SITALWeek #451
Welcome to Stuff I Thought About Last Week, a personal collection of topics on tech, innovation, science, the digital economic transition, the finance industry, and whatever else made me think last week.
Click HERE to SIGN UP for SITALWeek’s Sunday Email.
In today’s post: a variety of developments point to a rise in alternate payment rails including stablecoins and RTP; scripted content production declines as the streaming wars shift to the advertising wars; TSM begins chip production in the US; the stretched reality of nuclear data centers; haunts; using AI to fill the local news void; and, much more below.
Stuff about Innovation and Technology
Token Economy
A number of recent developments in crypto and stablecoins are noteworthy. PayPal paid an invoice to Ernst & Young for the first time using their PYUSD stablecoin via SAP’s digital currency hub. Visa will launch a USD stablecoin platform in 2025 aimed at helping banks issue their own stablecoins called Visa Tokenized Asset Platform (VTAP). Stripe, after taking a break from crypto in 2018 due to low adoption and high volatility, will enable stablecoin payments for its merchants via startup Paxos, according to The Information (Forbes also reports Stripe is in preliminary talks to acquire stablecoin infrastructure provider Bridge for $1B). The key thread here is the rise of stablecoins as a more viable crypto payment option, as they are linked to sovereign currency (or other commodity) price levels. The current market cap of all stablecoins is roughly $165B (as of the writing of this post) with a 24-hour volume of around $60B. By comparison, market caps for Bitcoin and Ethereum are ~$1.3T and ~$300B, respectively. Bitcoin has an approximate 24-hour volume of $30B while Ethereum is around half that number. Yet, despite only having around 10% of the combined market cap of Bitcoin and Ethereum, stablecoins have approximately 1.3x their daily transaction volume. A large portion of that activity is Tether, which reported a profit of over $5B in the first half of 2024. According to Chainalysis, Latin America is rapidly adopting stablecoins given their volatile local currencies. A recent article on the state of crypto from VC a16z notes that, in Q2 of 2024, stablecoin’s transaction volume of $8.5T was more than double that of Visa’s $3.9T. Concurrent with the rise in real-time payment options (RTP; see New Ways to Pay), there seems to be a meaningful desire to accelerate digital payments onto new technology rails across the economy.
SoCal Sunset
Filming days in LA are down significantly from their five-year averages: movies are down 48%, television is down 53%, and commercials (and miscellaneous) took a ~30% hit. The biggest victim continues to be reality TV. In #444, I discussed the thirty-year low in employment for LA’s Hollywood jobs. This long-term pullback comes thanks to the streaming wars’ conclusion, infinite content afforded by social media/YouTube, and non-Hollywood filming locations taking share. While the war for viewers and content is over with the streamers, the war for streaming ad dollars has just begun. A large roster of live sports is necessary to build a scale advertising business in streaming video, and the cost of sports rights is also sucking the oxygen out of budgets for scripted content. Last week, Netflix indicated that its advertising business won’t be a driver of growth in 2025 but may start to gain momentum in 2026 and beyond. If ads don’t take off until 2026, that postponement will arrive around four years after they announced a shift to ad-supported subscription plans. The failure to launch is in part because Netflix needs more content that advertisers value. For example, in order to build an ad business, I expect Netflix will need to make a much larger move into sports, but the assets and rights that are available are either scarce or very expensive. As I’ve noted in the past, Netflix’s view that its content demands an ad price premium vs. other digital media is a roadblock they may not get past. It's more likely we see a race to the bottom for ad prices as the inventory of streaming ads far outpaces the demand from advertisers.
Phoenix Rising
TSM has begun production of A16 processors for Apple at its new Arizona fab. The milestone is a long time coming, but still feels remarkable. Even more impressive, despite setbacks along the way, production is essentially on time versus the projections from four years ago. The leading-edge chip industry continues to be the foundation of the global economy, which we covered in depth in our 2020 whitepaper.
The Nuclear Option
A number of recent headlines indicate that data centers are increasingly seeking nuclear power. Google announced a small modular reactor deal, as did Amazon. The NYT sums up the billions of dollars that Microsoft, Google, and Amazon are committing to nuclear, including reopening Three Mile Island. We first covered this trend over a year ago in #412, and we discussed AI energy needs, including nuclear, in more detail in Pushing Electrons earlier this year. The actual power needed to displace the super efficient human brain/body with digital/robotic counterparts is a conundrum I covered in Energetic Robots. While the potential is real, so is the hype. It’s highly likely that the most optimistic predictions about the AI revolution will only come true in a world where the technology becomes many orders of magnitude more efficient. That doesn't mean we won’t need all the nuclear power, but it implies there may be many classic hype bubbles, interspersed with bursting doses of real-world reality, along the road. The negative feedback loops for construction of nuclear power plants create a substantial mismatch in timing, indicating that even the most bullish scenarios for nuclear would manifest well past the most bullish demand scenarios for AI's power needs.
Miscellaneous Stuff
$Boo
The WSJ reported on the $500M US haunted house industry. This seasonally scary business is both fickle and lucrative for the passionate purveyors of spine-tingling jump scares. According to the WSJ, 18% of US adults visited a haunted house in the last year. An unsurprising power law exists in the industry, with 2% of haunted houses having more than 50,000 annual visitors while 50% of haunts have less than 5,000 visitors. In addition to independent haunted houses, theme park scares have become a large and growing business for major outfits like Universal. And, of course, there is also a cottage industry on YouTube for touring haunts. Here is one example of a haunt called Arx Mortis that gives you a sense for the passion of the characters that populate these attractions.
Lit
With the arrival of The Offspring’s 11th album, Supercharged, Men’s Health profiles the founding member and lead singer Dexter Holland. Holland was working on his PhD in molecular biology around the time the band rocketed up the Billboard charts in the mid 1990s (he completed his degree in 2017). Amongst other pursuits, Holland is a licensed pilot who flies his own jet and has a line of hot sauces. Holland attributes his extreme productivity to dividing his time into blocks and focusing on one thing at a time.
Moon Time
Lunar time moves more swiftly relative to Earth time due to the orbiting rock’s weaker gravity compared to our planet. Synching time up is important for a multitude of safety and logistical tasks, so physicists at NIST calculated the daily time differential – 56 microseconds – between the Earth and its satellite and devised a GPS-like reference point system for creating a lunar time zone using surface and space-based atomic clocks.
Robo Newscasting
A resident of a small Massachusetts town is using Google’s NotebookLM and publicly available city documents to create a local news podcast to fill the void of disappearing local news coverage. I wrote about this handy AI research assistant in the previous edition of SITALWeek. The use of NotebookLM for small town news is a nifty example of how AI is going to find a surprising number of ways to generate more and more content.
✌️-Brad
Disclaimers:
The content of this newsletter is my personal opinion as of the date published and is subject to change without notice and may not reflect the opinion of NZS Capital, LLC. This newsletter is an informal gathering of topics I’ve recently read and thought about. I will sometimes state things in the newsletter that contradict my own views in order to provoke debate. Often I try to make jokes, and they aren’t very funny – sorry.
I may include links to third-party websites as a convenience, and the inclusion of such links does not imply any endorsement, approval, investigation, verification or monitoring by NZS Capital, LLC. If you choose to visit the linked sites, you do so at your own risk, and you will be subject to such sites' terms of use and privacy policies, over which NZS Capital, LLC has no control. In no event will NZS Capital, LLC be responsible for any information or content within the linked sites or your use of the linked sites.
Nothing in this newsletter should be construed as investment advice. The information contained herein is only as current as of the date indicated and may be superseded by subsequent market events or for other reasons. There is no guarantee that the information supplied is accurate, complete, or timely. Past performance is not a guarantee of future results.
Investing involves risk, including the possible loss of principal and fluctuation of value. Nothing contained in this newsletter is an offer to sell or solicit any investment services or securities. Initial Public Offerings (IPOs) are highly speculative investments and may be subject to lower liquidity and greater volatility. Special risks associated with IPOs include limited operating history, unseasoned trading, high turnover and non-repeatable performance.