What conservative investors think climate technology investments look like.

Elon Musk had a fantastic week and Mark Zuckerberg saw two hundred billion in market cap evaporate as shareholders doubt his billion-dollar investments in AI. Costs are high and potential returns still completely unclear as Meta AI, powered by their latest language model Llama 3, is offered free and open source.

The sentiment that returns are unclear was also often heard about investments in climate tech, yet the world's largest investor BlackRock and Singaporean state investment fund Temasek are investing heavily in this crucial sector through a new fund: Decarbonization Partners.

Those considering investing in the rapidly developing sector of climate tech and decarbonization as well, I look forward to meeting you in May when I am in the Netherlands and Singapore. But first: the surprising week of Elon Musk and Mark Zuckerberg.

After 52 editions, here it is: Tesla is the best-scoring stock of the week. What happened?

Musk wins despite gas pedal glue - yes, glue

It was, as is often the case in the tech sector, a tale of two extremes this week: Tesla soared, while Meta plunged. This is especially notable because Tesla shares had slipped to $138 after reaching an all-time high of $409, while Meta was one of the biggest risers in the stock market over the last year. What happened?

After the recall of all Tesla Cybertrucks sold due to possibly glued gas pedals and unclearstories about robotaxis
were received with deafening silence from the investor side, Tesla almost hid this sentence at the bottom of page ten of its quarterly report:

"We have updated our future vehicle line-up to accelerate the launch of new models ahead of our previously communicated start of production in the second half of 2025."

In other words, Tesla's long-awaited Model 2, the cheapest Tesla ever, which is supposed to be Tesla's version of the Volkswagen Golf, the car for the masses, comes to market earlier than expected. Promptly, TSLA shares rose 12%.

Meanwhile, Musk' s intended opponent in a cage fight between what would have been the two palest fighters in the history of martial arts, Meta's Mark Zuckerberg, had one of those moments when your confidence overrules your sanity.

Zuckerberg punished for candor

During Meta's quarterly earnings presentation, Zuckerberg let slip that it will take "a number of years" before investments in AI will translate into profits. Zuckerberg added truthfully that once Meta has found a revenue model, it will be very good at monetizing it.

Only nobody heard it anymore, much like when a party runs out of drinks and snacks, then the sound system breaks down but the host happily suggests that we all hold hands and sing together. Result: a 16% collapse in Meta's share price and a loss of two hundred billion dollars in market cap.

Meta lost as much as forty-five billion dollars since 2020 via its Reality Labs division on investments in smart glasses and not-yet-existing Metaverse business. No shareholder wants Zuckerberg to lose that kind of money on his investments in AI, while meanwhile the good ole' ad business is doing spectacularly well: also because Chinese discounters Temu and Shein advertise for billions via Facebook and Instagram, ad revenue rose 27% to over $35 billion in the first quarter.

Shareholders think about today, investors think about tomorrow

Shareholders would rather grab dividends than invest. Google owner Alphabet became worth two trillion dollars (two thousand billion) this week after it announced it would pay twenty cents per share in dividends and buy back its own shares for seventy billion dollars. This makes Alphabet the fourth most valuable company in the world after Microsoft, Apple and Nvidia.

This ignored the fact that Google's revenue growth, like Microsoft that presented outstanding quarterly numbers, was also driven by substantial growth (thirty percent) in cloud services, in which AI played a major role.

Yet Google, like all other tech companies, should be valued more on long-term vision and making the right choices in the process. Cloud services, with nine billion in revenue, are almost seven times smaller than ad revenue (62 billion), because for too long there was too little focus on cloud services and AI. Since then, Google has been playing catch-up.

Elon Musk is often ridiculed, sometimes rightly so, but anyone who looks a little longer at his activities has to admit that he possesses the rare combination of skills in being able to analyze the market correctly and subsequently position his own companies in them.

It is no coincidence that Musk, despite OpenAI's late start and dominance with ChatGPT and Google's huge competition with Gemini, managed to raise six billion dollars from investors for his AI company xAI. Last weekend that was supposed to be three billion dollars on a valuation of $15 billion, but then potential investors received an email to this effect:

"We all received an email that basically said, ‘It’s now $6B on $18B, and don’t complain because a lot of other people want in."

Now that is an email I would like to send around sometime, only with a happy smile emoticon at the end.

Elon Musk's pitch for xAI boils down to the company's ambition to connect the digital and physical worlds. Musk wants to do this by pulling training data for Grok, xAI's first product, from each of his companies, including X (formerly Twitter), Tesla, SpaceX, his tunneling company Boring Company and Neuralink, which develops computer interfaces that can be implanted in the human brain. It's a worldview that will generate a lot of resistance, but at least it shows long-term vision.

Decarbonization Partners: no website, but business cards that appear to be made of old tofu

BlackRock and Temasek raise $1.4 billion for climate tech

Solving the world's biggest challenge, climate change, also requires a long-term vision combined with a willingness to invest billions. The world's largest investment firm BlackRock and Singaporean state investment fund Temasek have therefore raised $1.4 billion to invest in technologies that combat climate change.

Predictably, the Wall Street Journal, widely read by Republican "ho-ho-not-so-fast-it-was-always-hot" investors, does not write about investments but about "wagers": a term used in a casino when putting your chips on red or black.

Greenhushing as bad as greenwashing

Knowing that the capital market looks with suspicion at the results of risky investments in unproven projects, making more and more companies guilty of greenhushing rather than greenwashing, Decarbonization Partners rushes to say that it invests only in "late-stage, proven decarbonization technologies."

It is unfortunate that investing in startups is avoided because there is much need for capital for start-ups, unproven companies; after all, how else will companies ever get to the stage of having proven themselves? It's a bit like saying as a parent that you love your kids as soon as they can walk well; but how they learn to walk, those kiddies figure that out for themselves.

In total, more than thirty institutional investors from 18 countries have invested in the fund, including pension funds, sovereign wealth funds and family offices, and at $1.4 billion it has raised even four hundred million dollars more than targeted.

Investments have already been made in seven companies developing various innovative decarbonization technologies, including low-carbon hydrogen producer Monolith that I wrote about last week, biotechnology company MycoWorks and electric battery material producer Group14. These are developments that are hopeful.

Carbon credit exchange in ... Saudi Arabia

Other hopeful news that has been snowed under in all the stock market turmoil, a rare word in connection with Saudi Arabia, is that the world's largest oil state will open a carbon credit trading exchange at the end of this year in partnership with market leader Xpansiv, which will provide the infrastructure for the exchange.

The announcement of a carbon credit exchange in this region quickly resembles a chicken breeder announcing he is going vegan, but should be seen as part of Saudi Arabia' s larger plan to move to a sustainable economy. It is looking more and more like it is serious, so it will be fascinating to follow what market share the Saudis can capture in the global carbon credit market, which Morgan Stanley estimates to be $100 billion by 2030.

Finally: I'm in May in the Netherlands and Singapore

In closing, a personal note in the fifty-second edition of this newsletter. Looking back over last year, one notices that I write a lot about market developments and investments, whereas thirty years ago I just started as an entrepreneur in the tech industry, launching the first national wide available internet service provider in the Netherlands.

Because I am no longer running a business, which for me always resulted in running with blinders on toward a dot on the horizon, I have the opportunity to mentor various entrepreneurs and help them invest where possible.

Since I started this newsletter, I have regularly received friendly invitations from readers to catch up on possible joint investing. I plan to do that next month; I'll be in the Netherlands and Singapore in May. If you're interested in hearing more about the projects I support, always focused on sustainability and a large international market, I'd love to hear from you.

Have a great Sunday and see you next week!

You surely remember the scene from the movie The Social Network where Justin Timberlake, in his role as Sean Parker, says to Mark Zuckerberg, "A million dollars isn't cool. You know what's cool? A billion dollars.' Ah, what simple, innocent times those were, looking back now. The CEO of OpenAI, Sam Altman, who was kicked out of his own company just a few months ago, has only been back in office for a few weeks but is laughing at millions and billions: Altman is looking for seven trillion dollars. Or: seven thousand billion dollars. For an idea, not even for an existing company yet. What's going on?

The face of investors as soon as they hear the amount Sam Altman wants.

The Wall Street Journal reported on Thursday that Sam Altman, the CEO of OpenAI, is seeking five to seven trillion dollars to build a global network of chip factories. It was already rumored last year that Altman wanted to set up a chip factory competing with Nvidia under the code name Tigris, but at the time it was not suspected that trillions were involved. The now leaked seven trillion in numbers is 7,000,000,000,000,000, a seven with 12 zeros.

Wait, how much?

To put this in perspective, in 1995 the Internet hype started with Netscape's IPO, much to the dismay of the traditional investment market because the browser maker was not yet making a profit, even though it had millions of users of the popular browser Navigator. On opening day, Netscape raised $82.5 million with the stock sale.

So Altman wants to raise eighty-five thousand times more money from private investors for his idea, for that is all it apparently is yet, than Netscape fetched on the Nasdaq. Times are changing.

To make another attempt to indicate how much money is involved: Altman wants to raise more than a third of the GDP of the entire European Union, the second largest economy in the world, with $7 trillion. The GNP of this planet, by the way, is $88 trillion; Altman would like 8% of that, so he can make a nice clean start.

According to the Wall Street Journal, Altman is in talks with the United Arab Emirates sovereign wealth fund, among others, and then I suspect it's not Dubai, which is better at marketing than making money but the wealthy oil-producing Abu Dhabi. Primarily through its sovereign wealth fund, Mubadala, Abu Dhabi is looking for new sources of revenue as oil wells appear to be slowly but surely closing to retain a chance of a livable planet.

It is plausible that Altman is also swinging by the Emirates' friendly big neighbor, Saudi Arabia, which is gaining traction with the sovereign wealth fund PIF (note the windmills at the top of the page, apparently Saudi Arabia is famous for those).

What do you spend 7 trillion on?

Altman seeks to address a critical bottleneck to OpenAI's growth: the scarcity of advanced graphics processors (GPUs) essential for training advanced AI models, such as his extremely popular ChatGPT. Despite the success of OpenAI and competitors such as Google Gemini and Anthropic, all of these billion-dollar companies are standing hat in hand at the doors of chipmaker Nvidia, whose lead as as maker of the best GPUs seems unsurmountable. But there's one thing: Nvidia can't handle the demand. And Altman doesn't want to be dependent on one supplier.

One of my New Year's resolutions was to judge people less in 2024, but people who are too cool to use capital letters don't make it easy for me

Altman announced on Twitter, a day before publication of the Wall Street Journal article:

"We believe the world needs more AI infrastructure - manufacturing capacity for fabs, energy, data centers, etc. - than people currently plan to build. Building AI infrastructure on a massive scale, and a resilient supply chain, is critical to economic competitiveness. OpenAI will try to help!"
- Sam Altman

Solid plan or pipe dream?

His ambitious plan involves setting up a network of several dozen chip factories ("fabs") that would ensure a steady supply of the crucial chips not only for OpenAI but also for other customers worldwide. The plan involves cooperation between OpenAI, investors, chip manufacturers including market leader TSMC, data centers and power producers. Because without their own power plants, chip factories cannot operate on this scale.

What is striking about Altman's tweet is his specific mention of data centers. That means he not only plans to reduce his dependence on Nvidia, but also wants to get rid of his reliance on cloud-based solutions like Microsoft now runs for OpenAI and Google for Anthropic. Microsoft owns 49% of OpenAI's shares and was instrumental in allowing Altman to return to OpenAI after the Palace Revolution in November, so that will be an interesting issue to follow.

If this initiative becomes a reality, it would mean that the AI industry and many other computing power-guzzling industries could realize their ambitions. But regardless of the money, it will result in a complex ownership structure where it is still unclear who will control and own the intellectual property, aside from all the chip factories, data centers and power plants.

Sustainability and geopolitics major challenges

Sam Altman's plan to radically scale up superchip manufacturing has significant sustainability implications. The environmental footprint of chip factories is significant; they are energy-intensive facilities that also require large amounts of water and produce harmful waste.

The unprecedented scale of Altman's idea would put enormous pressure on natural resources and energy networks. The environmental impact is compounded by the need for new power plants, which will increase CO2 emissions unless renewable energy sources are used exclusively. With financiers from the Middle East, that does not seem a reasonable priority.

Just last week, the Biden administration proudly announced a new initiative in which the U.S. is investing $5 billion in a public-private partnership aimed at supporting research and development in advanced computer chips. This initiative was completely drowned out by the WSJ article on Altman's plan.

President Biden's move underscores once again that the U.S. government recognizes the importance of high-performance chips, and therefore Altman's plan could quickly fuel geopolitical tensions. By attempting to expand chip production within a U.S.-led framework, China will surely respond, as it has also been explicitly pursuing high-end chips with Huawei playing a major role in recent years.

Superchips are a matter of national security and long-term economic growth. China will not stand idly by in the face of a concentration of production of these chips by US allies, possibly leading to retaliatory measures in which US companies and their partners will find it even more difficult to access the Chinese market. Altman's project therefore already casts the shadow of an intense trade war between China on the one hand and the U.S. and its allies on the other.

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