Dear Reader,
One of the most striking learnings to come out of the pandemic had nothing at all to do with viruses, vaccines, or virology. It had to do with the world’s supply chains.
The ironic thing is that the world’s supply chains had been working extremely well. Yes, there was always a hiccup here and there. But after decades of building the infrastructure and systems to support “just in time” supply chains, things were working.
The original drive for “just in time” was a financial one. If raw materials and goods could be delivered “just in time,” it would dramatically reduce the amount of working capital required by businesses to operate. This improved financial performance, and for public companies it improved the share price.
Then the pandemic hit. As we have learned, it wasn’t the virus that was the problem. It was the ill-informed, anti-science, tyrannical, and irrational policy response that caused the problems. Locking down and paying us to stay home created a string of fractures in supply chains that we still have not recovered from.
For those of us who have been out and about to our local supermarkets, Walmarts, Best Buys, and other stores, there are sections of these stores that have completely empty shelves. I saw it myself just last week… it’s extraordinary. The products have been manufactured, but they just can’t get to where they need to go.
But there is a silver lining to all of this.
When things are functioning well, it’s really hard for an industry to make major changes. The emotional willpower just isn’t there. There isn’t an obvious catalyst for change.
Well, we now have that catalyst, and the venture capitalists are all over it. The below chart shows the investment into supply chain technology on an annual basis. The trend is clear.
The 2021 data shows a record level of investment at $24.3 billion, and that data is just through September 30. I expect the final numbers to come in above $30 billion, which would be more than 2X that of the previous year.
I’m excited to see this shift. It is long overdue. Supply chain technology might not sound exciting or high-growth, but we’d be wrong to think that. If you’re interested in learning about the most valuable companies making this shift, you can watch my special presentation right here.
Any time there is a major, generational shift to new, bleeding edge technology, there are great investments at hand.
And the supply chain upgrades are part of a much larger picture, which I think of as a manufacturing renaissance. This includes new materials, 3D printing (additive manufacturing), autonomous vehicles, robotics and artificial intelligence for smart automation, and a decentralized manufacturing network that brings manufacturing back on shore.
Not only will these changes result in more resilient supply chains and create jobs, they will also be great for the planet. They’ll help us reduce carbon emissions that would have normally been used for shipping goods back and forth around the world.
Google is gearing up to spin out its secret quantum computing group called Sandbox into its own company. This has interesting implications for the industry.
Google’s quantum team originally started out as a secretive project led by Google co-founder Sergey Brin. As the program developed, Google brought in one of the more prominent figures in quantum computing – Jack Hidary – to run the team.
Hidary wrote a book on quantum computing – Quantum Computing: An Applied Approach. This is a book that I have on my own bookshelf. It’s not an easy read, but interesting, nonetheless.
Hidary’s own work has focused on the cross-section between quantum computing and artificial intelligence. This has been the focus of Google’s secretive project.
The timing of the book publishing was interesting. It happened just one month before Google announced that it had achieved quantum supremacy. This was the moment when Google’s quantum computer was able to outperform any classical supercomputer on the planet.
Google’s Quantum Computer (Left) & Quantum Processor (Right)
Source: Google
That announcement happened in October 2019. It was groundbreaking. It was one of the biggest breakthroughs of the year… and then nothing.
Since that day, Google’s quantum AI group hasn’t released anything meaningful for more than two years. The rest of the industry has been screaming ahead, announcing larger, more powerful quantum computers. But no news from Google… until now.
The team at Google has made more material progress under Hidary. Exponential growth applies to quantum computing as well. I expect that the Google team has made meaningful progress on error correction, while also producing a version 2 of the quantum processor shown above.
And if it is ready for a spin out into an independent company, it suggests that they are going to open the doors for business. With that always comes some big announcements.
If Hidary’s book is any indication of the direction of Sandbox, he’ll be taking an applied approach to running AI on its most advanced quantum computer and will be using that power to solve or optimize for real-world problems.
I’m surprised that Google has chosen to spin out something as valuable as Sandbox. It doesn’t have a history of doing that. As a perfect example, it never spun out its Android operating system division, which develops software for smartphones and tablets.
This is just me speculating, but I suspect it felt it had no choice. If it didn’t, it probably risked the departures of Hidary and key members of the team.
This is a common problem in Silicon Valley… After years of hard work on a special project, the large payouts only come if the company is independent and has the potential for an IPO.
Either way, Google’s quantum AI team is one of the most promising in the world. It’s the kind of company that has the potential to define an industry.
And it is the only significant competitor to my favorite quantum computing company, which is currently in my Exponential Tech Investor portfolio.
If there are two companies to own in this space, these are the two. Quantum is the next generation of computing; the potential is nearly limitless. There is enough room for two to play in the sandbox…
Biopharma giant Pfizer just inked an astounding $1.3 billion deal with Beam Therapeutics.
Pfizer will initially provide Beam with $300 million to develop therapies for three rare genetic diseases affecting the liver, the muscles, and the central nervous system. The additional $1 billion will flow as Beam hits additional commercial milestones.
Exponential Tech Investor subscribers know Beam Therapeutics well. We invested in Beam back in August 2020 as a play on CRISPR genetic editing technology. We are now up nearly 154% on our investment, and it’s still very early in the trend.
Beam’s approach to CRISPR is fascinating. The company is pioneering “base editing” technology. We can think of this, somewhat, as a second generation of genetic editing technology.
This technology is unique because it precisely edits a single DNA base pair. It converts one base to another base by rearranging the atoms of the DNA.
For those of us who remember our biology, we know that DNA strands are built on four types of nucleotides. They are cytosine, guanine, adenine, and thymine.
DNA Base Pairs
Source: How Stuff Works
And these nucleotides need to be combined in the correct order for our DNA to function correctly.
However, genetic mutations can disrupt this order. They can cause incorrect nucleotide pairs, which in turn leads to disease. In fact, there are more than 6,000 diseases caused by genetic mutations.
That’s where Beam comes in. Its base editing technology can transform an incorrect nucleotide into a correct one. We can think of this as fixing a “typo” in our genetic code.
And the fact that Pfizer was willing to shell out $1.3 billion just for the chance to work with Beam’s technology shows us how powerful this approach is in the industry. That’s a huge vote of confidence for Beam Therapeutics.
What’s more, this deal will be a major boon for other companies developing CRISPR genetic editing technology. That’s because Beam’s base editing is not a one-size-fits-all approach. It’s just one tool of many in the CRISPR toolbox.
Because of the COVID “vaccines,” mRNA technology attracted all the attention in 2021 in the biotech sector. It sucked all the air out of the room and so many of the most incredible developments in biotechnology were left waving for attention – genetic editing was one of them.
We can see the tide turning right now. The lunacy is coming to an end.
It is obvious that the pandemic has become endemic, and something that we’re going to have to live with. This is great news for the biotech industry, which represents what I believe to be the best value in 2022.
We’re in for a great year in biotech in 2022. To learn about one of my favorite biotech plays – a company that’s combining AI with the drug discovery process – go right here for the story.
Payment giant PayPal is exploring the launch of its own stablecoin. As a reminder, a stablecoin is a cryptocurrency that’s backed by a reserve asset – usually a national fiat currency like the U.S. dollar.
This comes on the back of the company’s initial push into the cryptocurrency space last February. That was when PayPal set out to enable cryptocurrency payments across its merchant network.
Interestingly, news of PayPal’s stablecoin plans first broke when a third-party developer discovered hidden code within PayPal’s app. The code referenced “PayPal Coin” and clearly indicated that it would be backed by U.S. dollars.
This leak forced PayPal to comment publicly on its motivations. The company said that it hasn’t seen a stablecoin out there that is “purpose-built for payments.” It envisions PayPal Coin filling that vacuum.
The statement actually doesn’t make sense, as they certainly exist. I suspect that PayPal was caught off guard with the discovery and wasn’t prepared with its positioning of the new stablecoin.
Either way, PayPal wants to launch a high-throughput digital asset that can securely handle transactions on a mass scale. This makes perfect sense…
After all, PayPal has a network of 361 million active users, and it settles over 15.4 billion transactions annually. On average, that comes out to 42 million transactions every day. It has a fantastic platform to build upon.
And there is something bigger happening right now.
Regular readers may remember that Facebook, now known as Meta, also wants to launch its own stablecoin. It is calling it Diem.
To me, this is a clear indication that Big Tech sees the transition to Web 3.0 as inevitable. Big Tech players simply can’t afford to risk being left behind and have been scrambling to enable digital payments on their platforms. By not doing so, they risk being entirely disrupted themselves by blockchain-enabled, Web 3.0 companies.
Web 3.0 is the next generation of the internet and financial services. And as we’ve seen, each new generation propels a handful of companies to unbelievable success.
We saw companies like Netscape and Yahoo come into being with Web 1.0.
The FAANGs – Facebook, Amazon, Apple, Netflix, and Google – were some of the big winners with Web 2.0. We can throw Microsoft in that bucket as well.
Web 3.0 companies have an inherent advantage. They are entirely digital-first and built with blockchain technology from the ground up. They are blockchain-native and carry none of the legacy technology and processes with them.
They are even capable of operating as fully autonomous decentralized organizations, something that the Web 2.0 companies would simply never do. They’ll never willingly cede control.
While Web 3.0 is sometimes referred to as “the internet of money,” the technology is enabling a new class of digital assets longtime readers have heard me talk a lot about over the past year: NFTs, or non-fungible tokens.
I believe NFTs will be a big winner over the coming years as they disrupt industries and gain new use cases.
That’s why I’m sharing more about what NFTs are and how they’re changing the world on January 26, at 8 p.m. ET at my NFT Moment event.
I just built an NFT model portfolio with my top three coins for this revolution. And on that Wednesday evening only, attendees at this event will have the chance to receive a free NFT of their own.
In other words, this is not a night to miss.
If you haven’t already, please sign up to attend. Simply go right here to RSVP.
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.
