Mad Hedge Technology Letter
October 11, 2024
Fiat Lux
Featured Trade:
(DISASTER MANAGEMENT SOFTWARE GOES BALLISTIC)
(PLTR)
In a world where natural disasters and global war has never been more common, there is one tech company whose fortunes are directly correlated in this types of chaos.
The tech firm and stock is Palantir (PLTR).
They specialize in disaster management software and even can sign contracts to prevent disaster management.
They apply unique software to deliver the best solutions for those they service, whether it is the U.S. military, a Fortune 500 company, or a state government looking at how to best allocate scarce resources during a torrid hurricane.
PLTR knows what to do, when to do it, and in what doses, and in 2024, that is a potent cocktail that has seen the company sign contract after contract.
It was only just a few months ago when PLTR was green lighted for a $99.8 million contract to extend access to the Maven Smart System to all military branches, including the U.S. Army, Air Force, Navy, Space Force, and Marine Corps.
The pact is a five-year firm-fixed price contract from the Army Combat Capabilities Development Command Army Research Laboratory aims to streamline access to current Maven Smart System capabilities, which utilize advanced artificial intelligence and machine learning.
Work is expected to enhance coordination between strategic and tactical operations, allowing the military to make informed decisions and fast actions.
Terms of the contract include support for AI-enabled battlespace awareness, global integration, force management, contested logistics, joint fires, and targeting workflows.
Combat vehicles from every military department will be outfitted by Maven to help them make the best decisions on the ground in real time.
The U.S. military and PLTR are also a common operational piece as part of its response efforts to aid in Hurricane Helene relief.
Maven specializes to facilitate battle space awareness, global integration, contested logistics, joint fires, and targeting workflows, but is being deployed to aid in the hurricane relief efforts.
While common operational tools and data systems have been used for disaster relief in the past, this marks the first time the Maven capability has been used for a hurricane.
The military is working to feed the data it is gathering directly to FEMA and other first responders. That includes general mapping data and data from various sensors that provide insights into things like road closures, communications, force movements, and which areas have yet to be serviced.
The system can also help with logistics by bringing in that data so that in real-time, based on the point of need and survey data from FEMA, food, water, medical supplies, or other goods can be reallocated to the best locations to serve citizens.
I’m not the one to wish ill on the populace, but it is almost a fact that the percentages of calamities that include natural disasters and kinetic wards have increased a great deal during the past 4 years.
There is not a company better positioned to take advantage of this through their best of breed software.
One thing I must note, management often dilutes shares by giving themselves vested shares, the stock tends to sell off big when these executives sell shares.
Wait for a big dip to jump in and ride the volatility higher.
Mad Hedge Technology Letter
October 9, 2024
Fiat Lux
Featured Trade:
(SQUEEZING COMPETITION)
(GOOGL)
Regulators are inching closer to Mag 7, and that has major ramifications for the trajectory of tech stocks.
It has been a time coming for tech as they have turned from market darlings to quasi-monopolies.
Look at your daily life, and it is hard to get away from some of these services like Google.
That is why the US Justice Department said in a new court filing that it may break up of Google (GOOGL).
Its anti-competitive practices have made it hard for smaller companies to add to the American economy.
It seems as if Google has benefited too much from its success.
Naturally, Google did not agree.
That makes sense because executives at Google would be crazy to want to break itself up simply because they can extract larger compensation when presiding over the current model.
People like the CEO Sundar Pichai have no incentive to splinter the company into many different divisions.
He simply would get paid less, and he would finally have to compete harder.
The move by DOJ also sends a signal to other tech giants currently facing antitrust cases from DOJ and other Washington regulators as part of a wide-ranging effort by the Biden administration to rein in what it views as anticompetitive behavior across a number of industries.
The case against Google targeting its dominance in search resulted in a landmark decision and concluded Google illegally monopolized the online search engine market and the market for search text advertising.
The judge concluded that Google’s agreements with browser providers and devices powered by Google’s Android operating system stifled rivals from entering and growing within the markets.
Google pays as much as $26 billion per year to maintain its position on mobile devices such as Apple (AAPL) and Samsung smartphones.
The DOJ could also ask the judge to force Google to share the data that it uses to refine its search algorithms with rival browsers and search providers and limit the company's dominance over search text ads.
DOJ suggested the judge should also consider blocking Google from illegally monopolizing related markets, in addition to the search and search text advertising markets.
It may ask the judge to force Google to give websites more ability to "opt out" of "any Google-owned artificial-intelligence product."
Forcing Google to reveal its algorithms would be devastating to the business model.
Everyone would know their secrets, and other big tech could take anything usable and inject it into their own algorithms.
Algorithms are the secret sauce to many tech companies, and it will only become more valuable when infused by AI.
In the medium term, this caps any upside to Google shares.
In the short-term, I could see a bounce back after the bad news is priced in.
In the long term, if standalone divisions of Google’s businesses are created, like the ad and search business, being unshackled from old management could make some of these parts into new growth companies.
The unprofitable parts like Waymo might get terminated.
It would be sink or swim time because management isn’t going to prop up anything wasteful.
It would be good for the tech market as a whole, add more value, and deliver more equal competition, which the Feds are set out to do.
Either way, the breaking up of Google is more like a marathon and not a spring, but tech now has to wake up to existential threats that were never there before.
“Risk comes from not knowing what you're doing.” – Said American Investor Warren Buffett
Mad Hedge Technology Letter
October 7, 2024
Fiat Lux
Featured Trade:
(ROBOTAXI HYPE IS HERE)
(TSLA), (ODFL), (CVLG), (ARCB), (ULH), (SNDR), (WERN)
If trucks drive themselves, what will happen to long-distance drivers?
Self-driving cars and an announcement is here this week.
Musk is set to take center stage in California to host Robotaxi Day. The long-awaited event is meant to offer insight into the electric-vehicle maker's pitch that it is a tech company first and a car company second.
What will become of long-distance drivers?
Actually, self-driving cars should have been part of the street scene for a long time, at least according to X’s CEO Elon Musk's forecasts.
In 2015, the Tesla founder predicted that two years later, fully autonomous cars would be driving around.
Not so fast.
Since then, he has adjusted the forecast year after year. Musk recently said that 2023 will finally be the day, but that came and went.
But it's not just Musk who has butchered it when it comes to self-driving cars. Many car producers have announced autonomous cars every year, and investors are chomping at the bit to find out something meaningful.
Many questions remain unanswered, and I do believe Musk could deliver something underwhelming at robotaxi day. At the end of the day, there is a lot of hype attached to Musk, and every press conference doesn’t deliver.
No wonder because the technical and social challenges involved in getting fully autonomous cars on the road are enormous.
Then there is the legislation of it – can an industry that is tilted towards benefitting Elon Musk really expect any Democratic legislation that is positive?
The consensus is that anything he will try to do will need a Republican president since he has burnt the bridge with the radical left.
What about the technical level?
What happens in unforeseen traffic situations? What if the human has to take the wheel, but his driving skills have long since atrophied? What do autonomous vehicles mean for traffic and urban planning? Who is liable in case of accidents?
Is "platooning" revolutionizing the forwarding business?
In the short term, there are traffic situations that are manageable in their complexity and in which autonomous vehicles could definitely play an important role in the future.
For example, experiments with automated truck convoys have long been carried out on freeways and highways. In this so-called "platooning," several trucks drive behind one another, with only the first vehicle in the column having to be driven by a person.
"Platooning" is intended to save fuel since the vehicles' slipstream can be used more efficiently. But there is also the suspicion that staff could also be saved because fewer long-distance drivers are needed.
In the U.S., the truck driver is the most common occupation in 26 out of 50 US states. There is a 67% chance of it disappearing completely in the next twenty years because artificial intelligent solutions will deliver us a timely way to replace the driver.
The economist John Maynard Keynes predicted in 1930 that by 2030, we would only be working 15 hours a week. In an essay entitled "Economic Possibilities for our Grandchildren, " the Brit didn’t consider that these gains would be pocketed by corporations and not the people.
It’s highly possible that within 10 years, humans won’t be driving groceries or other goods across states, and this function will be replaced by an algorithm. If not that, then products will be platooned to a destination headed by one driver followed by a herd of self-driving trucks behind him or her.
Some of the winners of this A.I. revolution will be public trucking names such as Old Dominion Freight Line (ODFL), Covenant Logistics Group (CVLG), Arcbest (ARCB), Universal Logistics Holdings (ULH), Schneider National (SNDR), Werner Enterprises (WERN).
This week could be a “sell the news” event for Tesla stock.
Mad Hedge Technology Letter
October 4, 2024
Fiat Lux
Featured Trade:
(TECH WANTS TO GET RID OF LABOR COSTS)
(TSLA), (NVDA)
Unshackling the restraints on human labor – that is where tech is headed.
I’m talking about AI.
Robots aren’t able to perform complicated tasks and that is the holy grail of AI.
If headway is made just on this one issue then the sky is the limit.
Profits are then unlimited and the world will change into something we could have never imagined.
If stakes weren’t high enough, the next explosive leg up in tech shares is now centered on this concept.
There is only so much balance sheet maneuvering can add to the bottom line.
Magnificent 7 stocks who are experts are juicing up the balance sheet will gradually run out of levers to pull.
Technology stocks demand that management move the needle along because the alternative is that the company will get left behind.
When the Department of Defense commenced its robotics challenge in 2015, the stated goal was to develop ground robots that can aid in disaster recovery with the help of human operators.
Nearly a decade later, generative AI is accelerating that learning curve, pushing human-like machines to pick up new tasks in real-time.
And just recently, Tesla (TSLA) presented an updated version of its Optimus robot at Tesla’s Investor Day and showed it roaming a factory floor. CEO Elon Musk touted the robot’s potential, saying it had the ability to push the company’s market cap to $25 trillion.
Humanoids that can adapt to existing environments have long been seen as the ultimate test if they can work alongside humans in spaces built for them.
Nvidia (NVDA) is driving rapid development through an ecosystem built specifically for humanoids. It combines high-powered chips that process data at high speeds with a digital world that allows users to train robots on skills applied in the real world.
Just this past summer, Nvidia unveiled “NIM Microservices,” a visual training ground that allows generative AI models to visually interpret their surroundings in 3D.
Nvidia’s ecosystem now enables robots to train using text and speech input, in addition to live demonstrations.
Humanoids have already begun taking their first steps into reality. Musk has said two Optimus robots are working at Tesla’s Fremont factory, and he expects a few thousand to be deployed by next year. Amazon (AMZN) has partnered with Oregon-based Agility to utilize its Digit robot at a test facility. Apptronik is working with Mercedes-Benz to integrate Apollo into its manufacturing line.
The goal is to adapt humanoid for the future which will allow them to operate beyond industrial use. They could become as ubiquitous if companies are able to scale and bring costs down to $10,000 per machine.
Technology is still in the stage of calculating how they bring the expenses under control.
It is not very cost-effective if a company needs to spend 5 times the actual cost of running the AI division on retrofitting the environment for a humanoid and resetting the language models for different tasks.
Much of these technical aspects are being worked out, and these companies are inching their way closer to a day when companies might be able to work fully without a human worker or alongside a minimum amount of workers.
Tesla is a company long-term that needs to be looked at and this assumption is solely based on their robotics and humanoid business. It is highly plausible that Elon Musk is at peace with sacrificing his EV business in the medium time as long as moving up the value chain to become the leader of what is next which is looking more like robotics using AI.
Musk is skating to where the puck is next and that is where the future will be.
