Long-Term Investing Ideas in a Volatile Market
Simon recently spoke with a $35 billion global asset manager about how they're navigating the market volatility. The key takeaways are to think long term, tune out the noise...
Tiernan Ray is one of the technology industry’s most in-depth reporters. He’s written about the seismic changes that have taken place in tech for 25 years – from the early days of the internet and the dotcom boom to the rise of cloud computing and artificial intelligence.
October 2, 2020 – By Samantha Bailey
The technology world moves really fast.
Moore’s Law has caused computer chips to double in transistor density every 18 months. Coding languages tend to become obsolete within a few years. Software is eating the world, and human beings are being replaced by machines doing business with other machines.
That’s a lot to keep up with! How are investors expected to keep up with everything going on?
To help us answer that question, we’ve brought in an expert. Tiernan Ray is one of the technology industry’s most in-depth reporters. He’s written about the seismic changes that have taken place in tech for 25 years – from the early days of the internet and the dotcom boom to the rise of cloud computing and artificial intelligence. He now offers daily insights in his latest newsletter www.thetechnologyletter.com.
In an exclusive interview with 7investing, Tiernan describes the most fundamental changes taking place in technology right now. He offers his thoughts on NVIDIA’s most recent acquisitions, why cloud computing is perpetually “overvalued”, and why orchestration platforms are an opportunity that investors should be paying attention to.
Tiernan also shares his take on social media regulations and a few of Simon’s “far out” ideas. To wrap things up, Tiernan mentions a few intriguing stock market ideas that investors might consider.
00:00 – Intro: The most interesting recent developments in technology
01:30 – NVIDIA: Recent acquisitions, its datacenter strategy, and current valuation
04:33 – Self-Driving Cars: Will GPUs have a role in this market?
08:45 – “The Great Cloud Rush”: How businesses are managing the chaos of multi-cloud deployments, and which companies are poised to win
09:49 – Cloud Computing Valuations: Are they “sky high”? What is Wall Street missing?
12:00 – Orchestration Platforms: Is this a winner-take-all market? Or can there be multiple winners?
17:58 – Social Media: What impact will the DOJ’s recent statement have on Facebook and Twitter?
23:07 – 5G: What companies does Tiernan think will benefit most from 5G?
25:38 – Far Out Ideas: Within the next five years, is Tiernan more bullish on Space Internet or Quantum Computing?
28:47 – Outro: One intriguing space that individual investors should be watching.
Publicly-traded companies mentioned in this interview include Datadog, Dynatrace, Facebook, New Relic, NVIDIA, Tesla, and Twitter. 7investing’s advisors and/or guests may have positions in the companies that are mentioned.
This interview was originally recorded on September 24, 2020 and was first published on October 2nd, 2020
Simon Erickson 0:00
Hello, everyone, and welcome to the 7investing podcast where today we’ll be talking about all things technology, including AI, cloud computing and self driving cars. My name is Simon Erickson, I’m founder and CEO of 7nvesting where it’s our mission to empower you to invest in your future. You do that by providing our best stock market opportunities each month for just $17. And also a ton of educational content to help investors make better decisions. I’m very excited to welcome our guests today. Tiernan Ray. is a technology reporter who’s covered the industry for more than 25 years, written for a variety of publications. And today, he’s covering it with ZDnet, and his own, The Technology Letter. Tiernan, thanks for joining 7investing here this afternoon.
Tiernan Ray 0:43
Pleasure. Thanks for having me, Simon.
Simon Erickson 0:45
Tiernan, like I had mentioned, you know, I’ve followed you for for more than 10 years. And I know that you follow the tech landscape for more than 25 years now. You’ve seen some seismic changes taking place over that time. So my first question for you has to be the 10,000 foot level one of what is it in tech right now that you think is really interesting?
Tiernan Ray 1:06
The artificial intelligence stuff that I’ve been writing about ZDnet is fascinating. And the intersection of that, and cloud computing and possibly on the horizon. Simon is the quantum computing element of that. But right now it’s it’s algorithms that are coming out of big data efforts and cloud computing, as it facilitates all of that.
Simon Erickson 1:28
There’s some good topics in there. Let’s start with AI first, and I know that a company that you put a lot of coverage out on for years has been Nvidia, also a great performer for investors as well. And we’ve been seeing them put some money to work here in the last couple of years, acquired mellanox, early this year for $7 billion, and then just $40 billion recently for ARM Holdings. Nvidia has been kind of such a staple of AI right at the accelerators and the GPUs and the parallelism and everything that they’ve done. It seems though, that they’re kind of trying to expand from being this GPU maker to being more of this broader based data center efficiency play. Tiernan, you’ve mentioned though, there’s kind of some conflicts potentially though with this with this acquisition of ARM. Since a lot of ARM’s customers were competitors of Nvidia’s GPUs. You think that Nvidia is gonna be able to make this jump successfully?
Tiernan Ray 2:22
I think it’s tricky, Simon. Their proposition makes sense, which is people want some form of artificial intelligence in every device. Nvidia currently has technology to do that. They need a distribution channel – ARM would give them that. However, ARM sells its technology blueprints to every company that competes with Nvidia, including Intel and Qualcomm and AMD. So I can’t imagine that they’re happy about this, even though Nvidia CEO Jensen Huang claims companies are just fine. I think companies are flipping out among the competitors, and they’re contemplating how they’re going to deal with this. And I think it’s going to it’s going to be a really thorny antitrust issue for Nvidia. And I think it’s going to be a problem for ARM’s ongoing business. And I don’t think it’s going to be as smooth as Jensen Huang would like people to believe. So the rationale for it makes perfect sense. It’s just this problem that, you know, all of the competitors to Nvidia are not happy about this
Simon Erickson 3:24
Is the goal of Nvidia in this to improve the efficiency and the diversity of what they’re selling to the data center right now? They want their performance per watt to be as attractive as possible to offer a broad buffet options for their customers.
Tiernan Ray 3:38
It makes sense. That’s one part of it, too, that they’ve had this power issue with GPUs not being as energy efficient as they should be. And some people think that that is right, the entire rationale is just beef up those, or slim down those data center chips. But I think that you know, the trillion device opportunity for them is to have an accelerator for AI and every single thing in the world. Which, which ARM would get them right into toasters into cars, even more so than they are now into all manner of IoT devices-think smart infrastructure, with an Nvidia accelerator and every single chip in that of which there are billions every year. So the volume opportunity is never with data center, just because it tends to be a smaller volume market. I feel like for Nvidia, this is kind of go big to high volume. And that’s what ARM with get them.
Simon Erickson 4:32
Great points there. One other comment I didn’t want to make about data center or at least something that we’ve noticed in the last couple years has been the shift to kind of basics, away from GPUs and more custom silicon chips. We saw Tesla do that a couple years ago, right? They hired Jim Keller from AMD fame to design them a chip that would help run the neural networks of their self driving cars. And I guess you know, my question is, you know, we saw a Tesla is a very innovative company, always ahead of the curve, was using GPUs for a lot of those functions before and now they’re trying to develop their own things. And Elon’s promised a $25,000 full self driving car within three years. I don’t think we can hold on to his timetable for anything that he comments on but bigger picture-what’s the role of GPUs and Nvidia in the autonomous vehicle operator?
Tiernan Ray 5:20
I think I think Nvidia will get there. I think they’ll find the right cost envelope. It seems like what Elon does does is a stalking horse, so to speak. He put something out there and it’s never, ever going to be really realized the way he describes it. I mean, the same thing with the battery technology this week. But he sets a goal for people and it’s a good way to cajole suppliers to meet what he wants, and I don’t think he’s, I don’t think Musk is attached to it has to be the Tesla chip. That is the brains I think they see themselves as a manufacturing company, first and foremost, and a software company secondly. Somewhere in there, an energy company, you know, with solar with rooftop solar. So I think the software component would be just fine if there’s lots of Tesla programs running on an Nvidia GPU and so that just means that Nvidia has to bring down the cost of what they can do. And maybe Jensen Wong and Nvidia imagines that, you know, ARM’s intellectual property would enable other suppliers of chips in the ecosystem to use Nvidia acceleration circuitry for AI in embedded chips that are, shall we say more in the oh, you know, Fairchild Semiconductor National Semiconductor price range. Which, in other words, these are gigantic catalog parts that go into automobiles already. Some of these companies have huge, huge market share, in autos, for all kinds of diversified semiconductors. That’s the kind of part you would like to be carrying – an ARM enabled Nvidia acceleration logic that brings royalties to Nvidia, but doesn’t require Nvidia to slim down apart from what might be thousands or hundreds of dollars down to $50 to fit within the cost envelope of a car. So if that’s the distribution strategy for Nvidia to get AI into a Tesla machine and the budget that makes sense for Elon Musk. I like that idea. It makes a lot of sense.
Simon Erickson 7:15
It sounds like there’s a lot of moving parts, there are a lot of opportunities. The idea is to kind of fit the pieces together and offer a variety of options for what do you think Tiernan? I mean, Nvidia is not a small company, it’s $300 billion market cap. This is priced accurately, or is this still the earliest innings of what they want to do?
Tiernan Ray 7:31
Everything’s been inflated upward Simon. The stocks that are the top tier used to trade it maybe four or five times revenue just a couple years ago, and things are now 10 times revenues. Now nothing I’m talking about. If you divide either enterprise value or market capitalization by the projected next 12 months, or the out year, so next fiscal year, projected annual revenue 10 times is now nothing for a company like Apple, 8 or 9 times for Oracle, and Nvidia is at 14, 15 times actually, if you sort of count all in diluted share count. 15 times revenue is a high point for any sort of established tech company now. And of course, there are companies that are small stocks that are trading for much more than that, but it’s pricey. When we looked at Nvidia at Barron’s five years ago, before data center had proven itself at Nvidia to be riding the wave of AI. Before it was clear that they were such a threat to Intel, they were not in anywhere in this range of 15 times forward revenue. So it’s pricy now on a price to free cash flow basis, which is sort of the other relevant metric for them. 44 times I mean, these are high high multiples. It used to be that it felt like 23 times earnings or 23 times cash flow was a lot. Everything is inflated now, and for the most part and Nvidia is an example of that. I think it’s pricey now. I think they would have to show that maybe there’s your your you know, your stock investing play is if you really think that ARM is going to work out for them to give them a vastly broader distribution, which means a much higher unit count for where they’re selling or and charging royalties. Then maybe you say oh, okay, you know, you have no idea what you know, the multiple is going to work not so expensive. When you see how the revenue growth is going to inflict maybe, maybe that’s your sort of your your outside option on the ARM play.
Simon Erickson 9:37
Makes a lot of sense Tiernan you know in the 10 times. revenue club used to be something we talked about a decade ago as a venture capitalist like Bill Gurley would mention. Now it’s common for for companies like these. We also kind of hear all the time that cloud computing companies are overpriced, right? How many times have we heard cloud companies SaaS companies, software as a service companies, being described as overvalued, overpriced, selling 20 times sales right? Or more than that right now, but still, if you look at the index as a whole, I mean, because, you know, 100 companies in index, it’s now what 500% over the last five years. What is it that Wall Street is missing when they’re valuing cloud computing companies? How is it that an overvalued company like that can continue to be mispriced in the market for so long?
Tiernan Ray 10:23
I think that everything is now relative valuation. And so if companies like Okta, you know, are the the metric. Okta is a highly successful company, very reliable, beat and raise kind of quarterly performance, and commanding high high multiples, I think everything else in cloud, you know, be it Twilio, be a talent be at Atlassian be and Iniva, everything gets measured against these relative benchmarks. And so there is no more any kind of absolute measure for what do you think, you know, these things should be priced at and nobody cares, relative to the S&P, what should they be priced at? It is basically every analyst looking at what are the comps? What are the peer group valuations? And just sort of marking it up to that? I think one of the recent ones was, you know, Dynatrace is sort of, not as, as expensive as Data Dog. These are two companies in analytics. And so if you’re looking at it, and you say, what’s my you know, information arbitrage? I think, Dynatrace is an analyst will say, I think Dynatrace is better than it’s been given credit for. It’s sort of out of favor versus Data Dog. So given the Dynatrade stocks, not as expensive as diet as Data Dog, I’m gonna say there’s a sort of a steal of a deal, you know, 25%, upside, and that’s how it, it gets marked down, even though both of those are somewhat expensive, right? But But there is a delta between the two of them and so everything is relative valuation at this point.
Simon Erickson 12:00
I’m glad you brought up Data Dog and Dynatrace, and you know, this is kind of in that field with New Relic also, where you’ve got a ton of apps being built in the cloud, and you want to see the performance not only of the software top of the stack, but also kind of the infrastructure of what’s behind it, you know, clear out the problems. So it’s, it’s running more efficiently for everybody. That has been a really hot space lately, and we’ve seen Data Dog really been the almost uncontested winner from that, at least in terms of stock performance. Do you think that these orchestration platforms, you know, whether it be application performance monitoring, whether it be cloud performance orchestration and multi cloud. I mean, we’re seeing a lot of, as you described it, I believe it was a cloud Gold Rush, or they’re rushed to the clouds, where everybody’s going to cloud, they’ve got a whole bunch of different providers to choose from, but they’ve got to make sense of that chaos. Because there’s a lot of inefficiency in that. Is this a winner take all market, were one of them goes and runs with everything? Or is this a place where you can have six seven winners in this.
Tiernan Ray 12:59
As long as it’s a tools market, Simon, you can have six or seven winners because I think devs devs, like tools, they love tools, like it’s never it presents under the Christmas tree. No dev wants one tool. They want lots of them. And they’ll use all of them. Because they’re all fun to use, just like programming language. Every dev knows seven programming languages because they do different things. And it’s fun to learn them. And it’s fun to try out new stuff. They kind of like foodies, like they don’t get to go to one restaurant reliably. It’s like why wouldn’t you sample right the buffet at every place. So I think there’s you don’t consolidate. That’s one of the problems for tools vendor, I think is you don’t achieve dominance. The infrastructure makers are different. And what I wonder about Simon is, as was Snowflake, which went public recently, which is kind of buying a lot of cloud capacity to sit in the middle of things as a database. I wonder if someone’s going to come along and do to New Relic and Data Dog and Dynatrace what Snowflakes attempting to do to Oracle, which is to, to turn what is a tools market into an infrastructure market and say, you know, you don’t need to buy all these tools, we’re just kind of sign up, put your credit card into our web based service, our cloud based service, and we’ll help you manage all these, what you’re trying to do is you’re trying to manage your applications runnability. So I feel like what the reason I came up with this phrase, the great cloud rush, which is a play on the 1800 Gold Rush is there keep being successive layers of companies like snowflake to fix what’s wrong with the cloud. And it’s like every time you think a company like Data Dog has nailed it, somebody else comes along is a little bit younger, and they say no, you know, we got a different way to do this. And it’s just part of the the great soup of cloud services that you can keep building companies. And you could keep taking a new take on it as long as there’s as long as there’s venture available right to do seed rounds and and a and b rounds. You could keep trying a new thing.
Simon Erickson 14:59
So let’s double click on that too, because we’re starting to see spats and a lot of companies that are these unicorns, these multibillion dollar private companies finding creative ways to come public now. Is this good for the technology industry that we’ve got a ton of capital that’s now going to the public markets, especially in spaces like this?
Tiernan Ray 15:18
It’s good for things that might not make it to market like LIDAR companies, sensor companies, that might have a hard time getting the kind of bridge financing that they need to move beyond prototype stage. And so I suspect that some of the spacs, these are special purpose acquisition companies that have reverse merged to bring private companies to the public markets, some of them may really be making a contribution by helping bring these LIDAR firms, for example, sensor firms that would be abstruse and wouldn’t get the attention to bring them easily into the public markets. Although, you know, I would wonder somebody wants to put their money where they want it an individual investor, I wonder if they’re happy with a blank check company making the decisions for where that money is going to go. So I think there’s also a real question here for the individual investor, when they just write a check to these spacs, and the spac is going to make the investing decision. That’s more question, sort of not my moral take. But it’s more a question I have for general, in general for individual investors is how happy are they with that? so far? I think, you know, they’ve been pretty happy. I think if you see the way these things have been bid up, right? Social Capital is the latest one a couple weeks ago, they bought Open Door, which is a real estate, how they basically they’ll give you cash money for your house, right? So they’re acting like a Zillow for home sales, but in a much more direct way, where they’re just gonna throw money at homeowners and help you flip that house real quick. And so Social Capital got a big jump on this when they announced the date. Social Capital, the SPAC they announced they buy Open Door. And so it seems like so far individual investors, the market is responding. But you know, Simon, sometimes it’s hard to tell, like the market kind of just likes a lot of stuff. And you wonder, like, how sincere is that?
Simon Erickson 17:13
It is very interesting to see the different ways that private companies are going public now. Right? It’s not just the IPO. It’s not even just the spac, the special purpose acquisition companies, like he said, this was all direct listings. Those were really popular a couple years ago, the Slacks, Spotify.
Tiernan Ray 17:28
Right? We haven’t seen as much of the direct listings yet. We haven’t seen as much as I’m waiting for more like remember the Google Dutch auction for the Google?
Simon Erickson 17:35
Tiernan Ray 17:35
You know, 20 years ago, that was at 16 years ago, that was like really like that Google had figured out the IPO price and see more of these kind of zany, you know, IPO processes where the like the brilliant CEO, tells the bankers how it’s going to be. I just didn’t find that entertaining.
Simon Erickson 17:54
It is creative, for sure. Shifting gears a little bit here, Tiernan, you know, something else that you wrote about in the last couple of days is actually about Facebook. It was with relation to the Department of Justice, actually not not intensifying, but relaxing its regulations on kind of content moderation out there. Specifically, it was saying that it would limit a platform’s ability to remove content arbitrarily, or in ways that were inconsistent with its own terms and services and my understanding of that it’s kind of putting the ball in the court of each one of those platforms to make the decision. Well, not having kind of this overall, you know, stated terms and conditions that they have to follow. What’s your take on the DOJ’s decision on this one?
Unknown Speaker 18:36
it’s easier for the for Facebook and social companies, because it narrows their responsibility. They had to before think about general what’s what would be generally objectionable content and think about whether they wanted to police that content to take it down. And now they’ve been told only worry about content that is actually unlawful, say let’s say the sale of contraband items posted as a piece of content on Facebook, or things that promote terrorism. And so presumably, it’s much easier to identify something that’s promoting terrorism on Facebook than other kinds of content. And some people will say that this is an overreach by William Barr, that this is the Department of Justice wanting to prevent liberals from shutting down conservative commentary that liberals find objectionable. If you leave aside that political discussion, it simply does narrow the responsibility of the website. So it’s good for Facebook and that sense, and none of it at all goes to the issue that has emerged in the last decade. That wasn’t here in 1996, when the Communications Decency Act was written, which is the thing that Barr is, is now proposing to revise. In 1996, we had no concept that a website could have a whole machinery of algorithms that would privilege certain content by which we mean it would surface content without your choosing, guessing for you what you might respond to. And this is the complaint of people like Roger McNamee wrote the book “Zucked About Facebook”, and a whole bunch of authors that the algorithms behind Facebook and Twitter are and behind Google search, are pushing to us content that we never chose. And so they’re not neutral platforms, they are surfacing things. And those algorithms as well can be manipulated. And so that whole thing that’s been discovered, and now it’s extensively documented in the last 10 years about social media and about keyword search, and such algorithm driven platforms is not addressed in any way at this point. It you know, it did wasn’t addressed when Mark Zuckerberg spoke before Congress, it’s now not addressed at all by William Barr in his proposal. And so the kind of the fundamental discovery about how social media operates, circa 2020, is in no way addressed by regulation. And based on, you know, a year’s worth of work now by William Barr, at least with this administration, it’s not going to be addressed. So I would think like, hey, this thumbs up, you know, if you’re Facebook like the way that we make money, these algorithms is not in any way, in jeopardy. At this point.
Simon Erickson 21:16
Which has always been on the table. It’s always been an investor risk about regulation. But from your perspective, at least regulation still in the Stone Age, compared to what’s happened the last 24 years.
Tiernan Ray 21:25
Its own its own age. And the question is with antitrust, will they move to talking about beyond consumer harm, to talking about competitive harm broadly, because, you know, for 2030 years now, antitrust is strictly focused on pricing and consumer harm or benefit. It’s been the only metric for antitrust, people been wanting for years for the law to look at the effect of large, large dominant companies in freezing out competitors generally. And it’s, it’s unclear if that will happen. And it feels like maybe there’s more momentum. Now. You know, with the Justice Department apparently going after Google, maybe there’s more momentum to change how antitrust has been pursued. But that remains to be seen. So there is still antitrust risk. But I would say in terms of regulating these innards, the guts of how Facebook and others operate, the laws in the Stone Age, it has no concept, it still thinks that when you go to Facebook, it’s just a website. And somebody put you post, you know, Simon post stuff, Tiernan post stuff, and I’m just looking at Simon stuff. He’s looking at my stuff, and that’s how it operates. They have no idea that, you know, Joe, Henry, Frank, Susan, Adam, David, Penelope are posting stuff that Simon and Tiernan didn’t ask to see, but we’re getting exposed to in disproportionate amounts. And that’s a new phenomenon.
Simon Erickson 22:49
Very true. And that was an excellent job of coming up with seven names very quickly too Tiernan.
Tiernan Ray 22:56
Free Association. I don’t know why, but it knows me. That’s a deep question. Probably Facebook. Penelope. Yeah. Just shows up in the power of social media. That’s right.
Simon Erickson 23:07
What one more specific question I wanted to ask you about was you know, we hear a lot about 5G. This is something that’s making headlines all the time right now.
Tiernan Ray 23:14
Simon Erickson 23:14
It seems like there’s a lot of opportunity for this. We’re always talking about internet things and the bandwidth that they would need. Of course, everything’s gotten mobile for for several years now. But I guess just open ended. Do you have thoughts about 5G?
Tiernan Ray 23:27
It’s, um, as sudden new momentum. I’m told by companies that are small suppliers. There’s two small companies that are both publicly traded that would be of interest to your investors. They’re excellent companies, excellent management and excellent products and they’re right in the middle of 5G. One is Cambium- CNBM is the ticker Cambium is a supplier of wireless equipment for basically doing kind of like extended range. You can think of it as sort of the intersection of WiFi and 5g. So KVM is one and Clear Field Communication. CLFD is the ticker is a Minnesota company that does a lot of outside what we call outside plant traditionally, which is boxes in the field that will connect fiber optics to the home or will connect fiber optics to a tower where you have a 5G radio. And so both of these companies are telling me that the pandemic lockdown on the the movement of people out of large office spaces to remote sites, including their home, has added a new urgency to rolling out 5G not just in the United States but in other parts of the world. That now, wide area, wireless broadband is seen as more critical to possibly allow people to continue to work from home in part or in total, in certain companies in certain fields and certain industries in certain regions. For an extended period of time, if you believe that things are not going back to the way they were, then you have to believe that there needs to be new infrastructure to serve people where they’re going to be working. So it, this seems to change very frequently. But I would say right now we’re in the midst of a better feeling about 5G and 5G investments, broadly speaking, and a sense that there’s new urgency because the pandemic, versus what might have been feeling like a slowing down, or lots of impediments, sort of last year at the end of last year.
Simon Erickson 25:38
Tiernan, why, I’ve got you here, I’ve got to have a little bit of fun and as far out their question, you know, because to hear your expertise on this, and I would really love to know what you think. But while we’re taking moonshots, I’m going to split you up with two ideas. You tell me which one of these two, you’re more bullish on within the next five years?
Tiernan Ray 25:56
Simon Erickson 25:56
The first is Satellite Internet.
Tiernan Ray 25:59
Simon Erickson 25:59
The second is quantum computing,
Tiernan Ray 26:01
Right. Quantum is easy for large companies to fund at the moment, because there’s been so much work in academia that everyone knows what the problems are, and they can take a stab at solving them in different ways. Satellite still is built in that kind of rogue, rogue action, lone wolf fashion where every company that does something satellite has a different idea of what that means. And so I know, for example, this week is Microsoft has a big annual conference where they shop a lot of stuff, and called Ignite. And one of the things they talked about is to hook up as your web services to satellites. And that I would take that as a barometer of like Microsoft’s really interested in what they can do with satellites, and, and everyone’s kind of really interested in what they can do with satellites. But I tend to feel where there’s an academic effort that has built a ground work at a support system for something, it tends to pay dividends. And so I like something like quantum that has been studied so extensively, intellectually, academically, for for decades, now paying off commercially, versus Space Cowboys building – they’re each building their own network of 300 satellites, and each one thinking they’re going to be the answer. And there’s sort of no coming together and no agreement. It’s like, it sort of feels to me like quantum is the internet where lots of players will benefit, because it’ll have decades of payoff versus you know, I don’t know every company is going to build their own network and think that they’re going to own it. Yeah. What do you think?
Simon Erickson 27:54
To me, I’ve always felt like quantum was the ultimate disrupter for computing power. But it always seems like it’s something that’s being figured out, it seems like it’s going to be something like the cloud, you know, at some point, we can tap into the quantum computer, you pay by the hour, maybe pay by the minute, but it’s going to be solving super complex things like drug development and protein,
Tiernan Ray 28:13
like it is. And on the way there, Simon, before they get to the relative relevant capacity for full quantum, what they’re talking about now is, you know, quantum accelerators where it’s partial work done. So there’s a kind of some operation within a general computing program is offline and run through quantum for some kind of advantage. It doesn’t even have to build the ultimate quantum computing systems. So there’s a little bit of a nuance now and maybe that will help.
Simon Erickson 28:41
Yeah, great point, Tiernan. And thanks for letting me put you on the spot with a crazy question like that. I’ll close out with one more that just kind of open ended, you know, you follow the tech industry for so long our audience at 7investing as individual investors, we’re really interested in this space. Anything you think we should be keeping an eye on that’s especially relevant or very interesting right now?
Tiernan Ray 29:02
In all of technology, you’re talking about
Simon Erickson 29:05
Anything that you follow in tech, could be anything we talked about could be anything that we haven’t talked about here
Tiernan Ray 29:09
Yeah, we have yet to see Simon a really good, a really good market for investing in materials and we saw whatever may or may not come out of it. Elon Musk’s presentation on Tuesday night was fascinating about new materials and all the waste that’s in production of something like battery. And supposedly I read somewhere that this is the materials century meaning century we’re 20 years into now is supposed to be dominated by the innovations in materials, things like synthetic materials, things like new ways of manufacturing the same stuff. And we’ve had select investments here and there. There’s a company called Thin Films, which I think is domiciled in Oslo, Norway. They’re neat company, they make things like, you know, smart materials that you could do for sort of having product packaging that that displays digital signage on it. I mean, fascinating stuff like this, but it’s one little thing and it’s kind of like, they’re the investments have been few and far between. But it sort of feels like, every single thing that’s out there from the iPhone to Alexa to self driving cars, has has, as one investor said, to me, it’s asymptotics, meaning it’s hit the the bad knee in the curve where it flatlines for a long time, it does not keep progressing. We’ve seen this definitely semiconductors with microprocessors with Moore’s Law, becoming a problem for Intel’s scaling. We’ve seen it as you mentioned earlier, with Nvidia, running up against energy issues in their GPUs, all these conventional electronics are running into problems of physics. And so we’re at the frontier of physics, and new materials might conceivably solve some of that. And for an investor standpoint, there are trapped efforts, captive efforts inside all these companies that are interesting. There haven’t been a lot of pure plays to invest in, in materials, but I would be that would be I would be interested. You know, as a decade’s long opportunity in what’s there, and maybe it’s like the new version of 3m or something. Maybe
Simon Erickson 31:23
That sounds intriguing. That’s a unique answer I haven’t heard before. So I’m going to be keeping my eyes on materials. Once again, Tiernan Ray You know, one of the one of I just think one of the most in depth technology reporters that there is out there. It’s really a pleasure having you on the 7investing podcast. Thanks so much for the time, Tiernan.
Tiernan Ray 31:39
Pleasure being here. Thank you for the opportunity.
Simon Erickson 31:41
And if you’d like to follow his newsletter, that is just www.thetechnologyletter.com. Some great material in there. Definitely great for due diligence of individual investors. And again, I’m Simon Erickson. I’m the CEO and founder of 7investing, where we’re here to empower you to invest in your future. Thanks for tuning in.
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