Amazon and the Cloud

Even after its disappointing latest earnings report Amazon is undervalued on cloud computing

Amazon is the leader in cloud computing and now the cloud computing business has a 200 billion USD  yearly revenue run rate with a growth rate of 35 % year on year.

Amazon's AWS cloud business' net profit margin is above 20% which coupled with the already large cloud computing industry and its stellar growth rate makes it possible that Amazon surpasses 3 trillion USD in market capitalisation in 7 years time.

Robinhood Is a Crypto Merchant Bank

At 33.85 billion USD market capitalization Robinhood is grossly undervalued in the long run.

Robin Hood is practically a cryptocurrency merchant bank. That is, a crypto investment bank.

Robinhood will be worth 100 billion USD if Bitcoin's price stays at 100 000 USD and 250 billion USD if Bitcoin's price reaches 200 000 USD, according to my estimates.

Cloud Stocks

Amazon, Microsoft and Alphabet, the Google search engine owner, could double in value in the next 5 years on the very probable growth of their cloud computing businesses. 

That can happen, despite all three  Amazon, Microsoft and Alphabet being valued currently at more than 1 trillion USD.

Actually, I think almost all estimates of the cloud computing business market size globally underestimate the promise of cloud computing. Simply because such mundane tasks like TV watching, video game playing and even artificial intelligence, machine learning will most likely move to the cloud infrastructure as a service premises of the large internet companies.

The cloud computing business currently is very profitable with net profit margins usually above 22 %. Unless the cloud becomes commoditized, the cloud computing business holds exceptional rewards.

Bitcoin as an Alternative to Investing in Stocks

Bitcoin's price reached an all time high this week. Many famous stock investors like Michael Novogratz have reportedly made a fortune investing in the new asset class of mainly Bitcoin and other cryptocurrencies.

Yes, Bitcoin dose not provide cash flows in the form of dividends, but also do not Amazon, Alphabet, owner of Google, Facebook, Tesla, Netflix and most technology stocks. And yet they are worth tens of billions and often hundreds of billions USDs and in Amazon and Alphabet's cases more than a trillion of USDs.

I do think Bitcoin could prove an altertnative to investing in stocks, be it at a lower percentage of the overall investment portfolio.

Bitcoin is undervalued, transforming our world and barring a black swan event like governments outlawing it, Bitcoin and main other cryptocurrencies are set to thrive in the future.

Bitcoin's Price and Gold

Many analysts see Bitcoin as an investment substitute for gold. And yes, as the price of gold has stagnated, Bitcoin's price reached this week an all time high.

It is interesting that although the USD, the main currency in which Bitcoin's price is quoted, has appreciated, the price of Bitcoin has went further up. Unlike gold's price which moves inversely to the USD as measured towards the EUR and a basket of leading currencies.

I forecast Bitcoin's price could climb above 100 000 USD in 2022.

What Will Drive the Further Bitcoin's Price Increase?

Institutional investor demand and excessive money creation by central banks will fuel the next round of Bitcoin's price increase.

The money printed, created by global central banks creates even more money via deposit multiplication. 

And part of the newly created hot money will find its way into Bitcoin.

Institutional investors looking for extra returns will also slowly enter more the cryptocurrencies asset class.

Stocks Which Would Benefit From Automation and Artificial Intelligence

The most obvious winners from the trend towards automation are NVIDIA and Microsoft.

NVIDIA, by producing graphical processing chips and computer chips, while Microsoft compiles the software to run the algorithms.

Many other electronic chips producers should also benefit.

Bitcoin's Price Could Reach 100 000 USD

Bitcoin, according to my estimates, is way undervalued.

The price of Bitcoin could surpass 100 000 USD in 2 years. Bitcoin saves people time, money and effort.

Bitcoin and the underlying blockchain algorithm will enhance dramatically the value produced by almost all industries existing today.

Is Tesla the Biggest Bubble in Stock Market History?

Tesla's market capitalisation is around 840 billion USD currently.

If Tesla's value falls to 140 billion USD, this would mean a loss of value of 700 billion USD.

This would most certainly be the largest loss of value for a single stock in history. Tesla's market capitalisation is simply of extraordinary size.

I estimate that a loss of 700 billion USD in value is not unlikely in the long-term. I judge the probability if that happening at 30 %.

Actually, I think Tesla's intrinsic value is 120 billion USD.

Cloud Computing as a Profitable Business

Amazon proves that cloud computing is a profitable business by achieving approximately 30 % net profit margin on Amazon Web Services, its cloud computing business.

This contrasts with Amazon's barely profitable US online merchandising business and consistently loss making international online sales business.

So cloud computing is really profitable if executed correctly. Most young technology start ups are loss making, even though many of them are unicorns or valued at 1 billion USD or more.

So cloud computing, which is slowly permeating every area of every day life and IT technology, could be the solution for profit making business endeavours for young technology start ups.

Cloud Computing Winners

Amazon, Microsoft and Alphabet, owner of the Google search engine, have gained a lot from the move to cloud services and will continue to reap the benefits from their infrastructure and first mover advantage. Their market capitalizations could double in 5 to 7 years.

Other potential winners are Arista Networks and Cloudflare.

In short, cloud computing rivals in disruption capabilities artificial intelligence.

Tesla Valuation on Green Energy Promise

Tesla, according to my estimates, is worth 120 billion USD. This compares with its current market capitalisation of 777.65 billion USD.

Basically, Tesla's value hangs on a binary outcome. Either Tesla achieves a technological breakthrough, starts producing electric vehicles profitably and ends up being worth more than 300 billion USD or Tesla burns out of investors' money and the only thing left from the electric vehicle pioneer is its technology.

Personally, I think something in between will happen. Tesla will make some technological advances but will still not end up with a finished technology which can manufacture electric cars profitably, without subsidies. So that is why I think Tesla is worth 120 billion USD - either Apple or some other large company will buy up Tesla and further develop the technology to produce profitably electric vehicles and achieve at least partially the promise of electric vehicles. This is what happened in many other technology sectors like search engines - first Yahoo was the pioneer, then Google won. In social media - MySpace was also a leader, then Facebook came to dominate social networking. 

Until then the price of Tesla's stock will be driven mainly by hype, rumours, news and both institutional and retail investors's hopes for a better green future.

Palantir Technologies AI Based Valuation. 09 October 2021

I estimate Palantir Technologies, the data analysis via artificial intelligence, or AI, company is worth 200 billion USD.

Palantir's market capitalisation is currently 45.87 billion USD.

Palantir has found an ingenious way to scale artificial intelligence, despite starting with mainly consulting projects.

Artificial intelligence, abbreviated AI, is driving the current fourth industrial revolution and artificial intelligence is arguably the future of information technology and its application in business. Palantir's lead in AI can unlock huge value creation opportunities despite the obvious risks associated with every relatively young company developing a highly promising technology field.

Companies That Will Benefit From Cloud Computing

Amazon, Microsoft and moderately Alphabet, the Google search engine owner, are the companies that are currently benefiting most from cloud services.

In the near future the existing technological edge of Amazon, Microsoft and Alphabet ensures they stand to reap more rewards from cloud computing in the future.

In short, I expect Amazon, Microsoft and Alphabet to double their respective market capitalizations in 10 years time receiving the benefits of cloud computing which will transform everyday life.

Bitcoin's Blockchain Algorithm as a Disruptor

Bitcoin has been taking over the world by storm in the last 8 years.

Actually, Bitcoin is the epitome of artificial intelligence since it is created via a hashing algorithm called blockchain.

This distributed ledger has the potential to disrupt almost every industry known to man since it can save the owners of companies money, effort and time. In end effect, the blockchain enables many people to validate a process or a transaction. Thus, Bitcoin's blockchain algorithm ensures exactness, smoothness and consistency of production processes which is vital for the existence of every business.

Anyway one analyses it, as Warren Buffett says "human nature rarely changes, if at all".

Humans have many flaws, the major being their ego, both of males and females. Ego makes people act basically irrationally, just to prove they are greater than someone else or just they are great. Make X great again has too many followers. Add to that the proverbial greed and fear (negative greed) which are both actually a product of ego and relying to people to take decisions does not always prove optimal.

The blockchain algorithm via hashing has a way of validating the truth, so to say, which requires minimal supervision. Yes, a human will still have to validate the transaction, no to mention that the blockchain actually uses countless human interactions to produce its results.

Bitcoin will slowly become a global electronic reserve currency. It just provides too many benefits.

Blockchain will slowly become ubiquitous. It uses the main idea that the Google search engine utilises. It basically reflects people's opinions via a machine learning way. Otherwise said, blockchain uses artificial intelligence to mine the opinion of many people. Blockchain does that in an electronic way which for the time being consumes too much energy. So like electric vehicles, blockchain needs a technological breakthrough to become long-term viable. And here is where the next brilliant Einstein, Tesla, Edison etc. has to come to the stage and achieve immortality. Will it happen? I would say the chances of a technological breakthrough in Bitcoin production are much higher than in electric vehicles, because simply the rewards of Bitcoin's underlying blockchain algorithm and its commercial applications are that much greater.

Bitcoin, actually serves as the infrastructure for the whole cryptocurrencies market. Bitcoin and its underlying blockchain algorithm provide the underpinnings of all cryptocurrencies, by securing the blockchain algorithm and the public's greater knowledge and acceptance of Bitcoin paves the way for the introduction of many other new and unique cryptocurrencies which fill in a financing niche for young start up companies left over by angel investing and venture capital seed rounds. Ethereum, the other leading cryptocurrency, also has promises to serve as a payments and applications development infrastructure for the cryptocurrencies market. From my experience in finance and financial markets I know very well the value of the plumbing for the global financial system. The repurchase agreements or repos market serves as the piping for financial markets and ensures the smooth functioning of global finance. When the repurchase agreements market breaks down, the whole financial system just stops. As evidenced quite clearly in the 2008 financial crisis and the ensuing Great Recession. Bitcoin and the blockchain are the repos for cryptocurrencies or with other words the building blocks for the whole new cryptocurrencies including financial system.

Between 2015 and 2017 there was a boom in the issuance of cryptocurrencies by small, predominantly technology start up companies which saw a window of opportunity to finance their business projects which were deemed too risky by angel investors and venture capital funds. Cryptocurrencies issued by technology start ups are considered tokens which are connected to a particular company project. If the start up's project proves successful, the price of the cryptocurrency associated with it rises. And the prices of such cryptocurrencies tokens can rise much faster and to higher levels than even small capitalization biotech and technology stocks, since unlike equities, cryptocurrencies are not part of the capital structure of the particular company issuing it. Or with other words cryptocurrencies are not entitled to bankruptcy proceeds.

The blockchain provides efficiency. And due to people's relatively short life span the importance of efficiencies will only get greater.