Tech Letter Archives

The Best Cybersecurity Stock in 2023

The best Silicon Valley cyber security company right now is Palo Alto Networks (PANW).

It’s not really debatable at this point.

It’s not surprising to find out that it is also the largest artificial intelligence (AI)-based cybersecurity company.

AI is all the rage now with grand promises of huge profits in the future.

To get into the nitty-gritty of it – PANW operates across three core segments.

These divisions are cloud security, network security, and security operations and the task in hand right now is working to integrate AI-powered capabilities across them all.

When it comes to network security, PANW is the gold standard in multiple categories. Its VM firewall, designed to add an extra layer of protection to private and public clouds, is ranked No. 1 in the industry for market share.

Since the company is one of the largest providers of cybersecurity in the world, it collects a treasure trove of data, which means it's well-positioned to train AI models to help protect its customers.

It analyzes 750 million new data points per day, leading its AI and machine learning models to detect 1.5 million unique, never-before-seen attacks daily. The end result: Palo Alto's AI blocks 8.6 billion attacks on behalf of customers every 24 hours.

Some of the largest organizations in the world trust Palo Alto as their primary cybersecurity provider. In the last quarter, they took bookings from customers spending a minimum of $10 million annually soaring by 136% year over year.

Bookings from customers spending at least $1 million and at least $5 million grew by 29% and 62%, respectively. Overall, these numbers highlight the surge in demand for advanced cybersecurity tools even during this difficult economic period.

Market research firm IDC estimates that global cybersecurity spending could increase 12% in 2023 to $219 billion as compared to last year. IDC also expects that global cybersecurity spending could cross $300 billion by 2026.

So, Palo Alto is growing faster than its competition and once they harness the power of AI, the stock could take off like a scalded chimp.

According to market research firm BlueWeave Consulting, the application of AI in cybersecurity is expected to grow at an annual pace of 21% through 2029 and generate $79 billion in annual revenue. That would be 3.5 times the size of the AI-enabled cybersecurity market last year.

Tech really can’t do much wrong these days.

It’s a terrible time for unproven companies and the share price proves that of stocks such as Coinbase Global (COIN) or Robinhood (HOOD).

However, established firms like PANW are lapping it up

The stock hit a rough patch and sunk to $135 per share and is now accelerating to $230 per share.

For a tech stock that aggressively raised profitability estimates and has turned the corner from going from loss maker, every 3-5% dip is a great buying opportunity for this stock.

The tech sector is up 9% in the past 30 days and that type of overperformance is due to accelerating business models like PANW.

Quote of the Day - June 5, 2023

Tech Letter

“I discovered Buddha but did not set out to unearth a world religion.” – Said CEO of Microsoft Satya Nadella

June 2, 2023

Tech Letter

Mad Hedge Technology Letter
June 2, 2023
Fiat Lux

Featured Trade:

(SEPARATE THE WHEAT FROM THE CHAFF)
(AI), (NVDA)

Separate the Wheat from the Chaff

Tech Letter

Readers should be careful about being the last ones getting into this generative AI craze.

I’m not saying it is over, but the last ones in can sometimes be the first one’s out.

The data shows that retail traders are pouring into AI stocks in droves without the inside knowledge they really need to succeed.

The truth is that not every AI stock is worth investing in and as time goes by, we will see this play out.

The market is always right.

Some AI stocks will just be a flash in the pan, riding on the coattails of the real AI stocks in a fake-it-to-make-it fashion.

Others could get bought out and shut down which was an infamous Facebook strategy called “catch and kill.”

C3.ai could be one of those stocks that I am talking about.

The stock spiked on the pandemonium almost quadrupling in price from around $12 per share to over $45 in the first half of the year, but the stock has come back to reality trading around $31 per share at the time of this writing.

The recent underperformance is due a good quarterly earnings result, but they offered underwhelming guidance to investors. This could become a recurrent problem for these smaller AI stocks that must promise heaven and earth to entice the incremental investor.

C3.ai said it expects total revenue of up to $72.5 million in its upcoming quarter, compared to analyst estimates of $71.3 million.

The management is on record for saying that while it will be a bumpy road, they believe C3 is currently participating in an $800 billion AI transformational opportunity over the next decade.

C3.ai has struggled to sign new major customers and recently shifted to consumption pricing — paying for software based on use rather than in a flat subscription — to court companies that are hesitant to commit to big contracts. The company said it inked 43 agreements in the quarter, including 19 pilots, and touted that the average sales cycle shortens to 3.7 months from 5 months in the same period a year ago.

Still, many are searching for a scalp from C3.ai.

The short side is stacked with traders looking to profit off a big dive in the price of shares.

Short interest amounted to about 29% of shares available to the public as of May 24.

Activist investors have accused the company of chasing trends and employing poor accounting practices.

Former employees said C3.ai has routinely overstated the readiness of its technology in the past, and this issue has not been put to bed yet.

It could be that C3.ai isn’t ready for showtime.

Maybe they are a few years away, but overstating their capabilities to get in on the action could be the best way for management to get rich quickly.

As sometimes in corporate America, it is better to cash out and strike while the iron is hot while they can before they are exposed as an inferior version of what they claim to be.

Quote of the Day - June 2, 2023

Tech Letter

“Almost everything is like a machine.” – Said Hedge fund Manager Ray Dalio

May 31, 2023

Tech Letter

Mad Hedge Technology Letter
May 31, 2023
Fiat Lux

Featured Trade:

(WILL CHINA WIN THE AI WARS)
(NVDA), (MSFT)

Will China Win the AI Wars

Tech Letter

The two tech heavyweights are basically what the generative AI wars are going to come down to.

Who do I mean?

The United States and China are naturally involved in a larger economic spat that has come to define the world we live in.

What’s the good news?

The Yanks are clearly ahead in the technology that could define the future of the human race.

China’s bread and butter has been to steal vital intellectual property, reverse engineer it, then roll it out for mass adoption.

The strategy has been incredibly effective in launching the Chinese to the second-biggest economy in the world.

Rinse and repeat, right?

China won’t be able to just “copy” generative AI unless they can poach the competition, but since American corporations know the Chinese playbook, I doubt they would allow IP secrets to leak out like a broken toilet.

It most likely appears as if the Chinese and their own Silicon Valley or lack of one will need to create this by themselves.

Funnily enough, American artificial intelligence developed from a non-profit OpenAI as it researched the Transformers machine learning model, which eventually powered ChatGPT.

This environment never existed in most Chinese companies. They would build deep learning systems or large language models only after they saw the popularity.

US investors have also been supportive of the country's research push. In 2019, Microsoft said it would put $1bn into OpenAI.

China, meanwhile, benefits from a larger consumer base. It is the world's second-most populous country, home to roughly 1.4 billion people.

China lives in a world where speed is essential, copying is an accepted practice, and competitors will stop at nothing to win a new market.

This rough-and-tumble environment makes a strong contrast to Silicon Valley, where copying is stigmatized and many companies are allowed to coast on the basis of one original idea or a lucky break.

Creativity and entrepreneurship aren’t valued in China.

At the fundamental level, Chinese tech companies might not be able to hang because they won’t have access to suitable materials.

High-performing computer chips, or semiconductors, are now the source of much tension between Washington and Beijing. They are used in everyday products including laptops and smartphones, and could have military applications. They are also crucial to the hardware required for AI learning.

US companies like Nvidia currently have the lead in developing AI chips and that supply is choked off by the US administration.

For now, the US seems to be ahead in the AI race, and there is already the possibility that current restrictions on semiconductor exports to China could hamper Beijing's technological progress.

However, China's ability to manufacture high-end equipment and components is an estimated 10 to 15 years behind global leaders and that could be the determinant between winning and losing.

Readers need to invest in the AI stocks like Nvidia on every dip and the best of the rest to participate in one of the greatest tech trends in the modern era.

May 26, 2023

Tech Letter

Mad Hedge Technology Letter
May 26, 2023
Fiat Lux

Featured Trade:

(RIDE THE ELEVATOR UP WITH GENERATIVE AI)
(NVIDA), (FOMO), (APPL), (MSFT), (META), (GOOGL), (AMZN)

Ride the Elevator Up With Generative AI

Tech Letter

Part of these artificial intelligence executives going on record to sound out the problems with AI is mostly to protect themselves if this weird digital experiment goes disastrously wrong.

They have mostly said that AI going rogue is a real possibility and could end mankind.

Obviously, we hope that doesn’t happen.

Much of the tech market gains this year have been because of the technology surrounding AI.

Strip that out and the gains will look paltry.

A good example is Nvidia (NVDA) offering legendary guidance to the demand of their chips because of the need to install them in AI-based technology.

The AI narrative truly has legs – it will be the theme that defines 2023 in technology stocks.

The Big 7 tech stocks will possess explosive qualities to their stock precisely because of this thesis.

Then there is the fear of missing out (FOMO).

Every financial advisor is pitching AI as an investment of a lifetime – something that cannot be missed by their clients.

Therefore, I do expect meteoric legs up in shares of Nvidia, Apple, Microsoft, Tesla, Amazon, Facebook, and Google in 2023.

These 7 stocks dominate the tech market and the generative AI gains will mostly manifest themselves in these 7 tech firms.

Yet there are dangerous concerns that AI could also destroy these companies and the internet which we interface with, because the changes could erode the trust in platforms by populating fake photos like deep fakes.

In Washington speech, Brad Smith calls for steps to ensure people know when a photo or video is generated by AI.

Brad Smith, the president of Microsoft, has said that his biggest concern around artificial intelligence was deep fakes, realistic-looking but false content.

Smith called for steps to ensure that people know when a photo or video is real and when it is generated by AI, potentially for harmful purposes.

For weeks, lawmakers in Washington have struggled with what laws to pass to control AI even as companies large and small have raced to bring increasingly versatile AI to market.

Last week, Sam Altman, CEO of OpenAI, the startup behind ChatGPT, told a Senate panel in his first appearance before Congress that the use of AI interferes with election integrity is a “significant area of concern,” adding that it needs regulation.

Lawmakers need to ensure that safety brakes be put on AI used to control the electric grid, water supply and other critical infrastructure so that humans remain in control.

It’s hard to know what is fake and real these days. Fake photos of politicians getting attacked or fake videos of tigers roaming around freely in Times Square New York look weirdly authentic.

AI is getting so good that nobody knows what is real anymore.

I’m sure some of you saw the recent Tom Cruise deep fake where the fake Tom Cruise is telling the audience that he does a lot of “industrial clean up” along with his own stunts. Honestly, I could not tell it was fake, and most people wouldn’t. It caught me – hook, line, and sinker.

As it stands, ride this generative AI to riches in the short-term, but be aware that this technology could blow up the internet or make the internet unusable because of security and trust reasons.

DEEPFAKES LOOK AND SOUND TOTALLY REAL IN 2023

Quote of the Day - May 26, 2023

Tech Letter

“It's better to be a pirate than to join the Navy.” – Said Co-Founder of Apple Steve Jobs