“Great achievers are driven, not so much by the pursuit of success, but by the fear of failure.” – Said Co-Founder of Oracle Larry Ellison
Mad Hedge Technology Letter
March 22, 2024
Fiat Lux
Featured Trade:
(REDDIT HAS SOME JUICE)
(RDDT), (META)
Readers who missed out on stocks like social media platforms like Facebook (META) now have a chance to grab a pillar of social media in American society.
Reddit (RDDT) went public yesterday and jumped 48% by the end of the trading day cementing its place as a top player of social media stocks in Silicon Valley.
The valuation now is $8 billion and we are just getting started as tech IPOs reverse from its recent dormant activity.
The strong showing by Reddit, along with AI-focused semiconductor connectivity company Astera Labs whose shares have gained 78% since its IPO Tuesday, provides a promising backdrop for other IPO candidates such as Microsoft-backed data security startup Rubrik and health-care payments company Waystar Technologies.
Reddit’s most loyal users were able to buy 8% of the shares at the IPO price, an opportunity typically reserved for institutional investors, and saw a total return in the aggregate of about $29 million by day’s end.
Reddit’s more than two-year slog to listing reflects the ups and downs of the market, beginning with its initial confidential filing in 2021 when IPOs on US exchanges set an all-time record of $339 billion.
Reddit’s listing pushes the total raised by IPOs via US exchanges this year to about $8.8 billion. That’s an increase of around 152% at this point in 2023.
One benefit of Reddit’s slow route to the public market is that enthusiasm for the AI revolution has continued to mount.
The potential of AI was at the center of Reddit’s proposed value proposition to investors, as companies eye the record-setting rallies in stocks like chipmaker Nvidia Corp.
Pay for growth, and for Reddit, which accelerated growth in the past six months, it just makes a strong case that it should be at a premium multiple.
Reddit said it’s in the early stages of allowing third parties to license access to data on the platform, including to coach up artificial intelligence models.
The company said that in January it entered into data licensing arrangements with an aggregate contract value of $203 million and terms ranging from two to three years. It expects a minimum of $66.4 million of revenue from those agreements this year, according to the filings.
Reddit also has announced a deal with Google, allowing Google’s AI products to use Reddit data to improve their technology. Large language models often need vast troves of human-generated content to improve.
Founded in 2005, Reddit averaged 73.1 million daily active unique visitors in the fourth quarter, according to its filings. The company reported a net loss of $91 million on revenue of $804 million in 2023, compared with a net loss of about $159 million on revenue of $667 million a year earlier.
It’s clear to me that there is a solid road map to monetizing Reddit’s platform whether it is licensing in-house data for AI large language models.
Reddit is an extremely rich and diverse social platform in which contributors discuss many topics.
As long as the over 73 million subscribers maintain their engagement, it’s easy to see how the tech company maintains its growth trajectory.
I do believe that subscriber growth will continue and the low-hanging fruit is that 100 million subscriber numbers.
Over time, this platform is a gold mine for AI algorithms to integrate with and that shouldn’t be diminished.
I would invest long-term only on big dips.
Mad Hedge Technology Letter
March 20, 2024
Fiat Lux
Featured Trade:
(A NEW SET OF CHIPS ARE COMING)
(NVDA)
The accolades keep raining down on Nvidia (NVDA) CEO Jensen Huang. I even heard one person say he is the new Steve Jobs.
Those are quite lofty compliments for a guy who has been under the radar for quite a long time. However, he can’t hide anymore as NVDA’s share price has skyrocketed and the valuation today stands at over $2.2 trillion.
NVDA should be at the heart and core of every tech portfolio. They are critical to the facilitation of AI in the present and the future. So when he talks publicly, people listen and that’s what just happened.
Jensen Huang described what he sees ahead for artificial intelligence and Nvidia. He believes it is something so vast and transformative that computing and how we use it will never be the same.
Huang gave the keynote address on Monday to open Nvidia's GTC 2024 conference. Huang focused on what he insisted was the coming transformative influence that his company's Blackwell program of chips and related systems would have on technology and artificial intelligence at the first level and the entire economy beyond.
The audience at the SAP Center in San Jose was waiting for his every word.
Huang focused on Nvidia's new generation of chips and the two factors that make AI work: the training (or programming) that enables the semiconductors to receive data, recognize and organize it, and send it back out to a client in usable form; and the brute computing power to make it all happen.
Nvidia's influence on artificial intelligence is already substantial, thanks to its H100 GPU chips and related products which power most AI applications now.
The Blackwell platform, expected to be available toward the end of 2024, will use a new series of chips, the B200 family, combined with new components and software to get the most out of the chips.
The goal is to let a user pack more training onto chips so these chips and the components built around them can recognize data more quickly.
The chips are supposed to access more inference — the capacity to know how to analyze the data to produce usable conclusions to queries and questions.
Blackwell is supposed to offer 4 times the capacity of Nvidia's wildly popular A100 chip to program the training aspects in the chips themselves and 30 times the inference output.
Add more of these chips into the system, and you can gather more data and translate it into more usable information almost instantaneously.
Nvidia is developing other equally fast components into the platform system so that the information flows in and out swiftly and, as importantly, smoothly, all the while using a lot less power.
Many can see how these cut across a slew of industries by making them more productive and efficient. The head and brains of an operation for most corporations will be an algorithm facilitated by an Nvidia chip.
The demand for these products will be out of the roof coming from industries like logistics, industrial, transport, consumer products, finance, and so on.
Nvidia will supercharge business everywhere.
I will keep tabs on how the Blackwell platform performs, but it is hard to envision it failing because Nvidia’s reputation precedes itself.
This also could trigger another leg to the bull market in tech stocks.
“Economies of scale are a good thing. If we didn't have them, we'd still be living in tents and eating buffalo.” – Said JP Morgan CEO Jamie Dimon
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)
