• Here’s proof that satellite internet poses no threat to 5G…
  • We may get a second chance with this fintech company…
  • Why the iPhone 12 is bullish for augmented reality…

Dear Reader,

We certainly wouldn’t know it if we followed the press, but the U.S. gross domestic product rocketed up at an annual pace of 33.1% in the third quarter. That’s a record… and that’s not all:

  • Consumer spending rose at a 40.7% annualized rate

  • Investment in equipment jumped 70.1% in the third quarter

  • Investment in new housing popped 60%

  • And U.S. manufacturing expanded to its best pace since mid-2018

And it is actually that last data point that really caught my eye…

Why?

Because mid-2018 had the best manufacturing numbers that the U.S. had seen since 2004… and we’re back at those levels again in the middle of this pandemic.

With numbers like these, we can ignore the doom and gloom of media. The U.S. economy is already racing back to remarkable health. And with the election soon behind us, we can all get back to the business of returning to a somewhat normal – if slightly modified – life.

One of the biggest learnings from the pandemic has been about the fragility of the global supply chains. It’s something that the Western world has long since known but has been slow to act on.

COVID-19 was simply the catalyst needed to force companies and governments to spring into action and begin the process of reshoring and diversifying their manufacturing bases.

This is a massive shift that began about four years ago, and it’s one that will unfold over the next decade. It is going to be a very profitable trend for investors as well.

Now let’s look at today’s insights…

Starlink’s satellite internet service just launched…

We have talked about SpaceX’s satellite constellation Starlink several times in The Bleeding Edge. The stated goal is to create a satellite network around the Earth that can provide internet access to anywhere on the planet.

And the beta version of Starlink’s satellite internet service just went live. It is calling this rollout the “Better Than Nothing Beta.” I love it. Typical Elon Musk humor.

The name speaks to the speeds that satellite internet can provide.

Starlink announced that users can expect speeds between 50 megabits per second (Mbps) to 150 Mbps with latency between 20 and 40 milliseconds. By comparison, the average cable TV internet service provides speeds between 200 and 300 Mbps with much lower latency.

And we’re already seeing speed tests of the service. On average, beta users are experiencing speeds of around 70 Mbps. That’s really slow for a typical high-speed internet connection in the U.S.

But compared to other satellite internet providers like HughesNet, it is several times faster.

Journalists have been quick to jump on reports of speeds above 150 Mbps, but they are all missing one key point about the service.

Starlink has only launched to a small number of beta users. When it makes the service more widely available and more customers sign up, the normal speeds will only get slower. Each satellite’s bandwidth will have to be shared with other consumers. The more people that use it, the worse the performance.

Starlink’s beta will cover the northern part of the U.S. and the southern part of Canada. But the service will be far inferior to the internet service most people in those regions already have. It’s not going to compete with existing internet service providers.

And Starlink acknowledges this. When consumers apply for the beta, it says, “Starlink is designed to deliver high-speed broadband internet in places where access has been unreliable, expensive, or completely unavailable.”

And Starlink’s service isn’t cheap. It will cost $99 per month. Plus users will need to buy a $499 satellite dish and a $100 mounting kit.

As regular readers of my Friday mailbags know, I occasionally get questions about whether satellite internet will steal 5G’s thunder. My answer has always been an emphatic no. Satellite internet will be vastly inferior. And Starlink’s official beta launch proves that.

In my travels through the American heartland, I consistently got speeds well over 1 gigabit per second (Gbps) on my 5G-enabled smartphone, with almost no latency. There is simply no comparison between satellite internet and the kinds of speeds and latency that will be normal for 5G wireless networks.

I did sign up for Starlink’s waiting list for the “Better Than Nothing Beta.” Even though I know it is inferior to what I already have, I always try to get direct experience working with the technology that we talk about here in The Bleeding Edge.

And I’ll continue to share anything I learn from those firsthand experiences with my readers.

One of my favorite private tech companies may be set free…

We talked about Visa’s acquisition of Plaid way back in January. At the time, I was disappointed. I really wanted to see Plaid go public.

Plaid is what’s known as an application programming interface (API) company. Think of it like an intermediary or “bridge” that allows two different software systems to communicate.

And though most consumers have never heard of this company, they have almost certainly used its technology. Plaid is the glue between our bank accounts and the financial applications we use on our phones and computers.

For example, Plaid’s API powers the connections between software applications and the traditional banking industry for payment network Venmo, stock-trading platform Robinhood, and even digital asset giant Coinbase, among many others. Anyone who has moved money from a bank account to one of these platforms has used Plaid’s tech.

To me, Plaid is the equivalent of Twilio (TWLO) for messaging and Okta (OKTA) for identity management.

And subscribers of my Exponential Tech Investor service know how explosive these companies can be. We have booked gains of 239% and later 211% on TWLO. And we booked a 95% gain on OKTA.

There was no doubt in my mind that Plaid would generate similar gains if it had gone public.

The reason I’m excited is that there’s a chance Visa’s acquisition of Plaid will be nixed. Plaid may be “set free.”

The Department of Justice (DOJ) has been investigating the acquisition for nearly a year now. And it is considering litigation against Visa to stop the deal. The DOJ’s stance is that the acquisition would stifle a healthy competitive environment in the financial services space.

If the DOJ does reverse the acquisition, it is very likely that Plaid will go public in the near future. And then we may in fact get a chance to invest in this great fintech company.

So I’ll be watching this story closely from here. I don’t typically root for government intervention in the marketplace, but the DOJ has a strong point in this particular case.

Plaid’s technology has already had an incredibly positive impact on innovation in the financial services sector. My strong preference is for it to go public and remain an independent company like Twilio and Okta so the innovation can continue in the space… and so investors will be able to gain exposure to such a great tech company.

Early numbers on iPhone 12 orders are surprising…

The early numbers on orders for the 5G-enabled iPhone 12 are in. And the demand has been strong, especially for the top-tier iPhone 12 Pro. This surprised even Apple.

With multitiered product launches, we typically see highest demand for the low-end and mid-tier products. And Apple built up its inventory for the iPhone 12 accordingly.

But with demand raging for the high-end iPhone 12 Pro, Apple has found itself under-stocked. It is now scrambling to increase its inventory. For that reason, there’s about a 30-day delay between new purchases and shipments.

It’s great to see Apple getting so much demand for its high-end, 5G-enabled iPhone. And what’s most exciting is the reason why.

Consumers are gravitating to the iPhone 12 Pro because of its light detection and ranging-powered (lidar) 3D depth perception. This is the same technology that many self-driving cars use to “see” the road and objects around them.

This will lead to an explosion of augmented reality (AR) applications for the iPhone 12 Pro and other future models. Our iPhones will be able to map out the rooms we are in and “overlay” graphics on top of our surroundings.

We will see plenty of fun AR games based on the incredible success Pokémon Go experienced. And we will see many practical AR-based applications as well. Imagine if we could hold our iPhone up to a restaurant building and have its menu displayed on our screen – before we ever go inside.

The faster devices with lidar sensors like the iPhone 12 Pro hit the market, the faster these new AR apps will become prevalent.

It’s not an understatement to say that mainstream AR is going to create a “new normal” for consumers. I can’t wait to enjoy the new smartphone applications that will take advantage of this technology.

As we would expect, there are major investment implications to this outsized demand as well.

Part of the delay between iPhone 12 Pro purchases and shipments right now is due to Apple needing to increase its order for vertical-cavity surface-emitting laser (VCSEL) chips. These are the key semiconductors that power lidar sensors. Naturally, this is great news for the companies that produce VCSELs.

So this is all very exciting. The next few quarters will see record levels of new smartphone purchases, and we’ll see the beginning of Phase 3 (applications) take off in earnest next year.

If any readers haven’t yet invested in the 5G trend, I’ve recently put together a presentation on how we can position ourselves for the wave of 5G buying now that the Apple iPhone 12 is released. If you’d like to learn more, go right here.

Regards,

Jeff Brown
Editor, The Bleeding Edge

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