Mad Hedge Technology Letter
March 18, 2024
Fiat Lux
Featured Trade:
(APPLE LOOKS FOR A WAY BACK)
(AAPL), (GOOGL)
Apple (AAPL) is in active negotiations to support iPhones with Google's (GOOGL) generative artificial intelligence engine and this is big news out of California.
The possible deal signals the sad truth that Apple's AI technology remains inferior to Google's suite of generative AI tools.
The move by Apple is a sign that management is in crisis mode in Cupertino, California.
Management has finally figured out that there is a real threat of getting left behind and steps are being taken to ameliorate this.
To be honest, I have not heard much about Apple’s AI exploits and I boil it down to Apple not having much of anything to show for.
Apple halted its long-rumored “Project Titan” work on developing an electric car.
The company reportedly announced the news internally and said many people in the 2,000-person team behind the car will shift to generative AI efforts instead.
Clearly, there is a strategic shift going on at Apple and management came to a conclusion the only way forward is to collaborate with other tech behemoths.
They are redeploying a 2,000-person team to go into some AI venture and onboarding Google’s AI software will be the next project for this team to work on.
It’s quite disappointing that Apple hasn’t been able to achieve any in-house headway into one of the biggest sub-sectors in technology today.
Apple needs to double down and hire another 2,000-person team of AI specialists to get to the root of the problem.
After the iPhone, many want to know what is next for Apple and CEO Time Cook has had time but an incomplete road map.
The two companies are in active negotiations to let Apple license Gemini, Google's set of generative AI models, to power some new features coming to the iPhone software this year.
Apple also recently held talks with OpenAI revealing their desperation to hang on to any olive branch extended to their future business.
There is even a possibility that an agreement between the two mega-tech giants will not materialize, and/or Apple will seek multiple partners to build a chatbot.
A deal would give Gemini a key edge with billions of potential users.
However, the report said, "the two parties haven't decided the terms or branding of an AI agreement or finalized how it would be implemented."
Google must feel vindicated after their AI tools went awry.
Even with a lot of rust around the edges, Google’s set of AI tools are still highly valued and sought after.
This is a major victory for Google and boosts the profile of their AI team and in-house expertise.
The AI wars will leave many other tech companies behind and Apple is ensuring itself it gets a seat at the table as the smartphone business gradually declines.
Apple has been lean any meaningful AI announcement and although this doesn’t put them back into the driving seat, it really is a breath of fresh air to see Tim Cook finally wake up and realize the company he shepherds is lost.
The iPhone is not the future and this is a painful way of telling shareholders that they have been asleep at the wheel.
In the short term, Google and Apple would be worth a trade.
“The most important investment you can make is in yourself.” – Said American Investor Warren Buffett
Mad Hedge Technology Letter
March 15, 2024
Fiat Lux
Featured Trade:
(POACHING FOREIGN TECH)
(TSLA), (OCDO.L)
Europe is reeling and now it is becoming Silicon Valley’s playground.
The evidence is all over Europe and quite clear-cut at this point.
The royal 7 from the likes of Tesla (TSLA) and Apple (APPL), who have been responsible for most of the stock market gains this year, are leading the charge to cherry-pick the best tech companies in Europe.
Many European companies are now waving the red flag amid commercial electricity costs spiking 100% in many Western European countries.
The unrelenting electricity increase has caused a mad rush to relocate the best European talent to the United States.
Or, if they don’t relocate out of their own will, many are buy-out targets just like the recent news of British online grocer Ocado.
They are on the verge of tasting the sweet hand of acquisitive cash from Amazon (AMZN).
Poached or not poached – Silicon Valley is dominating.
Ocado Group shares jumped the most in more than five years.
Even though the acquisition never came to fruition, this is the type of environment we find ourselves in, as European tech takes the Silicon Valley money before they can go themselves organically without any external help.
Ocado’s stock soared in 2018 on a landmark deal to build warehouses and license software to US supermarket chain Kroger Co., boosting the grocer’s credentials as a technology company. Ocado has partnerships with several grocers, but investor focus has shifted to profitability as demand for automated warehouses slows.
Amazon wasn’t only interested in Ocado, they had to abandon the iRobot deal.
Amazon’s deal to buy Roomba maker iRobot fell apart after iRobot said the deal had “no path to regulatory approval in the European Union.”
iRobot also announced layoffs of around 350 employees, or around 31 percent of its workforce as part of a restructuring.
Ocado has developed, leading automated warehouse technology that could be of great use to Amazon if it tried to take over the European supermarket industry, which it might.
Many American tourists might experience how outdated and obsolete many European supermarkets are these days.
On the corporate side, when I talk to many European workers on the ground in Milan and Brussels, the consensus is that finding a job at an American big tech firm is considered the proverbial golden paycheck.
European counterparts are mired in inefficiency and unproductivity, and the politicians who exist as 27 European Joe Bidens are ruthlessly driving the industry into the ground by taxing and regulating the hell out of them.
European workers also take 2 months of vacation every year along with 15 to 20 federal holidays per year.
When I read the tea leaves, the next expansion of Silicon Valley is to gobble up anything of perceived value in Europe and anything in any European Union country is fair game.
This buying spree could trigger another leg up to big tech and expand margins.
American tech possesses the powerful balance sheets to wield around the world and dominating the European supermarket industry would add to the top line.
Amazon has already forayed into the food industry with Whole Foods in America so this should be viewed as something similar to that.
Look for big tech to enter strategic European industries and eventually buy something like Manchester United or any other high-quality asset.
“Computers are useless. They can only give you answers.” – Said Artist Pablo Picasso
Mad Hedge Technology Letter
March 13, 2024
Fiat Lux
Featured Trade:
(COGNITION AI IS THE TALK OF THE TOWN)
(AI), (NVDA)
The AI war is heating up thanks to the new kid on the block Cognition AI.
They have certainly one-upped the competition.
Cognition AI’s team has a new type of technology called Devin.
Devin is a software development assistant in the vein of Copilot, which was built by GitHub, Microsoft, and OpenAI, but, like, a next-level software development assistant.
Instead of just offering coding suggestions and auto-completing some tasks, Devin can take on and finish an entire software project on its own.
The technology can even create websites within seconds. No coder will ever be able to compete with this.
As it works, Devin shows all the tasks it’s performing and finds and fixes bugs on its own as it tests the code being written.
The founders of Cognition AI are Scott Wu, its chief executive officer; Steven Hao, the chief technology officer; and Walden Yan, the chief product officer.
One of the big breakthroughs claims they can force a computer to reason with stunning efficiency.
Reasoning in AI-speak means that a system can go beyond predicting the next word in a sentence or the next snippet in a line of code, toward something more akin to thinking and rationalizing its way around problems.
It’s possible to give Devin jobs to do with natural language commands, and it will set off and accomplish them.
As Devin works, it tells you about its plan and then displays the commands and code it’s using. If something doesn’t look quite right, you can give the AI a prompt to go fix the issue, and Devin will incorporate the feedback midstream.
Most current AI systems go haywire soon after it veers away from the script. Off-schedule variables usually are hard for current AI to stomach.
What does this mean for the tech sector and the future of work?
A naïve person would say this will free developers from the drudgery of mundane tasks and let them focus on more creative jobs.
However, the smart crowd understands this will be a great excuse to cut staffing costs to the bone.
This will allow many non-coders to join in the game and totally bypass going through software developers who more often than not lack common sense.
Remember when the Chinese consumer went from cash to paying with QR codes via smartphones, they skipped over the credit card and America is still stuck on the plastic card.
People will be able to create 1-man tech companies and do the job of 100 people in no time.
This certainly is a winner-takes-all scenario and the mid-term future is quite bleak for software developers.
It’s looking highly likely and I would say ironic that the software developers creating AI are about to do a disservice to their colleagues and rid the economy of 99% of software developers.
Of course, AI isn’t that good yet, but the path is being laid and the countdown has been initiated.
With a few years of furious development of high-quality AI, this will usher in a golden age of tech stocks, because they will finally be able to fire most of the staff.
The advancement of AI can guarantee higher tech shares no matter what and many might say stocks like Nvidia are cheap because this trend is still in the early innings.
“There are a thousand ways to be smart.” – Said Founder of Amazon Jeff Bezos
Mad Hedge Technology Letter
March 11, 2024
Fiat Lux
Featured Trade:
(MICROSTRATEGY STRATEGIZES TO PROFITS)
(MSTR), ($BTC)
