- 3D printing is the future…
- Is this tech a threat to our wired and wireless networks?
- Gaming is for more than just kids…
Dear Reader,
Welcome to our weekly mailbag edition of The Bleeding Edge. All week, you submitted your questions about the biggest trends in technology.
Today, I’ll do my best to answer them.
If you have a question you’d like answered next week, be sure you submit it right here.
But before we get to the mailbag, let me just say thank you one more time to everybody who attended my recent investing summit.
As Bleeding Edge readers know, most IPOs today are terrible investments. Companies like Snowflake (SNOW) go public at absurd valuations. Venture capitalists, private equity, and the IPO underwriters make incredible fortunes. But retail investors are always the ones left “holding the bag.”
This has been one of the most infuriating dynamics in the markets I’ve seen during my decades as a technologist, investor, and analyst. How are retail investors ever going to grow their wealth in exciting, bleeding edge companies if they are locked out during the best years of growth?
I wanted to change this.
So I devoted five years of research to find a way to help normal investors profit from companies during their earliest days of growth. And I’ve found the answer.
In short, I’ve found a way for normal investors to make venture-capital-like gains without having to be an accredited investor or having to take part in any questionable private deals.
I call these investments “Penny IPOs.” And they are the closest thing I’ve found to “turning back the clock” and investing in a company like Amazon, which went public when its best days of growth were still ahead.
I’ve asked my publisher to keep a replay of the event online for a few days. If you missed the presentation, simply go right here to view it.
Now let’s turn to our questions…
The manufacturing trend of the future…
Let’s begin with a question on the U.S. manufacturing renaissance…
If Trump is going to bring manufacturing back to the U.S., do you feel it will be led by our 3D printer companies? Manufacturing done here… but with robots.
– Frederick L.
Hi, Frederick, and thanks for sending along this question. You are on the right track, but the answer is much bigger than just 3D printers.
As regular readers will know, I’ve been writing this year about the return of manufacturing to the United States. I predict that U.S. manufacturing will return onshore, and the country will reduce its heavy dependence on foreign countries… particularly China.
The pandemic has been a wake-up call for many companies.
When the world went on lockdown, many industries faced shortages of critical supplies and products, which helped them realize how fragile their supply chains really are.
This has been a real wake-up call for governments, multi-national corporations, and pretty much any company that relies on global supply chains as they exist today.
As readers will see above, the Boston Consulting Group puts together a global manufacturing cost competitiveness index every year that analyzes the cost of manufacturing around the world. It does this country by country, indexed against the U.S. market.
And it found that, on average, the advantages of manufacturing in China are now less than 5% compared to the cost of manufacturing in the U.S. And the index doesn’t consider factors like supply-chain risk, tariffs, intellectual-property theft, quality problems, or logistics costs.
What does this mean? It tells us that the competitive advantage of manufacturing in China is nowhere near as large as we might think. And if we factor in those other real “costs” of the factors that I mentioned above, it’s very likely negative.
The key technologies that enable the U.S. to be as competitive, or more so, than China are robotics, automation, artificial intelligence, machine learning, computer vision, business-process automation, and, of course, additive manufacturing. This is also known as 3D printing.
It is precisely these technologies that are already bringing about the “manufacturing renaissance” that I am so excited about.
3D printing is getting exciting as the number of possible materials that can be printed is exploding, costs are dropping, speed is increasing, and industries are learning how to use this incredible technology in areas where it has the largest impact.
Believe it or not, the industry is already developing 4D printers.
What’s the fourth dimension? It can be time, humidity, heat, or many other things. Imagine products that are printed dry but change shape when exposed to water. Or something that naturally shrinks into its desired state two hours after being printed.
Smaller manufacturing plants will be located close to their end markets. And with 3D printing, we can create fully customizable products on demand.
It’s the opposite of the one-size-fits-all approach that has been so standard in bulk product manufacturing in Asia and in shipping goods back to the U.S.
Imagine a world with a large number of smaller manufacturing plants, all of which are capable of producing goods customized to consumers’ wants and delivered in a matter of days – or sometimes hours. The convenience will be incredible.
So as the industry shifts toward this technology, 3D printing sites will be smaller-scale and dispersed throughout the market. We won’t have to worry about shipping or supply chains because our manufacturing will be powered by software.
And this will apply to a wide array of products… everything from parts like semiconductors to medical sensors and skin grafts.
Likewise, robotics will play another important role in this shift. The automation trend has been underway for years now, but it’s going to kick into high gear alongside 3D printing.
And contrary to mainstream belief, AI-powered robots are not going to replace humans. Instead, robots are going to augment humans by doing the work that we really don’t want to do anyway. They’ll speed FedEx’s package sorting, harvest our crops, assist in lab work… and help out in our new factories of the future.
And as I said above, it’s advances like this that will make the new onshore manufacturing cost effective. I can’t wait to see this movement hit its stride…
If any readers are interested in learning more about this trend… and the U.S.’s move away from relying on China… then you can go here to see this recent presentation I put together.
Apple-Fi won’t be a threat to Wi-Fi or 5G…
Next, a reader wants to know more about “Apple-Fi”…
Hello, Mr. Brown. Thank you so much for all of your input. It’s very helpful, as I’m still very new to any kind of investing. I keep hearing about Apple-Fi from other investors.
Supposedly, it should take over Wi-Fi. They claim it will be worldwide and a whole lot more affordable than Wi-Fi today.
Are you familiar with it? Can you elaborate on it at all? Thank you for all of your insight, and I look forward to hearing from you.
– Tara G.
Hi, Tara. This has been a popular question with readers lately.
Here’s some background…
In late 2019, news broke that Apple was working on a project to launch a series of satellites. The satellites could be used to “beam” data directly to Apple devices without having them rely on wireless network operators like Verizon or AT&T.
Since that announcement, others have speculated that this could herald the imminent destruction of today’s wired and wireless networks, including 5G.
But that’s complete nonsense.
Even if Apple employs this technology, our smartphones will still use 4G and 5G wireless networks for connectivity. Instead, we can think of a satellite configuration as an overlay network.
Apple would also have to put additional semiconductors and antenna technology into its phones to receive the signals from satellites.
Why would Apple do this? How would it use this satellite network?
It could certainly push out data, information, and video directly to its smartphone users. Theoretically, this could be done anywhere in the world with the right satellite network. The technology could also be used to improve Apple’s own mapping technology and services.
Apple has hired an impressive group of executives with strong backgrounds in the satellite communications industry. But while the company is clearly serious about the project, it doesn’t mean that this will become a commercial launch.
It is possible we’ll see something roll out within the next five years, but I seriously doubt that anything will happen this year or next.
An interesting question for me, though, is whether Apple will launch its own network of satellites or simply lease bandwidth from another network. If Apple’s aspirations are geographically limited, like in just the U.S. and Western Europe, a few geostationary satellites might do the trick.
But if Apple wants to cover the majority of Earth’s population, it will need a larger network of satellites. That might mean a partnership with a company like SpaceX and its Starlink project.
Ultimately, Starlink wants to launch as many as 42,000 satellites into space to provide internet connectivity to remote areas. Apple could simply strike a deal with SpaceX and use the Starlink network to accomplish its goals.
As a reminder, Starlink is not a threat to 5G. When we use a satellite internet service, latency can be half a second or more. It might not sound like much, but the delays can be significant.
And consumers will not get 100 megabits per second to the home over a satellite service. Streaming video to a television, for example, could be quite difficult. And satellite services have always capped monthly usage. Here’s another example: if the cap were just 2 GB, most consumers will have used up their monthly data cap within just one or two days.
Compare that to 5G wireless technology.
5G has a latency of only one millisecond. A millisecond is a thousandth of one second. And 5G speeds will average 1 gigabit per second (Gbps). I have personally experienced 1.7 Gbps in Washington, D.C. Peak speeds can reach 10 Gbps.
On top of that, 5G connectivity will be cheaper than paying for satellite internet. Which do we think consumers will opt for?
So even if Apple does get this project off the ground in the next several years, it still won’t be a threat to 5G.
And in fact, some of the absolute best investment returns are being found in 5G-related companies right now. That will remain the case for years to come.
If any of my readers haven’t gotten exposure to the 5G trend yet, I recommend they do so soon. Every day, we get closer to the mass adoption of 5G technology. Once that happens, the largest gains will be gone.
To see which 5G stocks I’m recommending to my readers, go right here.
Don’t discount these investment opportunities…
Let’s conclude with a question about investing in entertainment…
I understand that individual investment advice cannot be given, but is there an opinion on, for example, entertainment stocks? Some stocks are lower in share costs, and my thought is that in the future it could pay off. Is it even worth bothering with?
– Mike R.
Hi, Mike, and thanks for being a reader. You’ve posed an interesting question. As you said, I can’t give personalized investment advice, but I can make some general remarks about this topic.
“Entertainment” stocks are a broad area that could cover any number of products and industries. However, I do think there is potential for investment, particularly where entertainment intersects with technology.
And one of those areas where I see a lot of potential is gaming.
In 2019, gaming revenue brought in nearly $37 billion… in the U.S. alone. Globally, gaming brought in over $122 billion in revenue. That’s a huge market, and it’s growing by double digits just about every year. In fact, the gaming industry is larger than the entire motion picture industry.
So while many of us might see gaming just as something kids do, it’s important for us as investors to keep our finger on the pulse of this field.
And we can expect a major surge in the gaming industry with the launch of the next-generation Xbox Series X and PlayStation 5 (PS5) before year-end.
Both the Xbox Series X and the PS5 will employ solid-state drives (SSD) for the first time. This will speed up gameplay and loading times significantly.
SSDs have been around for years, but they were not used in previous consoles because they were too expensive. With SSD costs dropping more than 82% over the last eight years, it finally makes sense for Microsoft and Sony to put SSDs in their new consoles.
Another first for the Xbox Series X and the PS5 is ray-tracing technology. This is a graphics rendering technology that accurately creates lighting, shadows, and reflections on the screen. Hollywood has used this technology for years, but previous consoles didn’t have the processing power for it.
Ray tracing will create an incredibly realistic and immersive experience.
And that brings us to processing power…
Both consoles will employ Advanced Micro Devices’ (AMD) next-generation CPUs and GPUs for processing. That means AMD’s technology will be the “brains” of the new Xbox and the PS5.
This is a big win for AMD. We’ve written before about how AMD is taking on Intel and even competing against GPU giant NVIDIA. This is just more proof.
And AMD remains hot on my radar…
We captured gains of 278% on AMD in The Near Future Report last year. This stock has pulled back about 16% this month, but it needs to come down more before it will be an attractive investment once again.
That’s something I’m watching closely.
And there’s one more point that I’d like to address.
You mentioned that some stocks are “lower in share costs” and therefore might be attractive investments. One critical point that I always want all of my readers and subscribers to understand about investing is that the nominal share price has nothing at all to do with whether or not a stock is “cheap” or “expensive.”
When we analyze a stock and its return potential, we want to understand its valuation – not its share price – so that we can understand if the stock is over- or undervalued.
In addition to that, we need to understand the company’s products and/or services, its underlying technology, product strategy, product roadmap, intellectual property, go-to market strategy, the growth of the markets that it is targeting, and the competitive landscape that the company is operating in.
Understanding these things, and others, is critical to developing an investment thesis for any individual stock.
I hope that helps.
That’s all we have time for this week.
If you have a question for a future mailbag, you can send it to me right here.
Have a good weekend.
Regards,
Jeff Brown
Editor, The Bleeding Edge
P.S. If you missed my special presentation this past Wednesday night on Penny IPOs and how they can deliver life-changing gains… especially as we head into the 4X Window… don’t worry. I’ve asked my publisher to keep the recording online for just a few more days to make sure everyone has a chance to see it. If you’d like to find out more about this explosive opportunity, go right here to watch.
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