• The first city with self-driving buses will be…
  • I’m usually critical of this company, but today it deserves a tip of the hat
  • Amazon puts FedEx and UPS in its crosshairs


Dear Reader,

As the year quickly winds down, I hope we have more time to spend with friends and family and on matters of personal interest.

We shouldn’t expect too much from the markets for the next couple of weeks. Both Christmas and New Year’s Day both fall midweek. I suspect most investors will be taking time off. It’s a great way to make use of those precious vacation days.

In the meantime, I’d like to remind those who haven’t yet had a chance to watch my discussion with the one and only Glenn Beck, you can see it right here. It was one of the most enjoyable things that I did all year.

Glenn is really passionate about technology, what it is going to bring to the world, and the impact that it will have on society.

The discussion is completely unscripted, and we covered a wide range of exciting topics in the world of high tech. If you have some spare time in the next day or two, I’m confident that you’ll enjoy it.

Volkswagen’s building a fully autonomous public transit system…

Big news in the autonomous driving space…

Volkswagen (VW) just signed a major deal to develop a fully autonomous public transit system in Qatar. And the target launch date is 2022… just over two years away.

The system will be built in Qatar’s capital city of Doha. This is a metropolitan area that is home to more than 80% of Qatar’s population. This makes it a great target for deploying an autonomous public transportation system like this.

Per the deal, VW will provide a fleet of 35 autonomous vehicles and 10 self-driving buses. The vehicles will be capable of shuttling four passengers throughout Doha on a semifixed schedule. And the buses will transport a larger number of passengers on a fixed schedule.

That’s the easy part…

VW will also work with Qatar to address all the issues surrounding self-driving cars. The goal is to build an entire transportation system from top to bottom.

That means VW will help develop the legal framework. It will advise on the infrastructure required – including pickup and drop-off locations as well as charging stations for the vehicles. And VW will be responsible for the AI-enabled software that will manage this network.

So this is quite the undertaking. It will require huge investments from both parties. And it’s happening fast…

The first trials are set to begin in 2021. Then the full launch is expected in 2022.

And it’s worth pointing out that once Doha’s public transit system is automated, the cost to provide transportation services will plummet. That’s because labor and maintenance costs will be slashed.

Presumably, those cost savings will be passed on to citizens in the form of reduced transportation prices.

So I expect Qatar will be an early example of what an autonomous public transit system looks like. We shouldn’t be surprised if we see more and more cities follow suit.

Big news on the AI hardware front…

Intel just announced that it is acquiring early stage private company Habana Labs for $2 billion. As critical as I have been of Intel in these pages, this is a very smart acquisition.

Habana Labs was one of my favorite early stage artificial intelligence (AI) semiconductor companies. I’ve watched it closely since the company was founded in 2016.

Habana had raised only $120 million in venture capital (VC) since its founding, yet the company’s first AI chip hit the market this year. It’s quite the feat to go from founding to a commercial product in just a couple years.

What’s more, Habana’s chip was one of the highest-performing semiconductors among AI chips. It demonstrated great performance with low power consumption.

So it’s not at all surprising that Habana Labs got acquired this early. And it’s not surprising that Intel is the acquirer. Intel was an investor in the Series B venture capital round in 2018, so it had some insight into the progress Habana was making.

My concern is that Intel has a history of mismanaging its acquisitions…

Intel acquired AI companies Movidius and Nervana Systems back in 2016. Then Intel made a splash back in 2017 when it bought Mobileye for $15.3 billion.

Yet Intel expects to only generate $3.5 billion in revenue from AI semiconductors this year. Clearly, it isn’t having the success it expected with those AI acquisitions.

The one area of Intel’s business that’s still strong is the data center business. And Habana’s chips are designed specifically for that market. That’s why this acquisition makes so much sense for Intel.

The company completely missed the explosive trend of semiconductors designed to run artificial intelligence and machine learning software. That’s precisely why the acquisition of Habana is so necessary… It’s an effort to catch up to the likes of NVIDIA.

So I’ll wish Intel luck with the new acquisition. But I’d put my money on NVIDIA over Intel any day. (In my Near Future Report service, we’re currently up over 63% on NVIDIA.)

More incredible news from Amazon…

Traditional delivery companies could be in trouble…

A new report from Morgan Stanley estimates that Amazon now delivers about 50% of its own packages in the United States. That means Amazon is using its own logistics network – its own planes, trucks, and delivery vans – for half of all U.S. deliveries. No other carrier is touching those packages.

This estimate puts Amazon’s yearly shipping volume at 2.5 billion packages per year. That’s compared to UPS at 4.7 billion packages per year and FedEx at 3 billion per year.

This speaks volumes about the incredible investment Amazon has made in its logistics network. As I have said before, this is so much more than just an e-commerce company. Amazon is now a legitimate threat to both UPS and FedEx. And Morgan Stanley’s future forecasts make that clear…

By 2022, Morgan Stanley estimates that Amazon’s shipping volume will hit 6.5 billion packages per year. That’s compared to forecasts of 5 billion packages per year for UPS and 3.4 billion for FedEx.

In other words, Amazon is about to become the largest logistics company in the United States. And that will likely include delivering packages for other merchants who are currently using UPS and FedEx. Amazon now has the scale to take on more than just its own shipments.

And to be clear, Amazon’s service is better. In fact, the company just told third-party merchants selling on Amazon.com that they could no longer ship packages to Prime customers with FedEx Ground.

That’s because the service is too slow. It could not guarantee that Prime customers would receive their orders on time.

And we’re already seeing the effect of Amazon’s artificial intelligence-powered logistics network in the results of FedEx. FedEx just cut its earning targets for the fourth time this year. The results in FedEx’s second fiscal quarter showed a 40% drop in profit and a 3% decline in revenue. And its share price is down 40% from its 2018 highs. And no company is more responsible for FedEx’s struggles than Amazon.

In two years, most U.S. metropolitan areas will be entirely covered by Amazon’s logistics network. Meanwhile, UPS and FedEx will be relegated to the rural parts of the country where margins are lower and the routes are less efficient. Clearly, this is very bullish for Amazon… and very bearish for the incumbents.


Jeff Brown
Editor, The Bleeding Edge

P.S. I talked at length about Amazon when I was a guest on Glenn Beck’s podcast last month. We discussed why Amazon is still one of the “good guys” and why this company could soon know you better than you know yourself. Every reader of The Bleeding Edge should catch the full interview. Watch it right here.

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