Michiel Frackers: The new Internet hype is ... LK-99, a superconducting material?
When the five of the world's six largest companies publish their quarterly results, it is a major economic indicator and could be news. Unfortunately, instead of solid analysis, even the Financial Times and Washington Post preferred to publish uninspired opinion pieces about how boring the CEOs of Google, Microsoft and Apple are and how silly it is that Apple CEO Tim Cook always makes the v-sign in photos. Who cares, as long as he is not in every photo with his right arm extended?
Therefore, this week's news was the possible breakthrough of a superconducting material, LK-99. On Twitter, sorry, on X, the people who were experts on AI and mini-submarines earlier this year have been true alchemists since this week. Everyone was suddenly Merlin the magician.
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What exactly happened? Three Koreans published a paper on July 22 titled " The First Room-Temperature Ambient-Pressure Superconductor." If their research findings are confirmed, it would at a minimum revolutionize the design of computers and consumer electronics, think iPhones with the computing power of a quantum computer, but space technology, medical technology and the way factories are designed in industry would also change forever.
After a year in which Meta, with $40 billion in the bank and 80,000 employees, underscored the tech world's idea vacuum with the launch of the app Threads, a bland spinoff of Twitter, many believers in the cult of technology went completely berserk over LK-99. As Wired described it:
'A return to a time of groundbreaking discoveries - the light bulb, the Manhattan Project, the Internet - where the impact of scientific discovery is tangible within the span of a human's earthly presence. "We're back," as one X-user put it.
That superconductor at room temperature should theoretically be possible, it has been debated and written about for decades, but the world has never seen it happen. In short, it would be a discovery on the level of time travel, interplanetary life and a movie in which Tom Cruise looks older than 35.
The UFOs of science?
Unfortunately, false claims are so common in this area of research that physicists joke about USOs-"unidentified superconducting objects"-a pun on UFOs. Nature came up with a cold one:
'Advances in superconductivity are often touted for their potential practical impact on technologies such as computer chips and magnet trains, but Inna Vishik of the University of California at Davis points out that this excitement could be misplaced. 'Historically, advances in superconductivity have had enormous benefits for basic science, but little for everyday applications. There is no guarantee that a material that is superconducting at room temperature will be practically useful, Vishik says.
At the moment, LK-99 seems like a mirage. Still, even I can't help but watch videos like this one tracking how last week scientists worldwide are trying to replicate the Korean experiment, although I understand as little about producing LK-99 as I do about making the cruffin, the miraculous combination of a croissant and a muffin.
Cleantech is hot
If it turns out that the gentlemen behind LK-99 have actually made a scientific breakthrough, then (apart from a Nobel Prize) there is at least plenty of investor money waiting for them:
Social media is abuzz with chatter about the material, but some scientists are pushing back on the hype.
Source: Crunchbase
Many of the busiest investors in cleantech also became more active in 2023, according to Crunchbase. This is notable given that overall venture capital funding has declined, indicating that these industry-focused investors see many opportunities, particularly in "climate tech," technology that combats climate change.
KPMG releases bold report on Bitcoin and ESG
KPMG and bold, so far you could only come across those two words in articles about their go-to ski trips. Still, KPMG deserves kudos for publishing research on the ESG aspects of Bitcoin, because it can really only get criticism. On the one hand, from crypto fans who will sigh that KPMG wants to be modern and hitch a ride on the cryptohype; on the other, from many traditional KPMG clients who will wonder "what's wrong with KPMG, why are they writing about Bitcoin?
The most striking passage concerns the part about the ecological aspect: ' Bitcoin miners can be a useful ally in the transition to more renewable energy sources and reduce emissions, despite significant energy consumption.' Surely you rarely hear that, Decrypt also found. The wait is on for 'certified green-mined' Bitcoins. Highly recommended: the report is only 11 pages, provides an excellent overview of the state of Bitcoin and ESG, and can be downloaded here.
Spotlight 9: Apple, Amazon, Meta and Alphabet all rated differently
Winner of the week was the company with the bluntest axe: Amazon
I wanted to do a long discourse on the difference in how analysts and investors rate companies, versus the reality of market position, competitive advantage and structural earnings potential. In summary, my argument boils down to the fact that there are so many pure speculators in the stock market influencing the market, that the short-term share price is barely related to long-term company value. It works better if I take a few concrete examples. First, Uber: the company made a profit for the first time in its existence, but its share price fell because revenue was lower than expected. Maybe it's just a smaller, but more profitable, company than analysts expected. A few other examples following last week's release of quarterly earnings.
Meta is not mega
Take Meta, the maker behind Whatsapp, Instagram and Facebook. Collapsed completely last year when revenue fell apparently unexpectedly for investors. This led to doom-mongering that the company had peaked and would decline long term, enough to justify the stock's extreme discount relative to the rest of the market. We are eight months on and investors seem to be overreacting in the opposite direction, pushing the stock up in response to last month's earnings improvement, in which revenues rose and operating expenses fell due to the company's drive for efficiency (read: mass layoffs), leading to an increase in earnings. Is that vision?
Amazon scores at least in the short term
Another good example is Amazon: CEO Andy Jassy gets compliments for cutting costs while increasing sales. Under his reign, as many as 27,000 jobs were eliminated, and few things make investors as happy, as other people losing their jobs. The results caused shares to rise 8.3% at the end of the day Friday to $139.57, the best single-day performance since November and the highest price for Amazon shares in nearly a year.
An interjection stated: "Amazon's cloud business, which normally provides the bulk of the company's operating profit, exceeded expectations and showed signs of stabilizing. And herein lies my objection to this kind of short-term jubilation. Because I can still remember the years when analysts complained about all the investment that founder and former CEO Jeff Bezos made in all of Amazon's cloud services. 'Not a core business for an e-commerce company,' the analysts shouted in chorus.
The reality is that AWS is not only Amazon's biggest profit maker, but also provides the e-commerce branch with an unbridgeable competitive advantage over everyone else without such a cloud platform to handle all transactions. You read nothing about that, it's mostly about the $12 billion Jeff Bezos got richer on Friday. There is virtually no attention to the very way Bezos became successful: by consistently putting long-term interests ahead of short-term profits. (For fans of serious analysis of cloud services, this is an outstanding multi-page article comparing the cloud services of Amazon, Microsoft and Alphabet).
Does profit count above growth at Apple?
It is always nice to see what strategy Warren Buffett, the oracle from Omaha, is using. Buffett has invested as much as $151 billion in Apple, which is still less than 6% of the company by the way. He is looking over years rather than months and weeks, and that seems to have worked out nicely for the man. Apple posted declining sales but higher profits for the third quarter in a row, which resulted in 2% stock price decline.
I never make predictions, but on this one I will make an exception, looking purely at Apple's products: forget the Apple Vision Pro, which is a product with a very long horizon, but look at the Mac owners switching to laptops with the new Apple chips, the expectations about the new iPhone 15, the services (iCloud, Apple TV etc) and the wearables, especially the Apple watches, and I think Apple will post significantly higher profits in the first and second quarter in any case, plus sales will start to rise again. I'm writing it down in the calendar for Apple's quarterly earnings in 2024. Curious to see how wrong I will be.
Michiel Frackers is Chairman of Bluenote and Chairman of Blue City Solutions
You’re reading an outtake of my free weekly newsletter about the technological, economic and social events that are redefining our lives. Read the full story every Sunday here.
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