Mad Hedge Technology Letter
July 29, 2024
Fiat Lux
Featured Trade:
(THE EYEWEAR STRATEGY IN TECH)
(META), (ESSILORLUXOTTICA)
Meta planning on getting into the eyewear business is a little bit of a head-scratcher until pealing back the layers.
Meta in talks to buy a $5 billion minority interest in EssilorLuxottica is more about a mega tech company putting out feelers to how they can corner another premium market.
It’s almost a given that Meta would start to branch out into other venues once their core businesses start to stagnate.
The digital ad game and social media platforms only go so far in terms of growth these days and that doesn’t hack it. Shareholders aren’t excited about what prospects Facebook and Instagram have to offer moving forward.
EssilorLuxottica is the largest maker of eyewear in the world and the owner of many eyewear brands and retailers including Ray-Ban, LensCrafters, and Pearle Vision in the U.S. If the deal happens, Meta would own about 5% of EssilorLuxottica.
EssilorLuxottica also announced its acquisition of Heidelberg Engineering, a maker of imaging and healthcare machinery and technology, largely for the ophthalmic and eyecare markets worldwide.
Prescription glasses are not cheap ranging into the thousands of dollars for designer frames and lenses.
If Meta can figure out how to do this all online without going to the optician, imagine the juicy margins they could extract from this sort of venture.
Meta and EssilorLuxottica have a relationship for the production of the Ray-Ban smart glasses. The glasses’ latest version gives consumers video, camera, and Bluetooth headset capability in a stylish eyewear frame with a cool brand on it.
Heidelberg Engineering makes complex, sophisticated, expensive equipment that you may be exposed to if you’re examined in an ophthalmologist’s office. Buying Heidelberg makes EssilorLuxottica more entrenched in the industry where it is the established leader.
The tie-up with EssilorLuxottica is the perfect onboarding situation to understand how to perfect the optimal glasses and lenses and then transfer it into an online experience.
Remember, even if this investment is for VR purposes, the application revolves around virtual eyewear as well.
Meta now understands they need to secure a monopoly on eyewear and it is a conscious decision to make that a launching point for more of their products.
In the future, Meta wants consumers to access Instagram, Whatsapp, and Facebook through EssilorLuxottica eyewear products.
Meta also hopes to secure the first mover advantage while other big tech firms lack the deep knowledge of eyewear. There have already been numerous failed attempts at smart glasses and so Meta founder Mark Zuckerberg is doubling down with a relationship with Europe’s most deeply entrenched premium eyewear firm.
Although the boost to the bottom and top line won’t happen quickly with a possible relationship with EssilorLuxottica, this could anoint Meta as the gatekeeper to the new virtual world through this new eyewear tech.
It’s becoming clear that Meta is running up to certain upper limits in regards to the growth of their 3 platforms and they are looking for another super booster to prop up profits.
I don’t believe that Meta will be allowed to acquire this eyewear company because of anti-competitive laws, but adopting its best products and hiring their best talent seems a lot more on brand from Meta.
Meta has never been shy at poaching outside talent and rewarding them handsomely.
On the flip side, EssilorLuxottica would be smart to adopt some tech now by hiring the right people and trying to digitize the experience further otherwise Meta will get what they are coming for.
Meta pushing the envelope is one of the big reasons why they have stayed ahead of other big tech companies and why the stock has done so well the past few years.
Buy Meta stock once the tech market consolidates.
Mad Hedge Technology Letter
July 26, 2024
Fiat Lux
Featured Trade:
(THE UNBEATABLE PARTNERSHIP)
(EMR), (GRMN), (AMBA), (NVDA), (DXCM), (CSCO), (INTC), (QCOM)
Let me introduce to you one of the hottest trends in tech.
It has been on the tip of everyone's tongue for years, and that might be an understatement, but the interaction of the Internet of Things (IoT) and Artificial Intelligence (AI) offers companies a wide range of advantages.
In order to get the most out of IoT systems and to be able to interpret data, the symbiosis with AI is almost a must.
If the Internet of Things is merged with data analysis based on artificial intelligence, this is referred to as AIoT.
Moving forward, expect this to be the hot new phrase in an industry backdrop where investors love these hot catchphrases and monikers.
What is this used for?
Lower operating costs, shorter response times through automated processes, and helpful insights for business development are just a few of the notable advantages of the Internet of Things.
AI also offers a variety of business benefits: it reduces errors, automates tasks, and supports relevant business decisions. Machine learning as a sub-area of AI also ensures that models – such as neural networks – are adapted to data. Based on the models, predictions and decisions can be made. For example, if sensors deliver new data, they can be integrated into the existing modules.
The Statista Research Institute assumes that there will be 75 billion networked devices by 2025.
This is exactly where AI comes into play, which generates predictions based on the sensor values received.
However, many companies are still unable to properly benefit from the potential of connecting IoT and AI, or AIoT for short.
They are often skeptical about outsourcing their data - especially in terms of security and communication.
In part because the increased number of networked devices, which requires the connection of IoT and AI, increases the security requirements for infrastructure and communication structure enormously.
It is not surprising that companies are unsettled: Industrial infrastructures have grown historically due to constantly increasing requirements and present companies with completely new challenges, which manifest themselves, for example, in an increasing number of networked devices. With the combination of IoT and AI, many companies are venturing into relatively new territory.
By connecting IoT and AI, a continuous cycle of data collection and analysis is developing.
But companies can no longer deny the advantages of AIoT because this technical combination makes networked devices and objects even more useful.
Based on the insights generated by the models, those responsible can make decisions more easily and reliably predict future events. In this way, a continuous cycle of data collection and analysis develops. With predictive maintenance, for example, production companies can forecast device failures and thus prevent them.
The combination of the two technologies also makes sense from the safety point of view: continuous monitoring and pattern recognition help to identify failure probabilities and possible malfunctions at an early stage – potential gateways can thus be better identified and closed in good time.
The result: companies optimize their processes, avoid costly machine failures, and at the same time reduce maintenance costs and thus increase their operational efficiency.
In this way, IoT and AI represent a profitable fusion: While AI increases the benefit of existing IoT solutions, AI needs IoT data in order to be able to draw any conclusions at all.
AIoT is therefore a real gain for companies of all sizes. They thus optimize processes, are less prone to errors, improve their products and thus ensure their competitiveness in the long term.
Some hardware, software, and semiconductor stocks that will offer exposure into AIoT are Emerson Electric Co. (EMR), Garmin (GRMN), Ambarella (AMBA), Nvidia (NVDA), DexCom (DXCM), Cisco (CSCO), Intel (INTC), and Qualcomm (QCOM).
Mad Hedge Technology Letter
July 24, 2024
Fiat Lux
Featured Trade:
(THE FUTURE IS HERE)
(NO CODE)
The future is here.
No code or low code will bring a raft of new innovative tech companies to market, and we are in the early innings of this transformative development.
What is no code?
No-code is an approach to designing and using applications that requires zero coding or knowledge of programming languages.
This type of software hits us at a perfect time when the home office is beginning to become ubiquitous.
The self-service movement that empowers business users will support the creation, manipulation, and employment of data-driven applications.
If we turn back the pages of history, companies need an army of software programmers to develop even the measliest application.
That was then and this is now.
Fast forward to today and automated technology doesn’t only include cutting-edge industries like automotive cars, but also software on laptops that can be rejigged by individual entrepreneurs.
That’s right, one person with no coding experience will be able to design, develop, and offer a real-life application with meaningful business value without the help of expert programmers.
The research data backs up my thesis with research firms projecting a 23% increase in the global market for this type of technology.
During the pandemic, low-code/no-code tools saw steady growth due to their effectiveness in addressing some of tech’s most complicated challenges.
The essential need to digitize workflows and enhance customer and employee experiences will be a boost to the efficiency of commercial and operational teams.
No-code platforms have evolved from just facilitating mundane tasks to making it possible for a broader range of business employees to truly own their automation and build new software applications with no coding while increasing organizational capacity.
A few risks that larger companies might consider is that even for remote developers building new applications, governance is paramount.
IT staff will need to install guardrails and have those built into low-code/no-code platforms to maintain consistent levels of security across the organization.
Cybersecurity solutions need to be integrated into this workflow by training every employee at the organization on security behavior and using compartmentalization and limited access to prevent opportunities for mistakes.
Hard landings are hard to recover from and some can be crippling to the business model.
For no-code companies, harmonizing workflows is a key requirement for success.
In a low-code/no-code organization, departments should be able to work without silos and communicate freely across functions.
Elevated performance enabled by low-code/no-code tools will mean that the number of useful apps hurling toward the marketplace will be more and merrier than ever before.
Higher performance will no doubt usher in a new renaissance of efficiency and even better performance.
This also puts a 3 or even 4-day workweek squarely in play.
Many of the best tech minds in the world have supported the concept of working smarter instead of working harder.
A low code/no-code standard will allow for these achievements to take place.
The cratering of costs to start and run a tech firm is affected too.
Deploying startup capital to pay for other expenses will make it easier for successful incubation.
This will ultimately mean that this new type of tech company will need to embrace the fusion of IT and business staff, empowering them with composable applications to speed up the time to market for new solutions.
Low-code/no-code, APIs, and other tools are enabling companies to integrate new applications into their existing tech stack in a more seamless manner with a lift-and-shift approach vs. a rip-and-replace.
At the entrepreneur level, individuals will be able to harness the technology to build $100 million companies with a snap of the fingers when it wasn’t possible to do it before.
This is finally a chance for the little guy to recapture their moxie in the vast and sometimes overwhelming business world.
Mad Hedge Technology Letter
July 22, 2024
Fiat Lux
Featured Trade:
(THE EV CONUNDRUM)
(TSLA), (RIVN), (TOYOTA)
Sometimes tech trends start and stop and then start again.
It certainly feels that way for the EV industry when the Chairman of Toyota Akio Toyoda threw a damp towel on the progress of EVs taking over the world.
The Japanese Chairman told the world that he thought EVs would never account for more than a third of the market and that consumers should not be forced to buy them.
These ideas definitely go against the grain of the liberal democratic order.
Listen to the bureaucrats in Brussels and the left-wing establishment in Washington and it almost seems as if they want to ban oil and gas products.
Of course, the ban is certainly hyperbole, but the green movement towards lithium battery-powered cars has become quite political and partisan.
Akio Toyoda, chairman of the world’s biggest carmaker by sales, said that electric vehicles (EVs) should not be developed to the exclusion of other technologies such as the hybrid and hydrogen-powered cars that his company has focused on.
He said he believed battery EVs will only secure a maximum of 30% of the market – less than double their current share in the UK – with the remaining 70% taken by fuel cell EVs, hybrids, and hydrogen cars.
Mr. Toyoda argued that electric cars’ appeal is limited because one billion people in the world still live without electricity, while they are also expensive and need charging infrastructure to operate.
The chairman also pointed to Toyota’s recent announcement that it was working on a new combustion engine, saying it was important to give engine factory workers a role in the green transition.
Koji Sato, the car maker’s chief executive, last year promised Toyota would sell 1.5 million battery EVs a year by 2026, and 3.5 million by 2030.
Tesla, the world’s biggest EV producer on an annual basis, reported 1.8 million deliveries last year.
Mr. Toyoda’s two cents come after electric car sales have slowed in the Western world slowed in 2024.
I am of the notion that in the short term, all the low-hanging fruit has been plucked by the EV buyers.
To find the next incremental buyer, it won’t be impossible, but that same type of excitement won’t exist.
The truth is that many consumers are still tied to the combustible engine.
On a recent trip to Japan, almost no local drove an EV and I witnessed almost no charging points.
If one of the biggest economies in the world isn’t convinced, then there is still a lot of work to do and I don’t believe that the Japanese will give up gas-powered engines so quickly.
In the short term, the demand weakness in EVs bodes ill for EV stocks like Tesla or Rivian.
Throw in the fact that EVs aren’t cheap and the cost of living crisis is forcing consumers to migrate to necessities which unfortunately doesn’t include a brand new Tesla.
Stay away from EV stocks in the short term and pile into the AI narrative.
“It doesn't make sense to hire smart people and tell them what to do. We hire smart people so they can tell us what to do.” – Said Apple Co-Founder Steve Jobs
Mad Hedge Technology Letter
July 19, 2024
Fiat Lux
Featured Trade:
(FOLLOW THE CELL TOWERS IN TECH)
(CCI)
