Headline Developments
At 90, William Shatner became the oldest person to ever reach space, telling Blue Origin’s Jeff Bezos “what you have given me is the most profound experience” that “I hope I never recover from”. I’m sure Bezos also breathed a huge sigh of relief because if anything happened to Captain Kirk there would have been one hell of a reaction from Star Trek fans!
Microsoft (MSFT) and Nvidia (NVDA) have trained the world’s most advanced AI-powered language model, Megatron-Turing Natural Language Generation (MT-NLP), containing 530 billion parameters to achieve unmatched accuracy across natural language tasks such as reading comprehension and commonsense reasoning. According to Microsoft, language models with a larger number of parameters, more data, and more training time, acquire a richer, more nuanced understanding of language, for example gaining the ability to summarise books and even complete programming. To achieve this, Microsoft created parallel systems across 560 NVIDIA DGX A100 servers (each with 8x 80GB GPUs).
The world’s largest chip foundry, Taiwan Semi (TSM) is reported to be teaming up with Sony (6758.JP) to jointly construct a semiconductor factory in western Japan, in a move aimed at alleviating some of the pressure on the chip supply chain. The cost of the new plant is expected to cost ~$7b with the Japanese Government expected to cover half the cost. It also acts as somewhat of a contingency in case China make any moves to “reunify” Taiwan. Why? Well, per TrendForce below, Taiwan control 63% of the global chip market, so as a whole the two would control 70% of the world’s chips that go into everything from cars, laptops, fridges, medical devices, satellites, defence equipment…..you name it).
Similarly, Hyundai Motors (005380.KS) say they will start investing heavily in the development of their own chips within the group, so they are less dependent on supply constraints in future. COO Jose Munoz said the company’s components affiliate Hyundai Mobis (012330.KS) would play a key role in such a move.
Other Developments
Competition is heating up in the crypto / NFT space.
Firstly, FTX.US (private), backed by Coinbase (COIN) and Softbank (9984.JP) has built a trading platform for NFT’s (FTX NFTs) on the Solana blockchain (below), with plans to offer support for ethereum NFT’s (on which most NFTs are based) soon. Furthermore, FTX NFT is looking to support traditional payment rails (such as credit card and bank transfers) to create a more seamless buying experience for all.
This comes in the same week that Coinbase’s (COIN) are launching their own NFT platform, Coinbase NFT, which it hopes to have up and running by the end of the year. The platform will be a peer-to-peer marketplace which they say will make “mining, purchasing, showcasing and discovering NFTs easier than ever”. Whatsmore, it is targeted very much at the creator community, enabling a more seamless platform for the creation of NFTs (i.e. as simple as tapping a few buttons) whilst optimising for social engagement and community building.
Last but not least, Stripe (private), is ramping up its crypto team as they chart a path forward to be a central player in the crypto space. The organisation were an early mover (back in 2014) when it first started supporting bitcoin (a service it abandoned four years later). According to the job descriptions, candidates will help lay the foundation for Stripe’s crypto strategy, help identify technical challenges and advise leadership on product roadmap considerations.
Meanwhile, in regulatory news, China is upping the ante on its crypto crackdown, with the National Development Reform Committee (NDRC) adding crypto mining to a “negative list for market access” that limits or outright bans investments in a given industry (from both domestic and foreign investors). Britain’s Cambridge Centre for Alternative Finance showed (chart below) that China’s crackdown so far has seen China’s share of computers connected to the bitcoin network (hash rate) has fallen from 90% in 2019, to 44% in May this year…….to zero in July. As a result, the USA now accounts for 35.4% of the global hash rate (doubling in a few months), followed by Kazakstan and Russia.
Tesla (TSLA) Model Y will start rolling off the production line at the new Berlin Gigafactory (below) by the end of the year, according to Elon Musk. In a speech at the Gigafactory over the weekend, Musk said he’s hoping the plant will produce between 5,000 and 10,000 vehicles per week by the end of 2022, with ultimate aims of 500k cars each year. This comes after the latest data shows the Tesla Model 3 September sales (of 6,828) outpacing BMW 3 Series (3,000 sales) and Mercedes C-Class (2,200 sales), but falling agonisingly close (just 58 vehicles short) of trumping the best-selling VW Golf.
Norway has released data showing that 90% of all new vehicle sales are plug-in electric (including hybrid). Of the almost 18k new car registrations, 80% were pure electric (a 48% YoY rise), with the majority of demand coming in for Tesla’s (TSLA) Model Y and Model 3. This demand is largely driven by a federal policy for all new cars and vans to be zero-emission by 2025. Importantly, the report indicates that “range anxiety and other uncertainties are becoming history as the new electric cars that are now launched have good range and even faster-charging speeds”. In the US, electric makes up ~5% of new car sales whilst in Australia (who lag on any climate policy) the number is closer to 1.5%.
Fresh off a $128m capital raise, e-bike innovator VanMoof (private) has rolled out a new product - the VanMoof V, their first “hyperbike” which they plan to roll out in 2022. According to the launch video, the bike will be powered by two motors, with a top speed of 60km/h (although, most countries cap speed limits at half that).
The FCC has circulated Boeing’s (BA) application seeking approval to launch and operate 147 broadband internet satellites. An application was first submitted in 2017, with Elon Musk urging the FCC to reject the plan saying it presented “a clear danger of harmful interference” to other systems or “at a minimum, impose appropriate conditions to ensure that Boeing’s operations do not harm those of other” operators. As you can see below, there are dozens of pending operators of tens of thousands of low-earth-orbit satellites (where congestion and interference will be at its peak). The FCC (and other regulators around the world) will have a busy time managing all of this!
According to new research, the Montreal Protocol - established in 1987 to phase out chemicals destroying the ozone - has been successful in preventing 443 million cases of skin cancer and 63 million cases of cataracts in the US (to where the study was focused). The study showed that UV radiation levels will return to 1980 levels by the mid-2040s under the treaty, whilst a non-treaty scenario would have seen UV levels increasing throughout this century. The impact is also nicely visualised below (by Our World in Data) with the quite clear drop in ozone-depleting substances since the protocol was signed.
New Listings
Bitfury (private), who develop leading solutions across Blockchain, High-Performance Computing (HPC) and AI, are readying for Europe biggest blockchain IPO, according to The Telegraph. The company has raised $170m to date from investors including Bill Tai, MACSF, Dentsu, Macquarie and Galaxy Digital, with the company last valued at $1bn. Some of Bitfury’s services include Exonum (blockchain-as-a-service), Crystal (to help manage blockchain investigations) and liquidstack (immersion cooling systems for HPC). The company also retain an 83% share of Cipher Mining (CIFR), with aims of being the largest bitcoin mining operation by 2025 (at which point they expect to have 745MW of mining capacity).
SeatGeek (private), which has ticketing partnerships across all major sports codes in North America, as well as the Premier League, is merging with RedBall Acquisition Corp (RBAC) in a deal valuing the business at $1.35b. According to the investor presentation, the company will use the proceeds from the deal to accelerate enterprise client signings and invest in product evolution (i.e. blockchain ticketing, biometrics, at-event experiences - like gambling, upgrades and exclusives). The company are forecasting 2022 revenues of $345m (63% gross margin, -$61m EBITDA) with the 2025 target set on $1.2bn revenues (75% gross margin, +$160m EBITDA).
Event-Driven (M&A | Cap Raise | Earnings)
A mega week for cap raises:
Magic Leap: Raised $500m in parallel to the launch of a new AR headset (“Magic Leap 2”, below top) which they aim to launch next year (for mostly enterprise customers). The cap raise values the business at $2bn which, according to TechCrunch, is the same raise and valuation they achieved in 2014.
Masterworks: Raised $110m for their platform (below right) which sells ‘fractional’ shares in art from leading artists like Banksy, Kaws and Jean-Michel Basquiat. This values the platform at >$1bn. Note, this is not NFT-based but is a platform to break highly valuable works into smaller price units to provide greater accessibility to an asset class which is primarily the domain of the uber-wealthy.
MoonPay: The crypto payments infrastructure provider (a Stripe for crypto) trusted by bitcoin.com, OpenSea, Dapper and Rare is seeking to raise $400m from Tiger Global and Coatue Management. The platform enables a more seamless UX of crypto/NFT trading via traditional payment methods such as credit/debit cards and bank transfers.
Personio: SME HR platform has raised $270m, on a $6.3b valuation, from a whos who of VC including Altimeter, Greenoaks, Index, Accel and Lightspeed. The platform provides recruiting, onboarding, payroll, absence tracking and other functions for predominantly European SMEs.
Plume: Provider of smart mesh Wi-Fi solutions for the home (below left) has raised $300m at a $2.6bn valuation from Softbank. Other investors were not disclosed, but we know Comcast, Foxconn, Qualcomm and Samsung all sit on the cap table. With the cap raise, the company are likely to expand from the home and into other verticals such as business and industrial IoT.
In other ‘event-driven’ news, Nvidia’s (NVDA) planned $54bn acquisition of Arm (private) is going the distance with regulators, with the EU expected to extend its investigation for four months after concessions offered last week failed to satisfy the regulator’s concerns.
Have a great week.
Charlie
LinkedIn or E-Mail (cnave@granitebaycap.com)
Granite Bay Capital is an innovation focussed investment company with a deep focus on the companies at the leading edge of innovation across major themes such as AI, ubiquitous computing, sustainability, automation and longevity. Any views expressed in this article are those of the author(s) and do not constitute financial advice.