Tag: Tech

First High-NA for Intel

Intel received the world’s first high NA EUV (TWINSCAN EXE:5200) from ASML recently.

The purchase order was made in Jan 2022 – so it took some 2 years.

The machine is said to be 2x as expensive, or $350mn (or more). ASML says it has taken between 10 and 20 orders to date.

If TSMC was to take 10 machines, it will cost $3.5-4bn, or some 13% of its $28-32bn capex target for 2024.

If Intel to budget 35% of its revenue as capex, (say $60bn), it would be ~$21bn, 10 high-NA machines would be 17-19% of that capex budget.

To justify the cost of machine, high-NA “enables building transistors that are about 1.7 times smaller than today, resulting in almost triple the transistor density“. So if density is almost 3x, and assume price per wafer is up by ~45%, then cost per transistor could be halved.

Meanwhile, ASML said 2024 revenue guidance is similar to 2023, which was EUR27.56 billion.

Facebook – Not An Easy Business

Facebook blocked all news content in a Australia on Thursday – users cannot share news links and Facebook Pages of media account are taken down.

This is in response to Australian government’s proposed law, which requires payment deals between media outlets and tech companies over content.

This is also one day after Google stroke a deal with News Corp, the media giant. Under the proposed law, Google will need to pay for news content if they appear in search results.

1/ Why Google and Facebook chose different routes (at least for now)?

I think their ad business are fundamentally different.

Facebook ads is seen on Facebook platforms, but Google ads is seen on both Google products and third-party websites.

Google is enabling third-party advertisers (think about the ads on newspaper’ website) to make money, e.g. AdSense. They are partners, and this network of advertisers is valuable to Google.

Facebook’s ads is sold by getting to know users better and letting users stay on its platforms longer. Traffic is important to Facebook, so news is important as a form of content that users want to see. However, Facebook also thinks it is giving media outlets traffic in return. More important, ads sold by Facebook is not relying on those media outlet.

2/ What content should be on social media?

Instagram is in a purer form of social media, so does Twitter. They are usually gravitating towards certain types of contents. On the other hand, products such as Facebook’ main app are aggregating all kinds of “feeds” as long as they can drive traffic.

I think the two types are both here to stay.

Another related issue is how to regulate contents, which has been an increasingly important issue in the US and globally.

“Regulate more” or “regulate less”?

I think either way more regulatory interventions (government) is most likely inevitable.

If platforms regulate less, regulators may think Section 230 is providing to much protection and platforms are not doing enough for their social responsibility.

If platforms regulate more, regulators might think they have too much power, which is also risky. And as they moderate more, it costs more and they may be challenged more often on their decisions.

“Public square” is not easy. “Digital living room” is where Facebook may find more flexibility in contents.

Paying for news might be one of the solutions to navigate some content risk, e.g. fake news, misinformation. However, fake news or misinformation might be the traffic driver that Facebook values.

Kuaishou Valuation

So the competitor of Douyin (TikTok) in China, Kuaishou (HKEX: 1024) just went IPO this week, now valued at ~$160 billion.

It’s a well-known app in China – with the current market sentiment, hypes around video-based social platforms, I should say I am not surprised about the valuation.

Here I provide one way to look at Kuaishou’s valuation:

Q3 revenue is ~$2.4 billion:

1/ ~50% comes from live-streaming (virtual gifts).

2/ The rest is from ads and e-commerce. I categorize them as “good” revenues that are fast growing (+200% yoy for ads) and stable.

For the first part, virtual gifts, we can use Huya (most revenue is from live-streaming) as a comp – about 3x annualized revenue.

For the second part, we can compare it with Snap, which trades at 25x annualized revenue. Kuaishou’s ads business (~$900 million in Q3) is at the same scale as Snap and grows faster – so some can argue to use 30x.

Therefore,

Kuaishou = virtual gifts business x 3 + ads & other business x 30

As virtual gifts is 50% now, we are talk about 16.5x revenue as a whole.

Annualize it: $2.4 billion x 4 x 16.5 = $158.4 billion

Virtual gifts business is debatable – while it’s 50% of revenue, it accounts for less than 20% of Kuaishou’s value if we use the above framework. So change it from 3x to 2x or 1x won’t affect much actually.

Clubhouse Revenue (?)

Clubhouse is a $1 billion business with 2 million weekly active users (as of Jan 2021).

Despite the exploding user count, it appears to have zero revenue now.

Clubhouse mentioned three business model:  tipping, tickets and subscriptions (therefore, no ads – good!).

1/ tipping – it’s an established model in Asia but don’t think it will work well in the US. If rolled out, it will be on a smaller scale and shouldn’t be the main source of revenue, unless it incorporates cryptocurrencies like Dogecoin!

2/ tickets – I think this can work but it’s not sexy. It makes the app more “administrative” and ordinary. Also, eventbrite works well with some 2.5%+ fees.

3/ subscriptions – this sounds interesting and may leapfrog podcast subscription model. Another layer of curation can be added, which Clubhouse might have been working on).

Clubhouse may also think about adding features to be more relevant on a daily basis, than monetizing the app right now.

Spotify management should be worried.

Social medias should be worried too.

Alibaba Cloud in 2020 = AWS in 2015

Amazon and Alibaba posted their earnings for the last quarter of 2020 on Tuesday.

I made two charts that I believe will be interesting.

1/ AWS’ amazing growth and operating income

2/ Ali Cloud growth from 2016 to 2020, followed by AWS revenue 2016-2020

In another word, I am using AWS’ past performance as Ali Cloud’s revenue projection.

This graph looks smooth!

In another word, Ali Cloud is 5 years behind AWS in terms of revenue (or cloud adoption in China is 5 years behind)

One more thing, Ali Cloud just turned profitable this quarter (Dec 2020) in the adjusted EBITDA level.

PBOC’s Draft On Payment Regualtion

The most important clause is the definition of “dominant position” in the national e-payment market – over 50%, or over 2/3 for two companies, or over 3/4 for three companies.

The new regulation is only for nonbank payment service providers, like AliPay, WeChat Pay, etc.

The the most obvious outcome?

1/ In offline markets, it’s time for Meituan payment to grow.

2/ Meanwhile other internet companies will first grow their payment services within their ecosystem online. To name a few: JD payment, Pinduoduo payment, ByteDance’s payment, Kuaishou’s payment, Baidu’s Duxiaoman, Bilibili’s payment, etc.

3/ Traditional banks will be benefited. They can partner with internet companies and grow users. Related services can be provided via those internet companies, such as credit card, small loans, etc.

DoorDash Can Grow – But By How Much More Above $60 Billion

I did buy some DoorDash (NASDAQ: DASH) from the $140-150 level, but feel that potentials are priced in now.

To put some rough numbers –

DoorDash in 2020 Q3:

  • Active customers: 18 million
  • Total number of orders: 236 million
  • That’s around 1 order per week for each customer.
  • GOV: 7,252 billion
  • So $ per order = $30.7
  • Revenue: 879 billion
  • Take rate = 12.1%
  • Contribution Margin = 24.5%
  • Adj. EBITDA Margin = 9.8%

That’s a nice profit thanks to growing orders during covid (no marketing needed).

The question is how much of the growth will continue post-pandemic.

My guess is that GOV will continue to grow, due to

  1. Food delivery offers greater convenience & more selections – benefits that are not only tied to the pandemic (DashPass can become a food explorer’s subscription)
  2. DoorDash is inner-city-delivery-as-a-service and can expand to groceries & pickups from brick-and-mortar stores. It’s a way to revive every kind of physical retail.

Plus, it’s legit to argue that as delivery network density grows, the efficiency grows, and unit cost will drop.

That being said, let’s assume (post-pandemic, by 2022) total order number goes to 450 million/qtr so 1,800 million/yr (e.g. 30 million customer x 60 orders/yr)

$ per order goes up to $35.

GOV = $63 billion

With unchanged 12% take-rate, revenue = $7,560 billion

Adj. EBITDA = $1,512 billion (margin improved to 20%)

Then 40x adj. ebitda will give us a valuation of ~$60 billion. (which is DoorDash’s current valuation)

Clearly, multiples will depend on the market sentiment.

Some of the assumptions are not conservative I have to say, so I won’t expect some solid 50% return ($90bn valuation) from the current level in near term.

Fundings Versus $800 Billion Tesla & Top 5 US Tech All Have An EV Play

Following up on my post almost 2 years ago – fresh fundings are going to EV makers and autonomous driving.

The check sizes are big – you need billions of dollars to compete with the $800 billion Tesla.

1/ Microsoft + Cruise, $2+ billion

A new investor in the EV space – Microsoft (NASDAQ: MSFT) led the $2+ billion round for GM’s (NYSE: GM) Cruise, with valuation up to $30 billion. Microsoft’s Azure is getting the new customers: GM and Cruise.

Cruise, as a self-driving unit, spent $0.8 billion in operating cash flow in 2019.

At December 31, 2019, external investors held 17.3% of the fully diluted equity in Cruise Holdings. After this funding, GM should still have 77%+ of Cruise.

2/ Rivian, $2.65 billion

The financing is led by T. Rowe Price and the firm is valued at $27.6 billion. This is in addition to the $2.5 billion raised in July 2020.

3/ Lucid Motor, $2 billion (?)

It was reported (rumored) that Lucid Motor will go public via a SPAC deal with Churchill Capital Corp IV (NASDAQ: CCIV), which raised $2.07 billion last year.

The transaction could be valued at up to $15 billion.

CCIV share closed at $17.9 today, or 79% above its blank check ipo price of $10.

If pre-money Lucid is worth $13 billion, then buying CCIV at $17.9 is buying Lucid at over $23 billion.

There were a lot more others, with SPACs. To name a few others – Lordstown Motors (NASDAQ: RIDE) raised $1.175 billion; Luminar (NASDAQ: LAZR) raised $570 million; Fisker (NYSE: FSR) raised $1 billion, etc.

Plus, Apple will make EVs, Alphabet has Waymo, Amazon has Zoox and invested in Rivian. With Microsoft’s deal today and Tesla surpassing Facebook in market cap: now top 5 big tech in the US all have an EV play.

Takeaways:

1/ Cash might be abundant today – cash will be a competitive edge tomorrow.

2/ Covid-19 delayed most EV companies’ production for 1 year – that’s a gift for those who can produce – namely Tesla. The valuation jump includes the unexpected another year ahead.

3/ Top 5 big tech in the US all have an EV play.

Tech Companies Want A Podcast

Spotify (NYSE: SPOT) launched podcast service in 2015. It appears to be the leading podcast provider in 2020.

Podcast listeners are projected to surpass 100 million in 2020 in the US alone, and podcast ads revenue to surpass $1 billion in 2021, according to emarketer.

US Podcast Ad Spending, 2018-2022 (millions and % change)

Spotify launched Spotify Podcast Ads in January 2020.

In November last year, Spotify announced to acquire Megaphone for $235 million. Megaphone offers technology for podcast publishers and advertisers seeking targeted slots on podcasts.

Amazon Music came a bit late – it adds podcasts in September last year.

Apple, an already big player in podcast, seems to plan another route to monetize – a paid subscription service, according The Information today.

On the same day, Tencent Music (NYSE: TME) announced its acquisition of Lazy Audio, which provides audiobooks, and other forms of “podcast-like” audio services.

ByteDance, Kwai and LiZhi (NASDAQ: LIZI) have their own apps for podcast as well.

It’s another round of competition in long-form audio – PGC & UPGC contents will be hot.

Yep, tech companies always want to connect with users longer.

History Is Not A Straight Line Forward: Cannabis, Bitcoin, 3D Printing

History is not a straight line forward.

Setbacks are usual on the road. Plus, it takes time for new ideas to evolve into a better version of itself. As long as it represents a future that’s needed, it will come back from “disillusion”.

Instead of chasing the very new idea, investors looks back and brings past “bubbles” back to life – when they can show some real progress/changes.

Cannabis, Bitcoin and 3D printing are just three examples. It’s interesting to see the cycles forming, although 2-3 years might not be long enough to be called “big cycles”. That’s how the future arrives.

Future ways of living, of production and of how to organize the society are always the areas to invest – but be careful with bumps on the road.

1/ Cannabis

Cannabis stocks had a great performance in the second half of 2018 before they crashed. In the past few month, they are back to life with some 100-200%+ returns.

What has changed? People are expecting the US market to open up as legalization on the federal & states levels is under way. Price stabilizes, oversupply concerns are going away, more consolidation in the industry, and companies post strong growth and healthier gross margin in Q3.

Jan 1, 2017 – Jan 8, 2021 | ~2 years from the previous peak

 

2/ Bitcoin 

Bitcoin was called a “bubble” and is still called a “bubble” today. Bitcoin price hit $20k 3 years ago. Now it’s doubling the previous high to $40k.

What has changed? More people are seeing it as a hedge against USD depreciation as bitcoin’s supply is limited – it’s younger generation’s gold.

Jan 1, 2017 – Jan 8, 2021 | ~3 years from the previous peak

 

3/ 3D printing

3D printing was in a “hype” mode back in 2014 and quickly lost most of its “market cap” afterwards – just like cannabis and bitcoin.

What has changed? During COVID-19, when global supply chain was disrupted, people realized the value of flexibility of 3D printing, especially in medial equipment solutions. The 3D printing companies are also developing more “recurring” business model. With auto and other manufacturing sectors are expected to recover in 2021 and beyond, people are betting on a more “agile” future of the industrial world, with more customization and more flexible capex.

Jan 1, 2012 – Jan 8, 2021 | ~7 years from the previous peak

Charts are created by author, soured from WSJ