Colin’s Note: It’s time for another Q&A edition of The Bleeding Edge…
It’s been a minute since I’ve taken a moment to respond to the comments, questions, and concerns you and your fellow subscribers have been writing into our mailbag…
Today, I’ll talk about Intel once again and how the company – though its making some unique and interesting moves in the chips industry right now – isn’t really equipped to make the splash its hoping for.
Plus, I’ll give an update on a penny stock we mentioned back in December last year… share an update on where Tesla’s at these days… and share some thoughts on where I see Bitcoin headed in the short term…
It’s all in today’s video. Click below to watch or read on for the transcript, edited for flow. And if you have your own question or feedback you’d like me to address in our next Q&A, you can reach me at [email protected].
Bleeding Edge subscribers, hopefully, you guys are doing well.
It’s been a little while since we’ve done a formal question-and-answer video here in the newsletter. So I thought today we would take our time and answer some questions that have come in.
I’ll give you an update on a penny stock that we recommended back in December and on Tesla as well. And I’ll share my thoughts on where I think the price of Bitcoin is heading, at least in the shorter term.
But our very first question comes in and it relates to Intel. It says…
What do you think about Intel getting $8 billion from the CHIPS Act to develop chips to compete with Nvidia?
This is a really good question, but we have to unpack it a little bit.
So, there are two types of chip companies typically. You have chip companies like Nvidia and AMD… and you even have a company like Apple. A lot of people don’t realize Apple is one of the premier chip designers in the world.
These take the chip designs that they’re going to be putting in a phone or a data center or a laptop or a PC, they make their designs and take that to a foundry. And the leading foundry in the world by far is Taiwan Semiconductor – TSM or TSMC for short. This is the company that manufactures the chip.
What Intel is trying to do is rather unique and that hasn’t been done in the chip industry in a little while. Intel is trying to develop and design its own chips to go inside personal computers, servers, and those types of things. But the company is also trying to start a foundry business as well to directly take on TSM.
And so, when we’re talking about the $8 billion in CHIPS Act funding that Intel is getting, it’s not really to compete with Nvidia. In fact, Intel would like to bring Nvidia on as a customer. So, Nvidia creates a chip design, and then instead of bringing that to TSM to manufacture, they would bring it to Intel. Apple as well, instead of taking their designs to TSM, would have that design manufactured by Intel.
Now, I certainly see these leading chip designers like Nvidia and Apple being open to working with Intel. But the problem and the challenge is that while Intel is getting funding from the CHIPS Act here in the United States to the tune of over $8 billion… so is Taiwan Semiconductor Manufacturer.
Just last week, the company secured over $11 billion in grants and loans to build out its foundry business here in the United States. The company’s first American fab – fabrication plant – will be completed in Arizona by 2025. A second fab is likely to be online by 2028. So, the company is planning on investing over $68 billion in Arizona alone.
So, that is what Intel is up against. And in fact, $68 billion just in its investment in the Arizona fab. We’re not even talking about their operations in other parts of the world, including Taiwan, but 68 billion is about half of the market cap where Intel is today.
The challenge for Intel is they haven’t proven themselves as a leading-edge fabricator. For over a decade, the company’s chips have been marred with problems and delayed. I mean, this is why Intel stock has just not performed as well as AMD and certainly Nvidia.
And there’s really no evidence yet that Intel will do anything more than play a supporting role to TSM. Because if you’re Apple, Nvidia, or AMD… and TSM continues to invest the amount of money they’re investing here in the United States, let alone the rest of the world… there’s really not a big reason to go looking for another chip manufacturer.
Not only that, Intel already has a foundry business. Now, it’s relatively small compared to the rest of the company, but the problem is they haven’t proven that they can make money in that business.
Last fiscal year for Intel, the foundry business – which again is the chip manufacturing business for them –generated about $1 billion in revenue, but unfortunately lost about $500 million. That is a negative 50% margin in the chip manufacturing business.
Now, look, I am rooting for Intel. I think eventually they’ll find some success. But there is no way, in terms of the amount of dollars that TSM is spending, that it’s going to be able to catch up. And then, Nvidia, AMD, and other companies even like Apple, they’re in a completely different stratosphere when it comes to designing and putting their custom chips inside of data centers and PCs.
And then, furthermore, you have other competition coming online from other big wealthy tech companies like Meta and Google. They’re making their own custom silicon chips as well that are replacing a lot of chips, demand, and sales that used to go to Intel. I’ll say it again, I think Intel’s a great company. It’s one of the greatest American companies that we’ve ever had, but its best days are behind it.
The next question that came in relates to another great American manufacturing company, and that is Tesla. And the question is pretty straightforward…
Colin, what do I think about Tesla stock?
Now, Tesla stock, if you look at the stock chart, has gone more or less sideways for about three or four years. Now, it’s deviated as low as about $100 per share and peaked up to about $400 per share.
But more or less, you could have bought Tesla shares where they are today any number of times over the past four years. So, the stock has underperformed, especially when you look at the broader tech sector and other stocks out there.
But here’s what we know about Tesla… Its charging infrastructure – so charging stations for your electric vehicle (EV) – is absolutely the best. And that is the reason why you had other automobile makers – from Ford to GM to I think maybe close to a dozen of the other automobile makers – realize this. And they’re putting Tesla’s charger system on their car. So you’re able to take your Ford or your GM EV that you buy and you’re going to be able to charge this at a Tesla charging station.
I don’t see that competitive advantage for Tesla going away anytime soon. You look at the other publicly traded charging companies like Blink Charging, and there’s EVgo, and there are several others, these are fledgling companies and these charging stations are not nearly as good as Tesla’s and there’s certainly not enough of them to make a difference. So, Tesla has an advantage when it comes to charging infrastructure, probably going to be a decent business for them going forward.
They have an energy and storage business, which is interesting. It’s not only interesting, but it’s faster growing from a revenue perspective and it is profitable as well. So, this is battery storage and other technology related to energy and storage. What Tesla has proven that a lot of other companies just simply haven’t is they can develop and manufacture popular products at scale.
So, they do a very nice job of that. And that does give me hope that Tesla can do it again… certainly with another electric vehicle, maybe a cheaper one, or other models. But it also gives me hope that the company is going to be able to manufacture a humanoid robot.
Now, it could just be used internally at its facilities. But it could be one ready for the mass market, and that certainly could bring a new and interesting business model to Tesla.
In my opinion, Elon Musk is one of the best operators of a company. It is sometimes misreported and misunderstood in the financial media. People think Tesla is losing money, bleeding money. No. When you bring up the financials of Tesla, you’ll see a very financially healthy company. They have a lot of cash on hand, they generate operating profits, and they generate positive operating cash flow.
Just today, as demand for EVs certainly seems to have plateaued or it’s certainly not growing at the rate that maybe Tesla even expected, the company announced layoffs. And so, this is a guy – obviously, as you looked at what Elon Musk did with Twitter – who isn’t scared to lay people off and cut costs. And as a shareholder and as an investor, you love when your CEO is quick to act.
And so, I think Tesla is here for the long haul. I think you have to get it at the right price. I don’t see a catalyst that is likely to send Tesla stock soaring back up into the $300, $400, $500 range anytime soon. I think you can play a wait-and-see approach. And what you’re waiting and seeing is if Tesla can prove itself in other areas.
Because the electric vehicle, certainly here in the United States, has peaked from a demand perspective. There are other automobile makers out there – and I say this with all due respect, I own two Teslas – but Mercedes makes a beautiful EV. Ford, GM… all these companies make very nice products. And that’s going to keep a lid on how many units Tesla’s able to sell there. But they have an advantage when it comes to charging and when it comes to energy and storage business.
And the wild card, I think, is that humanoid robot. If it can turn that into a product that other companies want to buy – like Amazon or Walmart or other companies out there – Tesla would have a product that almost nobody has a competing position against. That’s my thoughts on Tesla.
Now, the next company that we’ll talk about is a company called SilverSun Technologies (SSNT), and if you recall, we recommended this back on December 5th as one of the best penny stocks you could possibly buy. Shortly after recommending the shares of SilverSun Technologies, the stock exploded. I mean, it went up over 100% over our recommendation price. And today, it’s fallen back a little bit, but it’s still trading at about 12 to $13, which means you’re up maybe between 20 or 30% just since December, which is obviously a pretty decent gain, and somebody wanted an update on that.
So, here’s the deal. At the time of recommendation, all we knew was Brad Jacobs, a legendary kind of roll-up investor. So, what this guy’s famous for doing is he did it at Waste Management, the garbage company. He found that the garbage collection business was fractured. You had all these local municipalities and all these small companies doing it. He decided to make one big garbage collection company called Waste Management.
He also saw it in the tool rental business. There were all these places to rent lawnmowers, and maybe a power washer, and it was a fractured business. So, he decided to roll that up into a company called United Rentals, which is still a fantastic company these days.
Then he did it again in the truck brokerage business. He found that there were all these mom-and-pop, small truck brokerage businesses. So he decided to roll that up into a company called Express-1, later renamed XPO. And that was my introduction to Brad Jacobs.
I own shares of XBO. And once Brad Jacobs took over, shares of this very fledgling penny stock soared. I was able to take all of my shares and sell them. And with that, I bought the house that I’m sitting in today.
So, I feel very blessed to have come across Brad Jacobs. And certainly, my family does as well. We’re very fortunate to have the home that we live in today, and a lot of it has to do with Brad Jacobs.
Now, he’s doing it again. And he’s going to rename SilverSun Technologies QXO. He’s going to look to acquire businesses distributing products from lumber to doors to windows to landscaping supplies. So, he’s not going to look to compete. It might sound like he’s looking to compete with Home Depot and Lowe’s. That’s not the case. He’s actually looking for the distributors that sell into a company like that.
So, through his experience – likely through United Rentals and certainly the trucking companies – what he’s found is when you’re building a large building or you’re building homes, you’re buying lumber from all these different sources. And then you have to have your windows come in from another source, and then you have to get your landscaping supplies somewhere else.
Now, he’s going to be able to combine and consolidate that business.
But where does that leave us for a recommendation? I would just take a wait-and-see approach. I don’t think there’s any reason to jump in there and buy shares of this company until he raises more money. So, that’s what Brad Jacobs is going to have to do.
He’s going to have to raise more and more money to go out and acquire companies in this sector. He’s going to have to go find a window distributor and a lumber distributor. And he’s going to have to buy these companies and combine them. That is going to take some time.
Even if you look at the stock chart of XPO – the shares I own – it went up almost immediately when Brad Jacobs took over, but it was a bumpy ride up to the top.
And so, these things will take time. I don’t think we have any rush. If you’re sitting on a 20 or 30% gain and you didn’t take profits when shares just spiked on hype and euphoria when Brad Jacobs took over, well, I tell you what, I would just continue to hold, but I wouldn’t see any reason to add to a position, and I certainly wouldn’t start a new position until Brad Jacobs starts proving out his idea.
Also, his fundraising model, he’s going to have to continue to raise funds to fund this business. That possibly means more shared dilution, which could mean taking on some bank loan debt or other types of financing to have his vision come to fruition. But one thing when it comes to Brad Jacobs is the guy delivers time and time again.
Now, the last question we have is people like the technical analysis that we do, and now technical analysis is not for everybody. I certainly subscribe to a technical analysis that is not nearly as complicated or complex as I see other people, although if somebody has a lot of lines and data points out there for you to look at, it certainly can be valuable.
This next viewer wanted to know if could I do a technical analysis on Bitcoin. Now, if you’re reading this in the newsletter, you might want to flip over to the video because technical analysis is hard to translate into words. It’s easier to see it on the video. (Jump to 14:49 to watch.)
Looking at a price chart of Bitcoin, what you see immediately is you had some highs back here in April at around $65,000. That is also currently the price of Bitcoin.
Then you also had some highs back in November of 2021, right at the same level. And now, here we are in March of 2024. And what are you seeing? Right about $65,000. This is where Bitcoin hits some resistance from a price perspective.
So, what you normally see at these levels is what you’ve seen in the past. You see a nice little selloff emerge as the incremental buyer to push the price of Bitcoin from $65,000 up to $70, $75, $80, $100,000. It just doesn’t materialize here.
So, you have to assume from a technical pattern perspective, that’s what you’re going to see with Bitcoin, is you are going to see the shares get rejected at the $64,000 level and move lower.
Now, the question is, where do they move lower?
I’ve put a green line in here where you tend to have support or the buyer step in. There’s another way, and I’m going to show you this, to find levels of support or where you can “buy the dip” when stocks – or in this case crypto – sell-off from some highs and then pull back. It’s in an indicator called volume profile.
So, on something like TradingView, which I’m on right now. You come over here to profiles and you go to the fixed range volume profile. Then you click off of it and select an area of the chart.
In this case, we’ll just look at the last four years of Bitcoin. And we place this on the chart. What you’re going to notice is, down at the bottom of my chart, I have the volume. This is essentially the number of tokens that were traded on a given day. And when volume is high, it means a lot of people are stepping in. When volume is low, it means the transaction of buying and selling just is pretty low.
What this volume profile illustrates is that a lot of people were very intelligent when it came to crypto, and they bought in the $16,000 to $20,000 range. Look at your volume as it is illustrated here on the screen, also illustrated at the bottom of the screen. This is the area where you had a lot of people step in and buy.
Now, as we’re seeing as the price of crypto has just continued to steadily go higher from $30,000 all the way to $60,000, we’re seeing volume shrivel up. So certainly, there are not a lot of sellers up at this range. But there are not a lot of people buying crypto at this elevated range.
And that’s what makes you a little bit nervous, at least from a perspective that the price is going to be able to hold here and go higher. That incremental buyer is not stepping in, and that means if the sellers emerge at this level, it is likely to push the shares, or in this case the price of the token, down pretty quickly.
If you’re in this for the long haul, this is exactly what you want anyway. You want another chance to accumulate some tokens back down here. South of about $30,000, that’s where I would look. And I know, from $64,000 down to $30,000 sounds like a lot…
But needless to say, the price of crypto is extraordinarily volatile. And I would expect in the coming weeks, maybe months, even a year or two ahead… the price of crypto will likely have a pretty big pullback. And that’ll be your opportunity if you want to add to the tokens that you already have or if you want to start a new position. That’s certainly where you would do it.
Guys, hopefully, you enjoyed today’s question-and-answer video. As always, you can leave them, if you’re watching here on YouTube, down in the comment section. If you’re reading it in the newsletter, reach us at [email protected]. I look forward to hearing from you again soon. I’ll be back later this week. Until then, good luck with your investments.