Krzysztof and I are trying out something new for the podcast next week. More of a freeform wide-ranging discussion on general topics that interest us rather than deep focus on a specific company or industry. We’ll be interested to see if it finds an audience.
There are 30 self-driving taxis buzzing around San Francisco between 10 at night and 6 in the morning, which is part of GM’s autonomous taxi beta project: https://getcruise.com/rides/
Electrek reports that initial feedback has been positive and that rates are already 20% less than UBER. There are expectations that rides will become even cheaper as the program scales.
I’m having some fun this morning and am running a Twitter poll to see how you feel about the AI/human relationship in 2042.
This was prompted by a rabbit hole I’ve been furiously digging myself into. Yann LeCun’s — an AI pioneer and now one of Meta’s (Nasdaq: META) chief scientists — has had an about-face lately. He recently published a paper stating our current approach to AI is the wrong one. He says that reinforcement learning is a brute-force attempt to predict the next steps in action-based sequences; when in reality we should be designing inference models that are trained in a cognitive architecture that responds to inputs from the world around it.
The “narrow AI” versus the “AGI” debate rages onward. But this time, it’s from one of AI’s most influential voices.
What: China’s Passenger Car Association recently increased its forecast for “new electric vehicles” that will be sold in the country during 2022, from 5 million units to 6 million. NEVs include battery-powered vehicles (BEVs) and also plug-in hybrid vehicles (PHEVs). There were 571,000 NEVs sold in June and then 564,000 sold in July, increasing at 144% and 129% (respectively) in year-over-year comparisons.
Here’s how the market share looked for those numbers in July. Keep in mind that some of these vendors — like Tesla and NIO — are only selling BEVs and don’t offer PHEVs:
- 29% – BYD
- 7% – SAIC Wuling
- 5% – Tesla
- 2% – Xpeng
- 2% – Volkswagen
- 2% – Chery
- 2% – NIO
- 52% – Everyone else.
Impact: I’m really intrigued by this as an investor. China’s EV market is not only growing rapidly, but it’s extremely fragmented and doesn’t have a clear-cut winner yet. It opens the door for companies we’re familiar with like Tesla, but also less-familiar companies like BYD, Xpeng and NIO. I’ll continue monitoring the sales reports, to see who’s winning share in this intriguing industry.
I did an interview earlier this week with Investors Business Daily to discuss picks-and-shovel opportunities in the electric vehicle market. This is a very different industry, with a very different supply chain, than the one that serves the internal combustion engine. As such, I think there’s a lot of opportunity for those who supply the necessary components of EVs.
I singled out QuantumScape (QS), Wolfspeed (WOLF), and onsemi (ON) as three investment opportunities on my radar. This is a market that has my full attention during the next 3-5 years.
MSCI (NYSE: MSCI) is a leading data platform who provides the deeply-embedded benchmarks used by ETFs and asset managers.
A few thoughts I have about the company:
- Great, recurring income stream that is difficult for customers to displace.
- Somewhat similar to the financial profile of exchanges like CME Group or Intercontinental Exchange. Deeply-embedded within the financial services industry.
- Tied to BlackRock as largest client.
- Excellent profitability: 58% operating margin and 22% return on invested capital.
- Increased its divided by 25% last year and is buying back around 3% of its shares each year. Today it yields 1%.
- The stock appears to be ridiculously expensive; though it’s also rarely ever cheap.
Cash compounder that could be a nice opportunity to consider for any dividend-reinvesting accounts.
I’ve been digging into silicon carbide lately and the important role that traction inverters will play in making electric vehicles significantly more efficient. I think this positions companies like onsemi and Wolfspeed favorably, as they are rapidly adding capacity to fuel upcoming demand from auto OEMs.
This is an excellent article that gives an overview of silicon carbon and the electrification of the auto market. And here is a conversation I had with Tiernan earlier this year, where he further describes the opportunity.
What: Interesting update from Statista showing the heftiest fines that Big Tech companies have paid for breaching GDPR regulations.
Impact: Almost negligible for investors. Even the greatest fine of $740 million on Amazon (Nasdaq: AMZN) is a drop in the bucket for these tech companies. GDPR imposes a higher bar and greater operating costs. But it looks like tech companies are complying.
I know I’m not alone in already thinking ahead to next week’s (September 13) release of the August Consumer Price Index report.
What could it bring? Well, from an equity investors’ standpoint, I should hope it brings more signs that inflation has indeed already peaked. Though last month’s (July, released in August) report pegged annual inflation at 8.5%, it was encouraging in that the figure was lower-than-expected — decelerating from a four-decade high of 9.1% in June thanks in part to declines in the prices of energy and gasoline (the latter of which has only continued to fall in recent weeks). Core CPI (which excludes energy and food costs) also arrived at 0.3%, decelerating from June’s 0.7% year-over-year increase. Housing might also be showing some signs of easing, with companies like Redfin (NASDAQ: RDFN) reporting higher mortgage rates contributing to worsening affordability, homebuyer and seller hesitancy and, consequently, lower selling prices.
That doesn’t mean, however, that the U.S. Federal Reserve will be willing to take a more dovish stance toward monetary policy; until Fed officials are absolutely confident inflation is firmly under control — which might well be several more months yet — they’ll almost certainly continue increasing rates…with a 50 to 75 basis point hike most likely at their next meeting.
But our stock market is a forward-looking machine. So you can be sure we’ll be keeping a close eye on the CPI print next week for any sign that inflation might be easing more rapidly than anticipated. If that happens, it could provide exactly the fuel the market needs to snap out of its current pessimistic state of risk-off stupor.
Now this is an interesting development — SOFI striking a multi-year partnership with LA Chargers Quarterback Justin Herbert. The deal includes giving Herbert an undisclosed equity stake in the company as well as appearing in their new brand campaign and TV spot.
Not exactly a game-changer, of course. But as the former CFO of the NFL, SoFi CEO Anthony Noto knows firsthand the value of such a deal. Name of the game at this point is to drive brand awareness and highlight SoFi’s superior offerings to legacy banks. I like it.
What: Taiwan Semiconductor (TSM) has reported >95% utilization for it 7 nanometer process tech platform. That’s a sign that demand is strong from customers for its most cutting-edge chip production.
Impact: This flies in the face of industry pundits, who are saying there’s an upcoming overcapacity in the typically-cyclical chip industry. Taiwan Semi has the IP to manufacture the world’s most cutting-edge chips. We’ll watch for its new Gate All-Around (GAA) tech to drive even smaller process nodes in the future.
More: Here’s a podcast that showcases the changes taking shape in the chip world. The Transistor Age of Quantum Computing With Tiernan Ray
What: News this morning that the Fed’s increasing interest rates again. Powell wants to get inflation back to 2%, preferably without throwing the US into a recession.
Impact: The rising interest rates means money is harder to come by and business will need to slow their expansion plans (or even lay off their staff). I’m interested right now in companies with really high Returns on Invested Capital like $MSCI. And avoiding those who are lighting money on unproven new ventures like $SNAP.