Weekend Update #70

Apr 15

Welcome to Blue Room's Weekend Update. Each week, we're sharing what companies we're researching and the what, the who and the how that we think makes the companies interesting and unique. This roundup is brought to you weekly by a group of interns, creative minds, artists and investors who believe that through best in class investing along with the democratization of financial education we can do great things together. Enjoy, Explore and Share.

Market Blink

As investors grappled with more negative developments in Ukraine, rising inflation, and economic indicators pointing to an increased probability of a recession, major indices fell this week. The S&P 500 closed the week at 4,392.59 (-2.13%), the Dow Jones Industrial Average closed at 34,451.23 (-0.78%), and the Nasdaq Composite closed at 13,351.08 (-2.63%). The U.S. 10-year Treasury yield also increased to 2.83%, a high since December 2018.

Despite a withdrawal of Russia’s troops from northern cities in Ukraine, Russia reported that peace talks had failed, and Ukraine prepared for an even heavier Russian assault on the eastern parts of the country. New Zealand’s central bank raised rates by half a percentage point — the country’s biggest rate hike since 2000 — as central banks around the world are starting to move to cool down inflation. A day after shareholders sued him for failure to report his 9.2% stake in a timely manner, Elon Musk placed a bid to buy Twitter for $43 billion on Thursday saying that he would take the company private.

In economic news for the week, the Consumer Price Index climbed to 8.5% year-over-year — the highest level since 1981 — showing signs that price increases are becoming increasingly broad-based. The NFIB Small Business Optimism Index fell to 93.2 in March and signaled further upward pressure on inflation, with a record high 72% of small business owners reporting raising average selling prices. Inflation-adjusted average hourly earnings continued to decrease to -2.7% year-over-year, marking the 12th consecutive month of decreasing real wages. The Producer Price Index also climbed to new highs at an 11.2% year-over-year increase in March, demonstrating particularly high increases in food prices. Retail Sales increased 0.5% month-over-month in March — largely driven by higher gasoline prices, comprising 9.6% of all retail sales. In preliminary results for April, the University of Michigan’s Consumer Sentiment Index surprisingly increased to 65.7 due to a strong rebound in consumers’ economic expectations for the next year. Importantly, the median 5-year expected inflation remained anchored at 3.0%, and the median 1-year expected inflation was unchanged month-over-month at 5.4%.

Thank you Blue Room Analyst JARED FENLEY.

2021 ANNUAL SHAREHOLDER NEWSLETTER

Amazon 2021 Shareholder Letter

April 14, 2022

Highlights

AWS grew 30% year-over-year in 2020 but lower than the 37% year-over-year growth rate in 2019 due to uncertainty and slowing demand that businesses encountered
- Amazon also helped companies optimize their existing AWS footprint to save money
Once companies concluded they didn’t want to manage their tech infrastructure themselves, they made the decision to accelerate their cloud investments
- This led to a re-acceleration of AWS revenue growth of 37% in 2021
Consumer revenue grew 39% year-over-year in 2020 and 43% year-over-year in Q1 2021
- This growth created logistics and cost challenges, exacerbated by a tighter labor market, and scarcer ocean, air and trucking capacity
They have invested over $100 billion to date on building out their fulfillment network
AWS began with the Elastic Computer Cloud (EC2) and has grown as customers provide feedback and Amazon iterates on new services and features, including server configurations, memory, high-performance compute, graphics rendering and machine learning
- They began developing their own chip; released the Graviton2 chip in 2020 and announced the Graviton3 last December
Devices—continuing to improve existing products, including the Kindle and tablet, as well as Ring and Blink, and their latest offering, Astro, a home robot launched in late 2021
Prime Video—noted how they originally paid studios and entertainment companies for content but they were expensive, country-specific and only available for a limited time period
- This prompted them to create compelling entertainment
- They are launching Thursday Night Football, the NFL’s first weekly prime time streaming-only broadcast starting in September 2022
  - The agreement is for 11 years
Channels—they’ve created this program that enables entertainment companies to leverage Prime Video’s technology and viewing experience and large member base to offer monthly subscriptions to their content
- “They have more invention in front of them in the next 15 years than the last 15”
Are focusing their efforts to improve their incident rates among their warehouse and courier and delivery employees
They are increasing the amount of affordable housing in the communities in which they have a large presence

Created Kuiper to expand access to information and resources to communities without broadband connectivity; will require $10 billion in capex over the next several years

Brian White -- Ambarella Inc., CFO

Bank of America Representatives

Aileen Smith - - Bank of America, Research Analyst

Aileen Smith - - Bank of America

Okay. Mic up. All right. So thank you, everyone, for joining us. For those of you who don't know me, I'm Aileen Smith, I work alongside John Murphy on BofA's U.S. autos team. We are going to have Ambarella kick off our second track officially up here.

Ambarella is covered by our U.S. semiconductor's analyst Vivek Arya. But from our perspective in the automotive industry, it's one that we are keeping an eye on, it's increasingly relevant to our space. Specifically, Ambarella is a fabless developer of low-power processors for applications where high bandwidth sensors like cameras and radars are collecting data, their systems-on-chip's technology integrate compression, advanced image processing and deep neural network processing to enable perception, fusion and central processing, and to extract valuable data from high-resolution video and image radar streams.

From Ambarella, we are very excited to welcome back Fermi Wang, who is the company's Co-Founder and Chief Executive Officer. He is a seasoned company leader. He's an entrepreneur, a video compression technology expert, and he holds several digital video patents. And we also have from Ambarella, Brian White, who is the Chief Financial Officer. He's a couple weeks into the job, so we won't grill him too much up here.

But Brian, thanks for joining us as well.

So Fermi, welcome back. I think this is a really good place to start, and we've asked this a couple of times at this conference in prior years, but to help set the stage for our audience, can you talk a bit about what is computer vision technology and why are cameras so important for -- to efficient data collection?

Fermi Wang - - Ambarella, CEO

Right. So computer vision is really about capturing video, then you analyze the video in real time to understand the environment, right? In the past, in fact, computer vision has been there for many, many years. And then traditionally people do it, for example, if you want to do face detection and license plate detection, you have two totally different algorithms, and we make it almost impossible to build a signal processing platform that's general enough to cover all of the different type of object segmentations.

So computer vision was very segmented for a long time. Until the deep neural network approach was published in 2012. In fact, neural networks were not a new thing either. When I was a PhD student in Colombia in 1987, neural networks were there. The problem was that there was no hardware fast enough to implement a neural network until 2012. And then people started publishing great results based on neural networks for computer vision. That's where people realized that using a neural network approach, you can do any kind of object detection with the training data and that using one network probably can differentiate multiple different objects at the same time.

So that's where it becomes possible to build silicon architecture to address all the possible different computer vision tests, including object detection, (Inaudible) segmentation for other high levels of digital video processing. When that happens, that makes it interesting for companies like Ambarella that we can create unique single -- silicon architecture to take advantage of the neural network approach and deliver the best performance and best power efficiency that we can for the customers.

University of Michigan Consumer Sentiment: Preliminary Results From the April 2022 Survey

Consumer Sentiment jumped by a surprising 10.6% in early April to 65.7, although it remained below January’s reading and lower than any prior month in the past decade. Nearly the entire gain was in the Expectations Index, which posted a monthly gain of 18.0%, including a leap of 29.4% in the year-ahead outlook for the economy and a 17.2% jump in personal financial expectations. A strong labor market bolstered wage expectations among consumers under age 45 to 5.3% — the largest expected gain in more than three decades, since April 1990.

Consumers still anticipate that the national unemployment rate will inch downward, acting to improve consumers’ outlook for the national economy. Perhaps the most surprising change was that consumers anticipated a year-ahead increase in gas prices of just 0.4 cents in April, completely reversing March’s surge to 49.6 cents. Retail gas prices have fallen since the March peak, and that fact was immediately recognized by consumers. The shift in gas price expectations may be partly due to Biden’s announced release of strategic oil reserves and the relaxing of some seasonal EPA rules.

United States Producer Price Index YoY and MoM

PPI is a family of data that gauges the cost of productions. There are three areas of PPI classification that use the same pool of data from the BLS: industry, commodity and commodity-based final and intermediate demand (FD-ID).

Finished Goods YoY~ Finished goods are goods that have completed the manufacturing process but have not yet been sold or distributed to the end user.
Final Demand ~ PPI for final demand measures the average change in prices received by domestic producers of goods, services and construction sold for personal consumption, capital, investment, government and export.

CPI for March registered an 8.5% year-over-year increase, the biggest jump since December 1981. Among the largest year-over-year contributors to the increase were:

Fuel oil — 70.1%
Motor fuel — 48.2%
Meats, poultry, eggs — 13.7%
Other food at home — 10.3%
Used cars and trucks — 35.3%
New vehicles — 12.5%
Tobacco and smoking products — 6.9%
Owners’ Equivalent Rent (OER) Residences — 4.5%
Transportation services — 7.7%
Airline fare — 23.6%

Source: U.S. Labor Department

The latest print adds pressure on the Federal Reserve to move forward with their stated policy of monetary tightening, as economists express a view that inflation won’t settle down to the Fed’s 2% target for a few years.

A
R
T

Anti-Hero Short Film Fest

TUESDAY APRIL 22

Join MCA DENVER at the Holiday Theater on Tuesday, April 22 for a special showing of the Anti-Hero Short Film Fest.

ABOUT THE EVENT:

* Anti-Hero; someone who is unconventional, misunderstood, marginalized, subversive, anti-establishment, unseen or something in between.

It is time to question the biased norms and standards placed upon us throughout our intertwined histories and champion new perceptions: how the insight from those who have been othered need to be viewed. The Anti-Hero Film Festival seeks to share and celebrate perspectives, narratives, and experiences that have been left out of history by highlighting the voices of women, BIPOC, and LGBTQIA+ communities.

LOCATION:
The Holiday Theater. 2644 W 32nd Ave, Denver, CO 80211

TICKETS