Editor’s Note: On Wednesday, Jeff revealed the details of a major AI-powered market shift that’s coming…
Much of the growth in the artificial intelligence (AI) industry has been centered around the rapid developments in generative AI and “narrow” artificial intelligence.
But this unprecedented growth has only been the first wave… The next wave is coming. And the race is on to the next generation of artificial intelligence – something Jeff calls “Exegesis AI.”
This race will kick off the next leg of this AI revolution… One where the smaller companies – the ones creating the foundation for this next level of artificial intelligence to flourish – will thrive.
And, as we’ve been seeing, where AI companies go, the market follows. That’s why Jeff called an AI Emergency Meeting earlier this week.
There’s an AI industry event scheduled for August 28 that Jeff believes will trigger a massive shift in the market.
That means there’s not much time left to get ahead of it… so we’ve made a replay of Jeff’s meeting available for a short while longer.
You can go here to access it and get the full rundown of the August 28 event and what Jeff sees down the line for the future of artificial intelligence… as well as a handful of companies he’s identified that are building the foundation for the next generation of AI.
Now, on to this week’s AMA…
Hi Jeff,
Just started receiving your Bleeding Edge newsletter again, after being a member of Brownstone through the other advisory you were part of. Really thankful to hear from you again.
Just a question you might be able to respond to. Around 2018, I heard about the great potential for solid-state cells that had much greater capacity than lithium batteries. They were saying the mileage potential was somewhere over 1,000 mi. range per charge. Are you aware of news on this?
Lastly, I remember your article on small component fusion generators made by a company called Constellation Energy(?) and other similar companies. Do you have an update on that?
Look forward to reading all of your super informative articles. Thanks.
– Hans V.
Hello Hans,
The “dream” of solid-state batteries has been around for a long time, well before 2018. The whole industry has been chasing the next generation of battery technology, but the progress has been woefully slow.
Solid-state batteries use a solid electrolyte instead of a liquid electrolyte that is used in our lithium-ion batteries today.
The allure of solid-state batteries is compelling because if once can be invented and manufactured at scale, it would increase energy density and thus increase the range of electric vehicles. Solid-state batteries can offer greater thermal stability which can result in not only a safer battery… but one that could be recharged to 80% capacity in less than 10 minutes.
The problem the industry keeps running into in the pursuit to create solid-state batteries is that they are very difficult to manufacture at scale. And solid electrolytes tend to experience degradation under use. This can result in cracks, short circuits, and dendrite growth which can result in a battery fire.
There are quite a few private and public companies that continue to work on this problem. SES AI (SES), QuantumScape (QS), Solid Power (SLDP), and Enovix (ENVX) are four examples.
SES, QuantumScape, and Solid Power have all been pretty disastrous.
They all have interesting technology and are working on the problem. But the expectations are so high and the chemistry required to manufacture the new batteries at scale is so complex, these are very volatile stocks.
Worse yet, because manufacturing at scale is so difficult, these companies have been burning through cash and will need to raise more.
Enovix is the only one of the four that isn’t focused on EV batteries. Its approach was smarter than the rest. It has been focusing on solid-state batteries for consumer electronics, which is an easier problem to solve for than EVs.
As Enovix further develops its battery technology for consumer electronics, eventually it plans on extending into the EV space. But just like the others, Enovix is burning through cash and will need to raise additional capital.
On top of that, it is trading at 34 times 2025 forecasted sales, an extremely high valuation for a company that will be out of money in less than 18 months.
I expect it will be several more years before these technical issues are solved and a few more after that before we start to see large-scale manufacturing of this new kind of EV battery.
In the meantime, Tesla appears to have made some material progress on its 4680 battery cell which uses a dry cathode.
The advantage of this is that it will be cheaper to manufacture and improve the energy density, resulting in a longer range for its EVs. This is something that, if commercialized at scale, will be yet another competitive advantage for Tesla compared to the rest of the EV industry.
As for Constellation Energy (CEG), it is the largest operator of nuclear fission power plants in the U.S. You may have been thinking about Avalanche Energy which is building a nuclear fusion microreactor, about the size of which could fit on a desktop.
Source: Avalanche Energy
Avalanche’s microreactor is called The Orbitron (cool name). From my perspective, this is an incredibly exciting approach because it can be designed to supply as little as 5 kilowatts to as much as hundreds of kilowatts.
It could be used to power a single home, a small neighborhood, something off-grid, or even on the Moon or Mars.
Please verify that [Editas] is the same company that I bought years ago when they were working on a cure for blindness. The trials were positive but outside FDA rules because of a technicality. After I read that Editas was awarded ownership of the rights to their process I kept thinking it would increase in value from licensing. Did they ever go out of business?
Thank you for your help. So glad you are back!
– Gay G.
Hello Gay,
Yes, that’s the same company. Editas did have success with its cure for LCA-10, a form of blindness caused by a genetic mutation; but it decided not to move forward with further clinical trials because the subset of the market that its therapy would be effective on was just too small.
But it did prove the efficacy of the technology of CRISPR, for which it owns foundational patents.
Editas still has a promising therapeutic pipeline, but real value right now is locked up in Editas’ intellectual property.
Just this last December, Editas won a huge victory that provides us an example of how valuable its patents are. Pharmaceutical company Vertex licensed Editas’ CRISPR-Cas9 patents for $100 million, plus potential licensing fees if the drugs receive FDA approval. Better yet, Vertex’s license deal was for just two therapeutic applications.
Editas has also put in place a licensing agreement with Vor Bio.
Editas’ patents not only survived several patent disputes, but they are now commercially validated by Vertex and Vor Bio. More will follow…
Editas has $318 million in cash and is ridiculously undervalued right now with an enterprise valuation of just $52 million. I highly suspect that another larger biotech company that has a strong interest in genetic editing will be a likely acquirer of Editas before the end of next year.
I was hoping that Jeff could address a question that I have about the Taiwan/China tensions and the possible or eventual effects on the semiconductor business and how it may or may not affect our investments.
– Michael F.
Hi Michael. Thanks for writing in. I touched on this subject in another AMA just a few weeks ago. Given the importance and timeliness of this topic, I’d like to repost again below…
I’ve written extensively over the last three years, in both The Bleeding Edge and Outer Limits, about the risk of China taking over Taiwan. It is definitely a critical point. And I’ve even gone so far as predicting it would happen during President Biden’s presidency. I have a few more months to be proven right.
In May, China carried out its most aggressive and comprehensive military drills, even using live ammunition and surrounding Taiwan. It was retribution for Taiwan electing a President it considered to be a “separatist.” For more context, I’d recommend reading The Bleeding Edge – The World’s Defense Against Subsea Espionage.
Xi Jinping built his re-election campaign on taking control of Taiwan. And given the obvious weakness in the White House, there is no better time for China to make its move on Taiwan.
I’ve done business extensively in mainland China, Hong Kong, and Taiwan over the years. I’ve lost count of how many times I’ve been to Beijing, Shanghai, Hong Kong, Taipei, and other locations. And I lived and worked for decades in the Asia Pacific region, so I developed a deep boots-on-the-ground understanding of the regional geopolitics and business culture.
While I believe that the risk of an administrative takeover of Taiwan is extremely high, I also believe that the risk of violent warfare is extremely low. There will certainly be a show of force by China when it happens, but I suspect it will be just that, a “show.”
Controlling Taiwan, much in the way that China took control over Hong Kong, is a way to gain economic leverage on the geopolitical stage. Taiwan’s most valuable economic output, from a global perspective, is its semiconductor industry.
This includes the manufacturing of silicon wafers (upon which semiconductors are etched), the semiconductors themselves, and the packaging of semiconductors (taking a semiconductor die and packaging it so it can be used in a computing system).
I find it highly unlikely that China would restrict Taiwan’s economic engine, especially in semiconductors – let alone destroy it. Not only does China benefit from TSMC’s output, but keeping those semiconductor fabrication plants in working order is precisely what will give China geopolitical leverage.
If China doesn’t like a trade or policy action taken by another country, it can just choke off semiconductor shipments, which would bring entire industries to a halt. It’s that simple. What a powerful position to be in.
And that’s precisely why TSMC, and others, are investing so heavily in manufacturing plants elsewhere. This geopolitical conflict is the catalyst for TSMC’s plans to spend $40 billion in Arizona building semiconductor manufacturing plants.
It’s happening right now, and not just in the semiconductor industry. It’s a domestic manufacturing renaissance – a multi-decade trend towards onshoring and building resilience into supply chains.
It’s a shame it took so long, but it finally started in 2016, with government-led incentives, and it will continue for years to come.
And with the employment of artificial intelligence, robotics, and automation technology, the cost to manufacture goods in the Western world is on a path toward equalization with China.
This is something that I continue to watch closely as it impacts not just the semiconductor industry, but the global economy. And of course, if things do develop, I’ll be sharing my thoughts and analysis with my Brownstone Research subscribers.
So happy Jeff is back. Hope all is well with business, family, and business family. Now, Jeff what about Akoustis? How does their future look?
Thank you.
– Alfred F.
Hi, Alfred. It’s been about a month now since I last reviewed Akoustis Technologies in The Bleeding Edge – Grounded By the World’s Largest IT Outage.
For the benefit of readers who might be unfamiliar with Akoustis, it’s a small-cap semiconductor company that had a stellar run through 2021 before – like the overall small-cap market – it hit a hard slump when the Fed started aggressively hiking interest rates.
Add a predatory patent dispute from a much larger rival, Qorvo, and Akoustis has had a rough couple of years.
If you’re interested in some of my recent thoughts on Akoustis, here’s what I wrote in July, along with my observations in Outer Limits…
CEO Jeff Shealy and his team have done fantastic work on both product and business development for Akoustis (AKTS), despite dealing with a bear market in small-cap stocks, and a patent dispute from Qorvo. The company continues to make major strides with every month that passes.
For more details, I recently provided a couple of updates on Akoustis, one before the news of the outcome of the patent litigation case, and another after.
You can find those here…
Outer Limits – Taking a Fresh Look at Akoustis (AKTS), an Incredible Small-Cap Semiconductor Company
Since my last update, CEO Jeff Shealy has stepped down from his role earlier this month. This doesn’t come as a surprise. It’s normal when a public company has a tough run that a board feels compelled to make a change. The chief product officer has taken the interim role, so I suspect we’ll learn more in the next couple of months.
On August 13, Akoustis announced that it won a $13 million deal for its RF filters. That’s a huge deal as it amounts to about half of its fiscal year 2024 sales.
As I’ve speculated previously, I wouldn’t be surprised if Qorvo steps in and acquires the company. I suspect that’s what the patent lawsuit was largely about, in an effort to drive down the valuation to get a better price.
I hate to see this kind of predatory behavior, but this isn’t the first time, and it won’t be the last.
Hi Jeff, recently all the talk and interest has been around all the positive potential impacts of AI in medicine, material science, business, etc., and most of the discussions I have seen revolve around using conventional hardware with supercomputers. In addition, the estimated future energy demand requirements of conventional AI hardware seem to be a big limiting factor moving forward based on the current electrical grid limits.
At the same time, many discussions have also focused on advances in quantum computing technology and its problem-solving abilities. I still hold shares of Rigetti (former recommendation) waiting on a rebound. What I have not seen is a lot of discussions about the marriage of these two technologies. On the surface, it seems like a marriage made in heaven and a great investment opportunity. Can you share your thoughts on what may be happening behind the scenes in both the private and public spaces? Your insight here would be appreciated. Also, welcome back!
– Wayne B
Hi Wayne,
You’re definitely on the right track. And you’re correct, there are some great benefits of combining quantum computing and artificial intelligence. There is also some nuance to consider in how these two technologies are used together.
For example, using a quantum computer to train a large AI model is not feasible at all. It might sound like it makes perfect sense. After all, the incredible computational power of a quantum computer combined with the extremely complex task of training a neural network seems like a perfect fit.
But quantum computers today are inherently unstable. They tend to only run for milliseconds before the noise in the system results in too many errors. And we can’t train an AI if we have a problem with too many errors.
That’s why massive data centers with racks upon racks of GPUs are required to train AI models. These parallel computing systems can run for weeks or months error-free and get the job done.
Far more practice is using a quantum computer for machine learning, specifically for complex tasks that require optimization. This has already been a focus for the quantum computing industry. Publicly traded players like D-Wave (QBTS), Rigetti (RGTI), IonQ (IONQ), and Honeywell (HON) are all good examples of that.
The most common applications for machine learning on quantum computers center around manufacturing, logistics, financial services, and life sciences.
One of the most interesting and important private companies for us to watch in this space is SandboxAQ. It was spun out from Alphabet (Google) in 2022 specifically to focus on the intersection between quantum computing and artificial intelligence.
The technical reality is that the closer the quantum computing industry gets to fault-tolerant quantum computers, the more we’ll be able to use them for artificial intelligence. When that happens, the implications are hard to comprehend.
We’ll be able to throw the most complex, computationally intensive tasks at them and have results in periods measured in minutes. But that’s years away. We can definitely expect to see artificial general intelligence before we see these kinds of developments with quantum computing.
With that said, the quantum computing industry is evolving rapidly, and it is experiencing its own kind of exponential growth. And there is a learning curve required when using quantum computers. Software needs to be programmed to work on the underlying computing technology, and naturally, quantum computers are quite different than working on GPUs or CPUs.
At the moment, each quantum computing company has its own software interface for working with their quantum computers. There is a lot of growth that still needs to happen in the industry to make it easier for companies and public institutions to work with quantum computers.
We’ll definitely continue to track these developments closely at Brownstone Research and in The Bleeding Edge.
Hello Jeff, as an Unlimited subscriber I am happy to have you back in the saddle and churning out your exceptional work. Your knowledge and efforts are truly appreciated.
I was curious about a possible timetable for relaunching Brownstone’s previous crypto services, Unchained Profits, and/or Neural Net Profits. I know you have previously stated you intend to do this but any further details you could provide would be appreciated.
I currently subscribe to a different crypto service and my “refund” window is coming to a close before too long, and with us entering a post-halving boom cycle (with the Mt. Gox, etc. issues now settled) I feel crypto guidance is crucial. Will you and your team be able to provide that guidance in the near future? Thanks for all the insight.
– Brett C.
Hi Brett,
Thanks for asking. I am putting in the final pieces right now to be able to relaunch both Neural Net Profits and Unchained Profits. I view these two research products as critical products at Brownstone Research.
In terms of overall focus, Brownstone Research leans heavily into growth assets. It doesn’t matter what the sector is. Wherever there is growth we’re going to have analysts and expertise. Blockchain technology – and the digital assets that represent blockchain projects – is a major growth area in high tech.
I’m happy to say that my team and I have been in “the laboratory” working on, refining, and improving the Perceptron, my proprietary neural network that is the “brain” behind Neural Net Profits.
I’ve spent seven figures over the last few years developing and improving this AI. And regular readers know I even have a patent filing for the Perceptron.
I don’t want to get ahead of myself, but the improvements are significant, and it is much smarter in its predictive capabilities after the training and improvements that we’ve made.
As for when? I’m pushing for a late September relaunch of Neural Net Profits with Unchained Profits most likely to follow after that… definitely before the end of the year.
Thanks again to all for the questions this week. If you have questions or comments for me and my team, you can reach us right here.
Have a wonderful weekend.
Jeff
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.
