Profiting on the fear of Physicists.

October 31, 2016

Stephen Hawking has never been accused of crying wolf. Unlike other physicists.
In 1982, two American astrophysicists postulated an apocalyptic theory. Predicated on the idea that a rare, soon-to-occur planetary re-alignment would create a gravitational pull that would adversely affect earth's tectonic plates. Resulting in massive earthquakes, tidal waves and other drastic climatologic events.
Their book, The Jupiter Effect, caused a stir. Yet, when the event occurred without incident, their professional reputations were laid to waste.

Recently, Cambridge professor and leading theoretical physicist Stephen Hawking has been warning us that the future of humanity lie in jeopardy. He has no book to promote. Nor any profit motives. And he happens to be among humanity's leading thinkers.
Mankind, Hawking has said, for all of its ambition, curiosity and innovation, may at some point lose control of its offspring. To the detriment of its very existence.
Accordingly, when Professor Hawking recently spoke at the opening of the Leverhulme Center for the Future of Intelligence, those in attendance knew what to expect.
For when Hawking is not waxing poetic on black holes, string theory and particle physics, he has positioned himself as the Paul Revere our age. Riding through the dead of night. Warning residents that the robots are coming.
Extra terrestrials. Poltergeists. Mythical beasts. And other unexplained phenomena appear as reoccurring dinner-table fodder for human beings worldwide. And yet, what Hawking has spent so much time preaching against is not some spooky superstition. But a scientific reality. One that has become an increasing presence in our lives with every passing week.
One that, Hawking insists, could be an unintended monster of our own design. Hidden somewhere deep within in the labs of Silicon Valley.
What might appear as helpful digital assistants, self-driving vehicles and interconnected household appliances could, someday, spell the end of mankind. For as Hawking explains, machines, and the growing artificial intelligence within them, have the ability to learn in an exponential fashion. As opposed to the more methodical, linear means by which man consumes information.
So if these machines ever begin to perceive mankind as a threat? Watch out.
"I don't think advances in artificial intelligence will necessarily be benign,' Professor Hawking has warned. "Once machines reach a critical stage of being able to evolve themselves we cannot predict whether their goals will be the same as ours."
Adding, "Artificial intelligence has the potential to evolve faster than the human race."
While warning of humanity's uncertain future should technology learn to think for itself and adapt to its environment, Hawking has repeatedly called for ethical standards around the development of AI. Not to mentioned a requirement for systematic safeguards, for circumstances where things got out of control.
Hawking has argued that developments in digital personal assistants Siri, Google Now and Cortana are merely symptoms of an IT arms race which "pale against what the coming decades will bring."
Going so far as to tell Larry King that the biggest threats to mankind are our own tendencies towards greed and stupidity. Weakness that machines and their AI systems may someday exploit against us.
Nor is Hawking alone in making such premonitions.
Last year, Tesla and SpaceX founder Elon Musk likened artificial intelligence to "summoning the demon." Further warning that the technology could someday be more harmful than nuclear weapons.
Of course, Hawking and Musk have also touted the many benefits of AI. Frequently seen in today's Internet of Things (IoT). If, Hawking has stated, the technology can be developed in a prudent fashion. Of course, he adds, the history of human development has rarely counted prudence among its default traits.
While Hawking, Musk and the dark prognostications of such any visionaries serve as fascinating dinner conversation, they do not help to create a winning stock portfolio.
And artificial intelligence, and the Internet of Things into which it is coming to fruition, embody today's technological innovations that have grown rife with investment opportunities. And so let's discuss a few of the companies that stand to benefit as IoT and artificial intelligence become mainstream.
For even if The Terminator ultimately resembles our manifest destiny, why not earn some profits in the meantime?
Let's begin with Facebook (FB).
The Facebook community is comprised of 1.6 billion users. Giving the company tremendous global influence as the network impacts the words, images and videos its members consume on a daily basis.
Facebook has made quantum leaps in its ability to allow individual facets of its network to communicate. To learn from users habits and preferences. And to use predictive modeling algorithms to personalize the content provided to constituents around the world. This has provided tremendous earnings to Facebook shareholders as the company leads the mobile advertising revolution - an arena in which the margins remain considerably higher than advertising's more traditional platforms. And even with a market cap of over $376B, the company has grown its earnings per share at over 31 percent per year. A remarkable feat for a company that size. And one that still puts a charge into Facebook's enthusiastic investors.
Another company charging into the artificial intelligence fray is Alphabet (GOOG), which commands some of the world's strongest algorithmic computing technologies.
Google's vision? To populate the average household with AI-driven products and services. All integrated into the Internet of Things so that they deliver a uniquely personalized service offering, day after day.
To that end, Google has acquired companies like Nest, which creates and distributes smart home devices capable of thinking for themselves, and adapting to changing realities and environments, based upon the personal preferences of the consumer.
It also explains why Google has consistently shown up in conversations about market leaders in everything from self-driving cars (Google has one) to cloud-computing technologies (Google has some of the most advanced available) to drones, household appliances and even the civil engineering and development of future communities.
The company's lush cash flows, vast computing power and intellectual capacity have allowed it to sit at the epicenter of the IoT's expanding oppportunity.
Of course, few of the IoT's components would work with leading-edge processor designer Nvidia (NVDA), which has developed a reputation throughout the gaming and investment worlds for its GeForce graphics processors and its Tegra line of mobile processors.
What most fail to recognize is the strides the company has made within the swelling opportunity in the autonomous vehicle revolution.
At the 2016 Consumer Electronics Show (CES), Nvidia unveiled its Drive PX 2 platform, the second iteration of its autonomous driving system. The updated platform is 10 times faster than the previous version.
In fact, Nvidia already claims Volvo as a customer.
Consumer and technological trends infer that autonomous vehicles will become a huge part of the Internet of Things. With analysts projecting an expected $42 billion market value by 2025.
Like Nvidia, Google has also established itself as a player in autonomous driving. Yet no conversation on the topic would be complete without mention of MobileEye (MBLY), another leading developer of self-driving software.
Of course, the Internet of Things would not be nearly so far along were it not for Amazon (AMZN). A company seemingly involved in every aspect of this burgeoning opportunity. One that offers huge IoT potential to both consumers and investors.
Consumers won't immediately consider Amazon as innovator at the center of the Internet of Things movement. In fact, most still consider the firm to be a giant online retailer. And most would be correct, in that regard.
But thanks to Jeff Bezos and his endless ambition, Amazon has become so much more.
For starters, Amazon launched the Dash Replenishment Service (DRS) last year. This allows manufacturers and product designers to build an automated ordering system into personal appliances. In fact, Whirlpool just debuted the first DRS appliance. Which sends a mobile notification whenever laundry detergent is low, and then automatically orders more detergent via Amazon's website.
Also, Amazon's Echo speaker enables consumers to control smart home systems through voice commands while also tapping Amazon's cloud-based voice assistant, Alexa, to answer questions, program devices, set alarms, play music, provide traffic and weather updates, among many other applications.
Further, Amazon's Alexa is now available to third-party developers who wish to integrate the voice-activated system into their own devices. Providing Amazon more opportunities to sell its cloud services (a huge profit center) to a wider array of companies.
And Amazon recently launched AWS IoT, its cloud platform for Internet-of-Things devices that enables these devices to easily and securely interact with cloud applications and other IoT connected devices.
Considering the experimental and innovative cultures, approaches to product development and forward-looking customer support at Amazon, Google, Facebook and Nvidia, we believe consumers are just beginning to understand what the IoT space can provide. Which potentially places proactive investors on the cusp of something big.
And while the pronouncements of visionaries like Hawking and Musk will have us eyeing our coffee makers and ceiling fans much more suspiciously in the years ahead, they won't prevent us from benefiting by these modern consumer conveniences. Nor the investment opportunities that should accompany them.
Perhaps more than ever does the old consumer caveat apply: buyer beware.

Securities offered through Dempsey Lord Smith LLC – Dempsey Lord Smith LLC, Rome, GA Member FINRA / SIPC / MSRB.

Advisory Services offered through Dempsey Lord Smith, LLC, an SEC Registered Investment Advisor. Clearing through and accounts held at Charles Schwab & Co., Inc.

Dempsey Lord Smith, LLC nor Hyde Park Wealth Advisors LLC provides tax or legal advice and you should consult your accountant and/or attorney if considering an investment of this type. Hyde Park Wealth Advisors LLC is not controlled by or a subsidiary of Dempsey Lord Smith LLC. Investing in Alternative Investments come with a variety of risks that could result in a complete loss of principal investment.

Alternative Investments offered as private placement securities are offered only to qualified accredited investors via confidential private placement memorandum. Income and returns are not guaranteed and there are no assurances investments will meet their stated objectives.

© 2024 Hyde Park Wealth Advisors. All Rights Reserved