BlackRock: The New Crypto Bro

Plus: Is there a Moore’s Law for export controls on chips? ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

June 29, 2023

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Good morning.

We have liftoff.

Today, Virgin Galactic, the cosmic travel company run by an eccentric British billionaire with platinum blond hair, is set to launch its first commercial trip to space… sorta. At roughly 62 miles high, the Kármán Line is what’s considered to be the boundary between Earth’s atmosphere and the beginning of outer space. Virgin’s 01 rocket plane will fly about 55 miles high, passengers will experience weightlessness for a few minutes, and then the plane will come back down. Good news for the passengers though: NASA considers anyone who’s traveled 50 miles above Earth to be a full-fledged astronaut.

Morning Brief

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Could BlackRock give crypto new life?

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The Chip Wars continue.

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A new tuberculosis vaccine has emerged.

Crypto

BlackRock’s Bid for Bitcoin ETF is Giving Crypto a Boost

Hush, honey. Adults are talking.

After FTX’s monumental meltdown last year, it was clear the crypto industry needed to get a haircut, turn off the rock n’ roll, and grow up, i.e. — start operating under some real regulations, even if Washington hasn’t entirely figured them out.

Maybe BlackRock was the parent crypto always needed.

Playing with the Big Kids

Cryptocurrencies hit the scene in 2009 with the launch of Bitcoin, and from there, tens of thousands emerged, acting as digital wallets on decentralized networks and unregulated by governments — real bank-disruptor stuff. A few even made a killing, especially when the industry started to look more legit via legacy banks and expensive celebrity endorsements. In 2021, one Bitcoin was worth more than $60,000. In the absence of meaningful industry oversight, crypto was always going to be risky (to wit, a Bitcoin is now worth about half of what it was two years ago).

So far, the US Securities and Exchange Commission has approved crypto ETFs based only on bitcoin futures contracts. Those are listed on the Chicago Mercantile Exchange, a regulated venue. But it’s yet to pull the trigger on approving so-called spot ETFs, which would allow people to directly buy and trade Bitcoins similar to investing in stocks. The SEC has denied these types of applications for a decade, citing a high potential for fraud and manipulation, as well as seeing most crypto-trading tokens as essentially unregulated securities. But a new challenger has appeared, one who happens to know a thing or two about succeeding in a highly regulated financial world:

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BlackRock has risen to be the largest asset manager in the world, with a portfolio recently valued at $8.6 trillion. It also has deep connections to world leaders, and in the US, it’s sometimes referred to as the fourth branch of government. BlackRock has the clout, legitimacy, and money behind it to maybe sway the SEC where others have failed.

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With the hopes of getting on the Nasdaq, BlackRock’s iShares Bitcoin Trust includes a “surveillance-sharing agreement.” That’s a real weedy term, but it’s basically just a measure to boost transparency on the exchange. Bloomberg analyst Eric Balchunas said BlackRock has a 50-50 shot of getting greenlit as the SEC has approved 575 of its applications and rejected only one. If successful, this could open the gates for more companies like Fidelity, WisdomTree, and Invesco to gain approval for their spot ETFs too.

“The BlackRock ETF is likely to be approved,” CoinRoutes CEO Dave Weisberger told the Financial Times.

Back from the Dead: FTX, the aforementioned crypto exchange that lost billions of dollars over just a few days thanks to founder Sam Bankman-Fried’s terrible management and possible criminal activity, could make a zombie-like return. According to The Wall Street Journal, CEO John J. Ray III said the company “has begun the process of soliciting interested parties to the reboot of the FTX.com exchange.” Ray previously told the WSJ that despite alleged fraud, customers and investors loved FTX’s business model and were happy with the product. First, it came for our wallets, let’s just hope this time it doesn’t come for our brains.

– Griffin Kelly

International

Nvidia Ensnared in Latest Round of Chip Restrictions

(Photo Credit: Howard Yermish/Flickr)

The Biden administration just fired the latest shot in the great Chip War. And Nvidia is once again collateral damage.

The Commerce Department will soon propose new restrictions on the sale of some artificial intelligence computer semiconductors to China, according to a Wall Street Journal report, a further tightening of export controls announced in October. Among the hardware included in the plan’s scope: Nvidia’s new A800 chip.

Keeping Up With the Regulation Joneses

Compared to their usual snail’s crawl, the feds are moving like an F1 race car. The latest rules could be in place as soon as next month, in hopes of blocking the delivery of some Nvidia chips to customers in China, as well as other countries, sources told the WSJ. But for Nvidia, the planned restrictions would mark something of a regulatory rope-a-dope.

The earlier restrictions made in October established certain technical thresholds designed to cut off foreign access to the most advanced US-developed AI chips — the scope of which included Nvidia’s high-powered A100 chip. At the time, Nvidia said the restriction could cost it $400 million in quarterly sales (for reference, the firm posted roughly $7.2 billion in revenue in its most recent earnings report). In response, the company developed the slightly less-powerful A800 chip to carefully avoid the government’s licensing restrictions altogether. But in this game of regulatory cat-and-mouse, for once it’s Tom staying one step ahead of Jerry:

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Nvidia’s CFO Colette Kress said at an investors conference Wednesday that the company is aware of the looming restrictions, though said the massive demand for its chips would be enough to stem off any “immediate material impact.”

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However, the A800 chip has been quite popular among Chinese companies, financial services company Jefferies told the WSJ. Meanwhile, as much as 10% of Nvidia’s data-center sales come from Chinese customers, according to Citi — though those same clients may have been bulk ordering hardware in anticipation of tighter restrictions to come.

Of course, Nvidia would rather avoid any further escalation of a chip trade war. That would result “in a permanent loss of opportunities for the US industry to compete and lead in one of the world’s largest markets,” Kress said at the investors conference.

Tokyo, Too: On other Chip War fronts, Japanese Investment Corp, a government-backed group, agreed this week to acquire publicly traded and Tokyo-based chipmaking material provider JSR for the cool price of $6.3 billion, or roughly a 35% premium on the company’s closing price on Friday. Stay tuned for our next newsreel from the microprocessing frontlines.

– Brian Boyle

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Simply put, they create the chips that power AI’s technology.

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And according to New Street Research, they already have nearly 95% of the market for graphics processors used in machine learning.

As CNBC put it, everyone from large organizations to startups depend on hundreds or even thousands of these very chips to build everything from chatbots to image generators.

The potential is massive, and The Motley Fool believes this could be one of the top stocks they’ve ever recommended.

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Vaccines

Wellcome Trust, Gates Foundation Fund First New TB Vaccine in 100 Years

The last time the TB vaccine had an update Warren Harding was president.

For the first time in over a century, a new tuberculosis vaccine is entering large-scale critical trials, courtesy of a more than half-billion dollar contribution from two of the world’s leading medical charities: The Bill & Melinda Gates Foundation and the Wellcome Trust.

TB Determined

Yes, a tuberculosis vaccine has already existed for more than 100 years. But it’s primarily effective for infants, offering little protection for adults and adolescents. In the US and similar advanced countries, it’s now mostly administered on a hyper-specific case-by-case basis, thanks in large part to the incredibly low rates of tuberculosis. But on a global level, TB remains quite prevalent — and deadly. In 2021, TB led to roughly 1.6 million deaths worldwide, second only to covid. Worse, the World Health Organization is now warning of drug-resistant strains.

Cracking an effective vaccine for older kids and adults has been difficult. The bacterial infection’s pathogens can lay dormant in the human body for years before deadly symptoms manifest. And there’s little financial incentive. “TB is the quintessential disease of poverty,” Trevor Mundel, the Gates Foundation’s head of global health, told the Financial Times. “Its incidence very much tracks poverty around the world. There’s no commercial market really for TB drugs, diagnostics or vaccines.”

It’s why the vaccine, dubbed M72, could mark a major breakthrough:

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Starting next year, doses will be administered to 26,000 young adults already carrying the pathogen but currently without symptoms in Africa and Southeast Asia. Vaccinologists are expecting efficacy of around 50% and durability of around 5 years, based on available data.

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That may sound minor, but even a vaccine with 50% efficacy could save up to 8.5 million lives by 2050, according to WHO calculations.

The Gates Foundation is contributing $400 million to conduct the Phase 3 trial, while Wellcome is adding another $150 million.

Off the Shelf: It’s been an arrival long in the making for M72. A prototype version was developed and tested on humans back in 2004 by US biotech firm Corixa, which has since been acquired by global pharma giant GSK. GSK continued to develop it for years, before handing the Gates Foundation a non-exclusive commercial license to deliver the vaccine to around 100 middle- and low-income nations, according to the FT, and the world will be a little healthier.

– Brian Boyle

Extra Upside

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Purple people-eater: McDonald’s Grimace shake has kicked off a disturbing TikTok trend.

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Hippocrates not be proud: DOJ charges 78 medical workers with $2.5 billion in health-care fraud.

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