Gen Hacker

Before I get into the weeds about why Palo Alto Networks, Inc. (PANW) is a robust cybersecurity company, I want to touch on the state of the cybersecurity industry and the recent developments that investors must be aware of.

Our cyber enemies have become sophisticated and nimble – the days of malicious software, the days of keyloggers have died out.

Now we’re talking about AI-based bots via machine learning (ML)-based attacks and corporations must maintain an entire enterprise infrastructure blocking external forces that hope to wreak havoc on the inside once they are in.

The volume of breaches has mushroomed in the past year because of the switch from manual hacking to automated hacking resulting in countless attacks.

Many companies that get hacked still don’t know they are hacked as we speak and could go unnoticed for decades.

And more commonly, breaches are automated attacks and even from state-sponsored groups that shoulder the dirty interests of sovereign states.

The number of artificial intelligence attacks that spread like wildfire clearly offers a pathway for Palo Alto Networks, Inc. (PANW) and companies of its ilk a golden opportunity to exploit the addressable market of protecting network infrastructure.

Every year, the stakes creep higher as globalization puts the pressure on global corporations to succeed in any way possible.

It is important to understand the context in which Palo Alto Networks, Inc. (PANW) operates and how impressed I am with the past earnings results that saw revenue 22% year-over-year to approximately $806 million.

Quarterly billings crossed the $1 billion mark, a first in the company’s history.

And superior performance in Prisma and Cortex platforms which refer to the collective next-gen security was substantially strong.

Palo Alto Networks, Inc. (PANW)’s next-gen security billings were approximately $192 million in the quarter. This represents a $768 million annual run rate and accelerated growth to approximately 180% year-over-year.

Over the last 12 months, the Prisma and Cortex teams will expand from 500 people to 1,500 people, and this will transpire through hiring new staff.

The company can effectively redeploy resources from what would have been part of the core business into the new business.

These revamps result in additional acceleration to the Prisma and Cortex growth rate from approximately 70-odd percent to 180%.

Here’s a quick side jaunt about the intent to acquire Zingbox, an enterprise IoT security company.

This acquisition is yet another pristine instance of the firm’s ongoing strategy to consolidate new technologies into a next-generation firewall platform, allowing customers to protect their complex enterprise ecosystems.

Some inter-industry developments have favored the company in a positive way with Palo Alto Networks catapulting Symantec and Zscaler at a Fortune 50 U.S. retailer to secure their data center and network of more than 2,000 retail outlets.

Palo Alto Networks displaced Zscaler and beat Fortinet at a major European national healthcare provider in their digital transformation project.

This will result in securing servicing for hundreds of hospitals along with all of their patients and employees.

Many victories will result in Palo Alto Networks winning the war against competition.

Palo Alto Networks beat CrowdStrike and displaced Symantec with the Prisma and Cortex platforms at a global insurance company with more than 25 million policyholders.

Palo Alto Networks beat Fortinet and displaced Cisco to become the standard security platform for the government at one of the most population-heavy regions in Asia Pacific.

Companies are spending more on cybersecurity, period.

What will the new paradigm shift of cybersecurity look like?

I believe the world migrates towards a lesser number of vendors.

The world needs to go towards more comprehensive security.

Industry needs to ditch manual labor and focus on diligently automating processes by scale.

Cybersecurity finds itself at an inflection point in the industry.

Almost every customer I’ve met with in the last month, approximately 600 of them, is in some way, shape or form on their journey to the cloud.

Some are analyzing the cloud. Some of them could deploy some applications in the cloud.

Some of them are in a hybrid cloud environment already and are looking to add more functions.

Some of them are going to go to multiple clouds.

Honestly, there is not a real customer who’s not talking about the cloud.

The security cloud market is a $1 trillion addressable market in the next 5 years offering a massive opportunity for cloud security firms to play an outsized role in allowing these customers to make that cloud journey over the next 3 to 5 years.

No need to obfuscate my words – I am bullish Palo Alto Networks, Inc.

 

 

The Product of No Regulation

No government interaction means the duopoly of digital ads continues as is and investors cannot be short Facebook unless massively hedged on a short-term trade.

CEO of Facebook Mark Zuckerberg and his data leak-optimizing tech company is at it again with plans to roll out an online dating feature on the Facebook platform.

The new business is coined “Facebook Dating” which is the new façade in which Facebook will gouge your personal data in every shape and form possible so Mark Zuckerberg can add to his plethora of gaudy mansions that dot Hawaii, Palo Alto and Lake Tahoe.

It’s nuts that most people still subscribe to Facebook’s unfair terms, but this takes it up a few notches higher by gifting the company access to the most personal of personal content that a person holds dear to his heart.

Facebook, as usual, has the marketing spinners putting out the misleading reasons to join such as starting “meaningful relationships” which shows that Facebook has shrugged off any type of personal data scrutiny to double down on this new data business.

As it stands, their cryptocurrency business looks as if the momentum has been hijacked for the moment as regulatory issues could stand in the way of that, but dating online is the lower hanging fruit.

Instagram users will be able to integrate posts seamlessly into their “Facebook Dating” profile and Facebook will roll out a new feature called a “Secret Crush” list which allows users to add people to this ridiculous list.

This is Facebook’s master plan for integrating Instagram before the anti-trust regulators deem the company anti-competitive.

Some of the risk involved is the alienation of a younger Instagram audience by forcing Facebook integration down their throats.

This will unhinge a few of the Instagram diehards but on the flip side, it could cause more engagement by an older Facebook seeking their partner on a younger Instagram world, meaning more ad dollars.

On the business side of things, Facebook has every incentive to try this and even lusting to get into many other short-term engagement tricks and gimmicks by moving into marginal industries.

It is no secret that quite possibly, the best place to get opioids is on Facebook’s platforms.

Until the government does something meaningful, Facebook will run wild trying to create these types of engagement cesspool businesses out of thin air.

The imminent collateral damage is Match Group, Inc. (MTCH) cratering over 6% now that a FANG is a direct competitor.

I wouldn’t want to be in their offices today.

Here’s Your Next Generation Semiconductor

Transistor capacity has always put the kibosh on semiconductor chip performance.

Chipmakers have for decades drained investment into a revolutionary new Japanese technique to push the limits of physics and cram more transistors onto pieces of silicon.

A secretive Japanese company that mastered the skill of manipulating light for applications is about to go mainstream with cutting edge technology.

Ushio Inc. announced it had achieved the once thought impossible task of refining powerful, ultra-precise lights needed to test chip designs based on extreme ultraviolet lithography (EUV), a process through which the next generation of semiconductors will be made.

The milestone means that the Japanese company will become a prominent player in future chipmaking and technology that harnesses it.

“The infrastructure is now mostly ready,” said CEO Koji Naito in an interview.

Testing equipment was primarily holding back EUV but with that hold-up dealt with, production efficiency and yields can finally go up setting the stage for electronic manufacturers with the possibilities of producing substantially better consumer products.

The Tokyo-based company developed a light source for equipment used to test what are known as masks: glass squares slightly bigger than a CD case that act as a stencil for chip designs. These templates must be picture-perfect, even a minute of malfunction in one of them can render every chip in a large batch unfit.

That’s where Ushio seamlessly slots in.

Its technology operates lasers to vaporize liquid tin into plasma and produce light closer in wavelength to X-rays than the spectrum visible to the human eye.

That light aids chipmakers in detecting errors in the product.

This process takes a room-sized machine that looks like a sci-fi death ray and requires a phalanx of workers to operate.

After 15 years of industrious development, the EUV business will generate profits next year.

Only Intel Corp., Samsung Electronics Co., and Taiwan Semiconductor Manufacturing Co. desire to go smaller than the 7-nanometer processes that are the current status quo of CPU design.

The focus on niche areas and creating things that others can’t is set to pay off for Ushio.

Ushio is poised to seize control of the market for light sources used in testing of patterned EUV masks, there are several boutique tech companies in the Tokyo area that are incessantly focused on high-precision manufacturing.

Ushio dominates lithography lamps used to make liquid crystal displays with 80% market share and controls 95% of the supply of excimer lamps used in silicon wafer cleaning.

Their secret sauce is balancing mass production with craftsmanship.

Materials like quartz glass are arduous to work with and possess peculiar thermal expansion properties from metals like the molybdenum in which they are housed.

Ushio was established in 1964, and it was the first Japanese company to develop and produce halogen lamps.

Starting from 1973, fishermen used its lights to catch squid.

The firm has succeeded in more than tripling its sales over the past 25 years.

The company is now venturing into the use of sodium lamps to nurture plants and using ultraviolet light calibrated to such a precise wavelength to kill bacteria without damaging human skin.