| | | | | By Jeff Brown, Editor, The Bleeding Edge | | |
It was a busy week with some heavy travel, and I hope everyone enjoyed Nick's and Ben's Bleeding Edge issues on Monday, Tuesday, and Wednesday. I was able to get back at it yesterday in The Bleeding Edge – A "Leveraged" Play on AI about the hottest IPO year to date – CoreWeave (CRWV). | | It is scheduled to start trading today, but before anyone rushes out to buy shares, I strongly recommend reading yesterday's Bleeding Edge. This is an unusual story with an interesting background. There is a lot of context to grok. Far better to be informed before blindly pressing the "buy" button. | | I just returned from Washington, D.C., and I have to say it was a wild trip. I've been in the capitol several times a year for the last decade, and all I can say is that I've never felt the kind of optimism that I felt this week on the ground. I've never witnessed a time when industry, policymakers, regulators, and politicians were so aligned with what needs to get done at a national level. | | There is a sense of urgency that I haven't seen before. There is a clear desire to ensure that the U.S. either establishes, returns to, or maintains leadership positions in critical industries like energy, artificial intelligence, robotics, defense technology, cybersecurity, quantum computing, financial technology, and manufacturing technology. | | Everyone is aligned in the stance that ceding leadership in these industries to adversaries like China or Russia is unacceptable. So, the doors are wide open to support private industry to ensure U.S. leadership. And this means even more capital will be drawn to the U.S. markets for investment, and talent from around the world will gravitate to U.S.-based companies. | | This environment will create fantastic investment opportunities in the U.S., both in public and private companies, as technological development accelerates on this latest wave of semiconductor innovation (hardware) and artificial intelligence (software). | | We have so much to look forward to, | | Jeff | | A Temporary Setback, Not a Permanent Downtrend | | | Hi Jeff, | | What is your take on the liberal meltdown over Elon Musk which I believe has affected the Tesla share price? Will this only get worse in the next few years, or do you think it is temporary? | | Thanks. | | – Ralph S. | | | | Hi Ralph, | | You're absolutely right… it definitely impacted Tesla's share price. The perception that liberals will stop buying Teslas has been enough for institutional capital to move to the sidelines. Tesla's share price is down almost 44% since its December highs. | | | | Some have also attributed the downturn in the share price to being caught up in the concerns around the impact of tariffs on the economy. But that makes no sense at all. Of all the car manufacturers, Tesla is the most American-made and is therefore best positioned with regards to any tariffs in the automotive industry. | | | | Cars with Highest U.S. Domestic Content | Source: Kelley Blue Book | | And it's worth noting that the Tesla Model Y is the best-selling car in the world. Not just the best-selling electric vehicle, but the best-selling car. If anything Tesla benefits from the tariffs. | | The most ironic part about this insanity is that Elon Musk is a lifelong Democrat. He hasn't suddenly changed. He still has the same values that he has had in the past, namely: protecting freedom of speech, light regulatory approach, pro-innovation, pro-opportunity, and pro-efficiency. He simply aligned with the party that believes in these values. | | And as we've learned in the last four years, the Democratic party demonstrated that it no longer supports the First Amendment – the constitutional right of freedom of speech. This reality was revealed as the truth came out about the censorship industrial complex in Congressional Hearings. It has been further revealed that U.S. taxpayer dollars were used to pay NGOs to suppress individuals and information that didn't align with the desired political narrative. | | These developments were the catalyst for Musk acquiring Twitter for $44 billion in late 2022. Musk knew what was happening, as many of us did, well in advance of the information being made public. The revelations of how systematic and structured the censorship really was became clear from the release of the Twitter files. | | A free society cannot exist without freedom of speech. And Musk knowingly overpaid for Twitter simply to defend everyone's constitutional right to freedom of speech. He knows that in the absence of a free society, there will only be a decline. | | The threats that half of the users would leave, that Twitter would collapse, and that Musk and his team would fail miserably have been everywhere since the acquisition. But let's look at the simple facts… | | Twitter had 229 million monthly active users (MAUs) pre-acquisition. X now has 600 million monthly active users – an increase of 371 million. | | There's no other way to put it, X is absolutely thriving. It is already one of the greatest turnarounds in history and a representation of what the vast majority of the population wants. | | The censorship industrial complex, which opposes freedom of speech, is also why Musk established xAI – his artificial intelligence company that will be the first to achieve artificial general intelligence (AGI). | | Musk knows that as these reasoning AIs like OpenAI's GPT and xAIs Grok become more useful, they will essentially become the operating system for our lives, and for our education. If they are programmed and trained on untruthful information, it would be disastrous for civilization. | | That's why the goal of xAI is to produce an unbiased, "maximum-truth-seeking AI." Balanced, unbiased, evidence-based, and capable of incredible performance and scientific discoveries. | | Tesla (TSLA) makes a phenomenal product. There is nothing like it in the industry. My Model Y is the best car I have ever had, and the cost of ownership is lower than any car I have owned in the past. And Tesla is the only company that has developed full self-driving software capable of unsupervised autonomous driving without any geographic restrictions. | | The significance of this will become apparent and widespread after Tesla launches its robotaxi network in Austin in June, and then elsewhere later this year. This is a landmark event. Transformational for Tesla, and the public transportation industry. | | So to answer your question directly, this is a short-term event, a temporary irrational moment in time. The criminals that have been destroying property (Teslas and Tesla facilities) will be arrested and prosecuted, Tesla will launch its robotaxi network (eventually nationwide), and then it will launch its Optimus humanoid robots for industrial, enterprise, and consumer applications. It will continue to produce groundbreaking technology, powered by electricity, that will transform the world. | | Musk and his teams at his various companies will win, and the world will be in a better place for it. | | | | Sam Altman, the CEO of OpenAI and the creator of ChatGPT… Called Stargate "the most important project of this era.” And according to Jeff Brown, the tech legend who picked Nvidia in 2016, before shares exploded more than 20,000% higher… It could send these five AI stocks exploding higher… as early as May 21st. If you missed out on the massive gains from Nvidia… This could be your second (and perhaps LAST) chance to profit from this AI boom. | | | | Who Is on the Other Side of Deep Access Trades? | | | Hello again, Jeff. | | Well, this is nothing short of amazing, and I am sold on this Deep Access put method. This morning I sold: | WOLF @ $1.38 for a net profit of $118.42 – a 21% profit on 5 contracts (in 10 days)
MODG @ $1.70 for a net profit of $300.00 – a 55% profit on 5 contracts (in 12 days)
SPCE @ $2.00 for a net profit of 428.42 – a 75% profit on 5 contracts (in12 days) | | This is incredible! I started out with small trades just to see it work. Perhaps later, I will boost my # of contracts to up my gains a bit. This works, and thank you so much. | | That said, I still do not understand who is on the other side of this trade and what they stand to gain by buying my put contracts. Could you explain this a bit more? After all, someone paid me $1,000 to buy my 5 SPCE contracts that I paid $571 for 10 days earlier. How do they gain by this trade? Sorry to be so thick. | | – Gary D. | | | | Hi Gary, | | Thanks for writing in – and congratulations on your success with the Deep Access trades! I have no doubt we'll see plenty more winners in the months ahead. The Deep Access AI is getting smarter and improving, I couldn't be more excited. | | As for your question – who is buying our puts after they've gone up in value? | | There are two main answers to this. | | First, there are always investors looking to buy puts, even as prices rise. | | Some investors may be hedging their long positions in these stocks. As a stock declines, risk-averse investors tend to worry more. They'll often rush to buy puts after the decline is already well underway – just when we're looking to sell for a profit. | | Then there are momentum traders and speculators. Some traders specialize in riding trends, buying puts after a downtrend is visible. But our system often identifies short opportunities before the trend is obvious. It can see the movement of institutional capital establishing their short positions prior to the decline in the share price. | | The Deep Access AI can also seen when the institutional capital is starting to close out their short positions. That means by the time the downside momentum is obvious to all, we're typically exiting our positions. | | And then you have institutional funds running complex options strategies. They may be using our puts as part of a larger multi-leg trade or as part of a structured hedge. These funds provide additional liquidity to the options market. | | But let's say none of these traders were willing to buy our puts… then who would step in? | | That brings us to the second group: market makers. | | Market makers exist to ensure there's always a buyer and a seller in the options market. And in many cases, they pay for the privilege of making markets. Why? | | Because they make money on the bid/ask spread. | | For example, let's say a put option is quoted at $3.00 (bid) and $3.10 (ask). That means the market maker will buy the put for $3.00 and sell it for $3.10. Every time they execute this trade, they pocket the $0.10 spread – or $10. | | That may not sound like much. But multiply it by thousands of contracts per day, and you're looking at a very profitable business. | | And in many cases, exchanges pay market makers a small rebate when their posted quotes get filled. That's another revenue stream for them. | | Market makers aren't directional traders – they don't care whether a stock goes up or down. Their goal is to remain neutral and capture the bid/ask spread over and over again in large volumes. | | To do this, they use hedging strategies. | | For example, let's say a market maker buys 10 put contracts from us in Virgin Galactic (SPCE). And let's say these puts have a delta of -0.8, that means: | - If SPCE falls by $1, the puts will increase in value by $0.80 per contract
- If SPCE rises by $1, the puts will lose $0.80 per contract
| | Effectively, the market maker is short 800 shares of SPCE after purchasing those 10 puts. | | So to hedge their position, they'll buy 800 shares of SPCE on the open market. | | This allows them to offset their risk. They don't really care what happens to SPCE's price. They just keep making money from bid/ask spreads and rebates. | | This is why we have a liquid options market. | | Before recommending any trade, we always check liquidity. We ensure that the options market can handle our subscribers' orders without distorting prices. | | So no matter how successful our put trades are – there will always be a market for us to exit. | | I hope this helps clarify things, Gary. And again, congrats on your gains! Looking forward to more wins ahead. | And for Bleeding Edge readers who are interested in taking advantage of our Deep Access AI and getting in on our future trades, you can go here to learn more. | | The Life-changing Potential of Autonomous Driving | | | Hi Jeff. I am a lifetime member of Brownstone. I just read your article on killer app. | | I have been following you and like your articles. Yes, it's great for people to be able to drive autonomously but think about what this will do for people who are visually or physically impaired. This will be so life-impacting. | | I just thought I'd mention this since I have not seen it mentioned in any of your articles. Thanks. Keep up the great work. | | – Anthony V. | | | | Hi Anthony, | | Absolutely, what a fantastic point you've made that I have neglected to make. Thanks for doing so. | | Those who are visually impaired would not only be able to take advantage of fully autonomous ride-hailing services but would also be able to own their own autonomous vehicle. With full, unsupervised, autonomous driving, we actually won't even need to have a driver's license. | | In time, there really won't be a need for steering wheels and pedals. I'm sure that Tesla will incorporate natural speech into its self-driving software so that instructions can be given to the car like "Please park the car to the left of the red car," or, "Park the car in the garage," or, "Pull up to the front door and then park while I have dinner." This added utility will remove any need at all to touch the steering wheel. | | What an exciting future we're in for. And we won't have to wait long at all. | | Once Tesla launches its first robotaxi deployment, I'll be sure to capture some footage in real life and share that with you. We're always going to stay on the bleeding edge… | | A Correction | | | Regarding Roadmap to the Future, I wonder whether the phrase, "And yet the Rubin GPU has 1,300 transistors, 2,304 memory chips, and 12,672 Vera CPU cores," should say 1,300 *trillion* transistors instead. | | – Alejandro G. | | Hello Jeff,
As a general rule, you talk over my head in the Bleeding Edge emails. However, I'm not completely stupid. Lol! Math, in particular, is my strong point. That being said, I find myself in dire need of clarification after reading the latest edition of The Bleeding Edge, from 3/20/25. | | With great interest, I read about your take of Jensen Huang's statements from the GTC event. I was following along fairly well until I got to the section where you stated:
"Blackwell has 130 trillion transistors, 576 memory chips, and 2,592 Grace CPU cores.
And yet the Rubin GPU has 1,300 transistors, 2,304 memory chips, and 12,672 Vera CPU cores." | | That is where the math kicked in…and the confusion. By the way, I am easily confused…lol! You stated "It's almost night and day. Rubin has 10 times the transistors and 7.5 times as much memory." By my math, that is 1/100 billionth of the transistors (as opposed to 10x (massive difference), 4 times the memory chips, and about 4.9 times the CPU cores. I'm not even concerned about the discrepancy in the memory increase, instead, it's all about the transistor numbers for me. | | Granted, there may be some assumptions in your statement, but I avoid assuming ANYTHING! As a result, I was left confused throughout the rest of the email. I get the gist of conveying the extreme advances but I'm stuck on the math issue. It is the curse of being a numbers guy, what can I say??!!? | | Can you please clarify this for me? What am I missing? I am getting old and the brain isn't what it used to be, so I won't be surprised if it is something simple. Don't worry, you won't hurt my feelings. Lol! | | Thank you very much for sharing your knowledge and insight! I look forward to reading a response from you and gaining a better understanding. I don't doubt that I'm missing something, but I can't figure out what so far. | | Thanks again! | | – Charles M. | | | | Gentleman, | | Thank you for writing in. I appreciate you both for catching my error. You are 100% correct. It is rare for me to make a silly mistake like that, but "1,300 trillion" is absolutely correct and what I meant to write. Both my editor and I missed that one… | | I did have the "Rubin has 10 times the transistors" correct though. That's what makes NVIDIA's next-generation Rubin GPU so remarkable. | Either way, we'll get this corrected on our website archive of The Bleeding Edge. All of the Bleeding Edge content is free and searchable, which is why I'm grateful for you letting me know. Accuracy is very important to the Brownstone team. | | Thanks again. | | What's Going on With Biotech? | | | Jeff, is Editas still relevant in the biotech field? Are their patents still applicable or has new invention bypassed their lock on in vivo applications? While Spring has sprung it seems biotech is still in its winter! Many months ago you promised your long-term readers a review of your early list of biotech firms to buy and that has not happened yet. Hopefully, that review can be one of your daily reports shortly. | | Patiently yours, thank you. | | – Richard D. | | | | Hi Richard, | | Yes, Editas' patents are still applicable to CRISPR-based drug development, and the company is already generating revenue for royalty and milestone payments for licensing its intellectual property. At this stage, it could become an intellectual property company and discontinue any therapeutic development. | | It has $270 million in cash and little debt yet is trading at a negative $129 million enterprise value. This is simply an indication that we're still stuck grinding through this irrational biotech winter. | | We can see this dilemma in the XBI, which is an equally weighted biotech index. | | 5-Year Stock Chart of XBI | | | | XBI is down 19% since its December high and still more than 50% down from the 2021 high. | | I will say that venture capital is picking up in the biotech space right now, primarily driven by the use of artificial intelligence to accelerate drug discovery. I've never been more excited about the biotech industry than I am right now. | | My team and I have been doing a lot more research behind the scenes on biotech to prepare for what's coming. | | I definitely will be increasing coverage of this space later this year. I don't want to prematurely jump back into biotech. I'll wait until I am confident that we have turned the corner and the Golden Age of biotech has begun. | | Biotech company share prices and valuations have to be functioning normally for me to feel comfortable recommending small-cap biotech names to my subscribers. Otherwise, I'm just not comfortable with the risk. | | I deeply appreciate your patience. As we get closer, I'll be sure to provide updates. | | A Follow-up on Tariffs | | | I believe it's a good thing to get a balanced viewpoint on many topics, especially current hot ones. Today's letter penned by Nick was not at all balanced, which is his right to advance, even though I have come to expect a fairer airing on The Bleeding Edge. | | Nick's argument in favour of tariffs basically boiled down to: if you tariff it, it will henceforth be built in America. Check. The problem is, as is so often the case, the argument is wholly incomplete. | | Nick completely disregarded the concept of counter-tariffs which, along with the high dollar value, will negatively impact exports. Or how about those products that cannot be "manufactured" in the U.S.? Canadian potash comes to mind. I'm reasonably certain the Midwest farmers will not be thrilled with a 25% price increase for fertilizer to grow food that will then be more expensive. | | How about the fact that high tariffs designed to protect domestic industries have universally led to a collapse in innovation in those industries as companies became protected and, therefore, lazy? Or how about the poor consumer who now has to pay an artificially inflated price for a product he/she wants because he/she doesn't like the American equivalent? How many people buy American electronics (if any are actually made anymore )? Since Japan and Korea started making TVs, for example, the quality and innovation have skyrocketed and the prices have plummeted. Thank god Zenith, RCA, Magnavox, and Philco weren't protected! | | Let's look at aluminum. DJT just slapped a 50% tariff on foreign aluminum. Do you know why more aluminum isn't made (only high-value finishing is done in the U.S.) in the U.S.? It's because its single highest cost of production is energy, so it gets produced in Quebec, Canada – the home to the cheapest green, hydroelectric power in North America (also affordable energy export to the U.S. northeast states) – and Iceland where there is abundant green, inexpensive, geo-thermal energy. | | Every can of beer and every can of soda is about to rise in price thanks to artificial tariffs that make no sense. Tariffs should be a win-win proposition for countries and consumers. | | Lastly, regarding your notion that these tariffs may just be jockeying for better trade deals, I'd like to remind you that DJT tore up a negotiated NAFTA agreement and then instituted a replacement agreement (USMCA) that he declared was the best trade deal ever done! Now he is violating every clause in that agreement falsely claiming Canada and Mexico are taking terrible advantage of the U.S. on trade! A | | After looking at both the facts and the sequence, you can only be left to conclude, aside from him being a liar, that he is either a fool or he is creating global chaos for his own enrichment. It just makes America and Americans look bad and untrustworthy. I hope you still think that LG washing machine is worth all that. | | Free and free-ish trade elevates everyone. | | – Stephen B. | | | | Hi Stephen, | | I appreciate you writing in, and I actually think that we're all on the same page with regard to what we'd like to see. | | | | | At Brownstone Research, we've always leaned toward free-market principles. Why? It creates the best conditions for economic growth and investment opportunities for us and our subscribers. In a perfect world, governments wouldn't interfere in industry. Countries with a competitive advantage would produce what they excel at, trading freely with others. | | | | The nuance here is that this is what we would like to see happen. As you put it, and we agree, "free and free-ish trade elevates everyone." | | Complex tariff systems add friction to transactions. "Friction" is one of my favorite lenses to look through when evaluating an investment opportunity. | | Does the product or service remove friction in a transaction? Those that do tend to have a competitive advantage and experience accelerated adoption. | | I'd like to see a world where we have less friction, not more. Friction is inefficient, costs more, and slows down development and advancement. | | Sadly, not all countries agree with these philosophies. After all, friction is often what keeps those in power, in power. It can also enable grift and corruption. There are strong financial motivations for maintaining friction, and, sadly, that usually comes at the expense of the everyday consumer. | | Our job as analysts isn't to see the world in the way that we'd like to see it. It's to see the world as it is and to accurately predict the direction it is moving in. | | Many countries have large, unreasonable tariffs on U.S.-made products resulting in very unbalanced trade agreements that are not mutually beneficial. This is the point of the current tariffs being discussed and implemented. They are absolutely a tool for trade negotiations. | | The outcome won't be perfect, but I am confident that it will be better than what exists today. And yes, there will be some tariffs in place designed to protect certain U.S. industries. There always have been, regardless of who is in office. | | Large industries that employ a large number of Americans and are vital to local economies will always receive political consideration. Note:every country in the world does this. | | The other major nuance here is that supply chain security has become a matter of national importance after the lessons learned during the pandemic. | | There is a major movement to reshore a lot of manufacturing to the U.S. to improve national security. Again, it won't be perfect, and it will take time, But we should keep in mind that this is a reversal of national policy in support of offshoring that has lasted the last 30 years or so. | | Not everything will be able to be manufactured in the U.S., which is of course the U.S. needs fair and balanced trade agreements with its most important trading partners. And something will be manufactured onshore and will cost the U.S. consumer a bit more than a similar product that has been made in China. But the employment of artificial intelligence, robotics, and process automation technology will quickly close the gap in price differentials between China and the U.S. | | And the added benefit will be less emissions from fossil fuels due to manufacturing being closer to the end market. | | While we'll continue to analyze and see the world for what it is and where it's going, we'll certainly hope for the best possible outcomes for how we'd like to see it. It may take the next 8–10 years, but I do see a path towards more "free-ish" trade and a significantly higher quality of life for everyone. | Thank you to everyone who wrote in. As always, you can reach us right here if you have questions or concerns you'd like addressed in a future AMA. | | Have a great weekend, everyone. | | Sincerely, | | Jeff | | | | | | | This is an extremely leveraged play on the AI data center boom… Any company growing this quickly and using... | | | | | | When sentiment sours, investors and traders tend to tune out what's going on day-to-day in crypto… but it's more... | | | | | | This current market environment is a blessing in disguise for those who see it for what it actually is... | | | | | | | | | | | | | | | To ensure our emails continue reaching your inbox, please add our email address to your address book. This editorial email containing advertisements was sent to southernstylecooking@gmail.com because you subscribed to this service. To stop receiving these emails, click here. Brownstone Research welcomes your feedback and questions. But please note: The law prohibits us from giving personalized advice. 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