Dear Reader,
What an incredible day in the markets yesterday.
The Dow Jones Industrial Average (DJIA) rocketed 5.1% on a rebound from last week’s constant selling. That was the best day for the DJIA since March 2009. The Nasdaq Composite was also up almost as much at about 4.5% on the day.
The good news is that the COVID-19 outbreak in mainland China appears to have finally flattened out. More than half of those known to have caught the virus have already recovered.
The bad news is that South Korea, Iran, and Italy are now dealing with rapid growth in cases of COVID-19.
I’ve lost count of how many executives I’ve spoken with who are experiencing the equivalent of travel bans at work. Many are being told that they’ll have to self-quarantine for two weeks if they travel to certain countries.
And business trips have fallen off a cliff. Industry conferences continue to be canceled daily.
For example, my team was looking forward to the annual GPU Technology Conference (GTC) hosted by NVIDIA every year.
NVIDIA is a company I identified on the verge of a massive breakout back in early 2016. Widely misunderstood as just a gaming company, NVIDIA was best positioned to benefit from an explosion in artificial intelligence and machine learning technology.
Those who followed my advice at that time are now up more than 1,000% on their investment.
Sadly, NVIDIA has decided to cancel its conference that was scheduled for March 22–26. The good news is that NVIDIA CEO Jensen Huang will still deliver his keynote speech online via a livestream.
It is always one of the most important talks of the year. I highly recommend it for those interested in understanding how rapidly the gaming and the artificial intelligence markets are developing.
And even after 1,000% gains, I’m still bullish on NVIDIA’s prospects.
Now let’s turn to today’s insights…
Genetic sequencing is about to become available to everybody… And that will accelerate the transition of the biotechnology industry toward precision medicine.
Chinese genetic sequencing company BGI Group just announced that it can deliver full genome sequencing for a mere $100.
Full genome sequencing is the process of determining a person’s unique DNA makeup. It unlocks the blueprint for an individual’s genetic code.
This is quite different from what companies like 23andMe and Ancestry.com do. These companies offer genotyping services, which have been around the $100 price range for years now.
Genotyping does not sequence the entire genome, however. It simply spot-checks it for specific genetic variants. This does provide valuable insight… but nothing compared to full genome sequencing.
The first full genome sequencing was completed by Dr. Craig Venter and his team at Celera Genomics in 2001. The cost? $100 million. But as recently as late 2019, the price tag to sequence a full genome fell below $1,000, an exponential decline.
Most recently, the cost has been around $600, with a couple of companies offering the service for around $400. And now it appears we’ve gotten to $100 in less than two decades. This is incredible.
The $100 price point changes the game for health insurance companies. At just $100 per patient, health insurance providers can cover full genome sequencing for all patients. This will dramatically save costs on unnecessary and ineffective treatments. More importantly, it will result in better outcomes for patients.
This will unlock precision medicine for the masses. It’s not an understatement to say that this will revolutionize health care, for several reasons…
Doctors will no longer have to make educated guesses when patients come in sick. Instead, they can run genetic tests and determine with certainty whether a patient’s illness is the result of a genetic condition.
That means patients will no longer have to suffer the trial-and-error process. Instead, they will get the right treatment to target the root cause of their illness, not just the symptoms.
And we’ll see health care costs plummet. That’s because it will no longer be necessary to run extensive tests, searching for the problem, or to have patients try out different drugs, looking for what works. Instead, full genome sequencing for $100 will provide the answers.
And I’ll point out – the big winners in this from an investment angle are 1) the companies that produce sequencing machines and 2) those that develop precision medicines that address the underlying cause of a health condition. They are going to see a major spike in demand…
I’m keeping a close eye on U.S. sequencing giant Illumina (ILMN). But even with the recent volatility, Illumina is still more richly valued than I’d like to see. I’ll alert my readers if and when that changes.
Google just announced that it is going to invest more than $10 billion in data centers and offices throughout 11 states in the U.S. this year.
Of course, Google’s home state of California is part of the deal. New York and Washington are also on the list.
But what’s interesting is that Google is also investing in states like Colorado, Georgia, Massachusetts, Nebraska, Oklahoma, Ohio, Pennsylvania, and Texas.
We’re talking about America’s heartland with those last eight states. And with $10 billion spread out between them, Google’s investment is on par with what major wireless operators like AT&T and Verizon will spend building out 5G networks this year.
And Google is doing the same in Europe with a $3 billion investment over the next two years.
So this is going to be great for the areas receiving the investment. It’s also a shrewd move on Google’s part…
Google has been under fire in the U.S. and the European Union for its data surveillance and privacy practices. Well, rather than change its ways, Google is trying to win some goodwill by pumping money into some underserved areas.
No doubt it will point to the jobs created when the regulators come calling again.
So partly this is a public relations move. And I suspect it is going to work. It will deflect some regulatory scrutiny in the present.
The other reality is that Google genuinely needs to increase the capacities of its data centers. It needs more computing power, given the exponential growth in data traffic. And that will only accelerate with the adoption of 5G wireless technology across the country.
Speaking of 5G investment…
The current U.S. administration just announced a couple of exciting 5G summits. Director of the National Economic Council Larry Kudlow said that the Trump White House will host a 5G summit in “early April.” It will involve major U.S. carriers AT&T, Verizon, T-Mobile, and Sprint. The summit will also include Japanese carrier Rakuten Mobile.
This is interesting…
I am familiar with Rakuten from my time spent as a corporate executive in Japan. Rakuten is basically the Japanese version of Amazon. And it is doing some interesting work on employing advanced software technology over wireless networks.
This is a smart move. It will be great for U.S. carriers to get exposure to the work Rakuten is doing in the space. This cross-pollination of ideas often leads to new innovations that wouldn’t otherwise come about.
Also, the Federal Communications Commission (FCC) is hosting a 5G forum on March 26, which I plan on attending. The purpose is to aggressively push American leadership in 5G… which I think is great. But I believe there’s another motivation from the White House…
The president is very vocal about his desire for America to quickly build out its 5G networks. In fact, in January 2018, a White House memo was leaked that floated the idea of nationalizing America’s 5G infrastructure. I believe this was a method of “lighting a fire” under wireless operators.
And I believe this latest slate of 5G summits is a way for the administration to say, “We’re keeping an eye on you. We have to keep building.”
As I’ve said before, 5G is a matter of national competitiveness. The race is on for the launch of 5G networks. And that’s a major catalyst for economic growth.
And as regular readers know, the investment implications of this trend are massive. I’ve put on a presentation where I unveil my No. 1 large-capitalization 5G stock for 2020. Interested readers can catch up here.
Also, I’ve talked before about my top early stage 5G company, Affirmed Networks. The company is still private now, but I believe it will go public before the year is out. That’s something I’ll be monitoring closely as the 5G boom continues to grow in 2020.
Regards,
Jeff Brown
Editor, The Bleeding Edge
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The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
