- This kind of thing drives me nuts…
- Amazon is the true king of the internet…
- I have to tip my cap to Elon Musk…
Tonight’s the night.
I would like to invite all readers to join me for our Investment Accelerator event at 8:00 p.m. ET sharp. We have a big night planned.
At the event, I’m going to bring viewers up to speed on what we are most excited about right now here at Brownstone Research. And I will outline what I see as the five best investment opportunities that could 10x our money over the next five years.
We are also going to talk about a rare opportunity to join a top-tier group of investors for the chance to potentially share in $1 billion in tech profits.
I know the world and the markets seem chaotic right now. And the sensational news headlines do nothing but fan the flames. As a result, many investors are worried about the future.
I’m not one of them.
That’s because I’m a technologist. Technologists use technology to tackle the world’s biggest challenges. And to that end, I see immense opportunity in a number of areas right now.
In fact, all the uncertainty that is prevalent today is creating the perfect climate for savvy tech investors. Those who can tune out the noise, ignore the hype, and focus on the big picture will do extremely well in the years to come.
And that’s what our Investment Accelerator event is all about.
The market is giving us a tremendous opportunity to turbocharge our investment returns right now. At Brownstone Research, we intend to take advantage of it.
So I encourage all of my readers to tune in tonight at 8:00 p.m. ET. As always, my presentation will be free to all readers of The Bleeding Edge.
See you tonight.
Now let’s turn to today’s insights…
AI-fueled process automation is here…
One of my favorite areas of technological development right now is something called process automation. It sounds dry and boring, but this tech is transforming the way businesses operate. It’s the kind of technology that consumers never see… yet we benefit from it.
Process automation uses artificial intelligence (AI) to help companies automate routine tasks currently being done by employees. An AI can typically accomplish these repetitive and dull tasks much more efficiently than humans can.
And this frees up employees to focus on more highly valued and complex tasks that require deeper thought. Everyone wins.
This is one of the hottest sectors in the entire tech industry right now. Process automation is not well understood yet by most companies. But the use of it is spreading like wildfire. And pretty soon, companies that aren’t employing this technology will be at a severe competitive disadvantage.
One of my favorite private companies in this space is UiPath. I was getting excited about its future as it confidentially filed to go public back in December.
But in a surprise move, UiPath just announced a $750 million Series F venture capital (VC) round that values the company at $35 billion. This represents an enterprise value-to-sales (EV/sales) ratio of about 87. That’s an extraordinary valuation. Not even Zoom is that inflated.
This begs the question… Why would UiPath take on such a massive VC round if it intends to conduct an IPO?
And the answer is that the VCs and the institutions must have convinced UiPath to do one more funding round. There’s just so much demand for institutional money to get access to pre-IPO shares in high-growth tech companies.
And raising three quarters of a billion dollars at a $35 billion valuation is cheap money for UiPath. There’s very little downside for the company other than some relatively small dilution.
Unfortunately, this is also a great example of how the insiders “conspire” against normal retail investors.
I love UiPath and its technology. This is a company that should have gone public years ago. But instead, the VCs and the institutional investors kept it private with round after round of VC funding. This has been entirely intentional… and entirely profit-driven.
UiPath’s Series A VC round happened in April 2017. That’s less than four years ago. At the time, UiPath was valued at $109.6 million.
Fast forward to today. UiPath is worth $35 billion. That represents appreciation of 31,834.3% in less than four years. And this appreciation was captured entirely by the insiders. Now they will look to dump their shares on normal retail investors when UiPath goes public later this year, locking in their massive returns.
This kind of thing drives me nuts. And this is why I founded Brownstone Research.
Our premium research services are designed specifically to stack the deck in favor of retail investors. That includes presenting normal investors with VC-like investment opportunities that can generate life-changing gains.
So I am very excited about the rise of process automation as well as the work UiPath is doing.
But I would suggest that investors steer clear of the stock when UiPath goes public. Buying in at an EV/sales of 87 – or probably higher at the time of the IPO – is a guaranteed way to lose a lot of money.
To put things in perspective, UiPath would need to fall 80–90% before I would be comfortable recommending the stock.
To use an old phrase, we are absolutely seeing irrational exuberance in certain sectors of the market right now. That’s why it’s critical to have context and understand the valuation of assets so we can preserve and grow wealth.
Google finally revealed its cloud revenue…
Big news – Google finally broke out its revenue and operating income for Google Cloud. We finally have insight into how its cloud-based services stack up in the space.
Amazon Web Services (AWS), Google Cloud, and Microsoft Azure are the three giants in the cloud-based services industry. And AWS holds down the top spot.
But we’ve never known for sure how close behind Google has been in this space. That’s because it has always concealed its numbers. This has frustrated traditional financial analysts for years.
Well, now we know why Google hasn’t been transparent. Google Cloud is so far behind AWS that it is embarrassing.
The numbers show that Google Cloud generated $13 billion in revenue last year. But this came at a $5.6 billion loss. That’s right. Google Cloud lost nearly $6 billion on the year.
This tells us that Google has simply been buying business in an unsuccessful effort to catch up to Amazon.
For comparison, AWS did nearly $13 billion in revenue in just the fourth quarter of last year alone. And this generated nearly $3.6 billion in operating income for the company.
What this tells me is that Google – a company many see as the king of the internet – completely missed the move to cloud-based services. It is years behind Amazon with very little hope of catching up.
But at least Google was finally willing to be transparent about its numbers.
As for Microsoft, it still refuses to break out its full cloud services revenue. It claims to have a massive cloud business. But again, the context is important.
Microsoft lumps all sales generated from its Microsoft Office software suite, LinkedIn, and even its Minecraft gaming business into its cloud revenue.
What we want to know is how much revenue Microsoft generates actually selling cloud services to enterprise customers that have no ties to Microsoft.
So we don’t know exactly where Microsoft is, but we can be sure it is behind Google Cloud.
And the big takeaway here is that Amazon is the true king of the internet.
I’m on record predicting that Amazon will be the world’s next $2 trillion company. And that prediction is looking better and better.
More details on Musk’s $100 million carbon-capture challenge…
Last week, we talked about how Elon Musk is putting up $100 million in prize money to start a new competition. Teams will compete to see who can develop the best technology to capture carbon emissions and maybe even convert them into a useful product.
Well, we just got more details on the competition. And I am even more excited than I was last week.
It turns out that Musk is using the XPRIZE Foundation to host the competition. This is exactly the organization that I originally referred to as the model for these kinds of prize-based competitions. They are calling it the $100M Gigaton Scale Carbon Removal challenge. It will run for about four years before the winner is determined.
What’s significant here is that the XPRIZE Foundation provides structure for the competition.
To start with, the teams must develop a prototype that can remove at least one ton of carbon from the atmosphere per day. And they must demonstrate that this solution can be scaled up to the gigaton level. That means the teams must show that their solution will cumulatively be able to remove at least one billion tons of carbon.
What’s more, the teams must demonstrate that their solution can be economical at the gigaton scale. That’s where Musk comes in with his business acumen. After all, what’s the point of an idea if there is no way to make it economically possible?
Another rule in place is that the technology must be able to store the carbon for at least 100 years. That would be the case if the carbon is not redirected into a useful product.
In addition to these rules, the XPRIZE Foundation also structured how the prize money will be doled out. The grand prize winner will receive $50 million. Second place will get $20 million. And third place will earn $10 million.
Additionally, XPRIZE will pick the top 15 teams after 18 months and award them $1 million in capital to keep their work going. This will help get the best ideas to the finish line.
As for the remaining $5 million, the XPRIZE Foundation will issue $200,000 scholarships to each of the 25 student teams competing in the challenge.
If anyone is interested in checking out the competition, you can learn more here.
This is a great approach. As I said last week, these incentives are so much more effective for solving grand challenges than government handouts.
And by supporting student teams, this competition is helping future technologists get meaningful experience. That will pay dividends down the road.
And if previous XPRIZE challenges are any guide, I think we will see at least one major breakthrough come from this competition. I tip my cap to Musk for his willingness to provide the funding.
If I was sitting on more than $150 billion, I would be doing exactly the same thing.
Editor, The Bleeding Edge
P.S. One last reminder to tune in to my Investment Accelerator event tonight at 8 p.m. ET. If you haven’t yet reserved your spot, go right here to do so now. We’ll get started in just a few hours.
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