Dream On
This week, I'm going to concentrate on some dreams that people have and the likelihood of them coming true. I've covered some before, and some have only appeared recently. What do they all have in common? In one way or another, they are all in response to limiting greenhouse gases as a result of how we generate power, get around, or eat. None of the solutions, or the firms involved, would have been remotely possible just 10 years ago. Unfortunately, at this point, most are more vision that reality, more research projects than viable, revenue-generating businesses. However, for long term investors, they are worth keeping an eye on while their valuations (and hype) are relatively low.
First up is the age-old dream of nuclear fusion. Yes, we've been down this road before, and it's never really panned out. But new progress is being made thanks to advances in computational power, artificial intelligence, and materials science. Just last December, researchers finally achieved the elusive "net gain," i.e., more energy was produced than supplied. Although a new milestone, and certainly exciting, it's important to be realistic -- fusion is years, possibly decades, away from reliable production on a commercial basis. Although it's not going to happen overnight, certain materials and processes may become valuable along the way. Think of all the products thrown off as a result of the Space Race, and you get the idea. In any case, stay tuned and keep track of the private start-ups in the space. Eventually, one or more will go public and success (or at least partial success) could yield significant upside, to say the least. Among the early-stage firms involved are Avalanche Energy, Realta Fusion, Commonwealth Fusion Systems, and Helion.
Ok, now that we have the power supply situation solved thanks to fusion, how are we going to get around? Last October, I wrote about some new transportation alternatives and the companies involved (Flying Cars!). Joby Aviation (JOBY) is developing eVTOL (electric vertical take-off and landing) aircraft that can compete with helicopters and other short haul alternatives. Basically, a fast, quiet, and efficient air taxi. So far, they have secured a partnership with Delta for airport service in NY and LA. Similar to my reservations regarding new EV auto manufacturers, developing a new breed of flying machine, much less one with brand new technology, requires vast pools of capital as well as endless patience for unforeseen engineering delays and regulatory red tape. JOBY also has competitors, such as Archer Aviation (ACHR) and a host of private startups. After some initial enthusiasm in 2021 when investors were buying anything with a sexy sounding concept, JOBY has come back to earth (see below). Again, this is a long-term investment -- don't expect much in the near to medium term.
Finally, what are we going to be munching on in our fusion-power personal flying machine? Surely, consuming real live animals with all their methane emissions will no longer be acceptable. As gross as it sounds, cultivated meat might be the solution. I reviewed plant-based meat alternatives last September (Beyond Meat) and was less than enthusiastic about one of its main purveyors, Beyond Meat (BYND). But this takes the alternative meat concept to a different level. Cultivated meat differs from its plant-based cousin in that the "meat" isn't derived from plants but grown in a lab. Very basically, stem cells are supplied from a live animal or egg and then grown in nutrient-rich vessels. After a few weeks, meat -- not the rest of the animal -- is produced. Yum!
Some well-known investors and food producers are taking this very seriously. Upside Foods, one of the startups involved, has raised over $600 million; $400 million of which was raised in a Series C round just last April. Although cultivated chicken was deemed safe to eat by the FDA last year, it has yet to receive approval from the Agriculture Department. But even if it does, daunting problems remain. Like any new technology, there is a vast gulf between prototypes and commercial application. In the case of cultivated meat, volume, cost, and contamination problems must be solved. And, of course, there is the minor issue of consumer acceptance. If you think people recoil from GMO crops, I can only imagine what they will think about artificial meat grown in a tank. Personally, I'm skeptical on this one, but maybe my personal food choices are coloring my judgement.
Beyond Meat's (BYND) trials and tribulations over the last few years may provide a guide as to what the cultivated meat industry might face. Other than the all-too-common issues that usually accompany new technologies and products -- cost, quality, expenses, and uncontrolled growth -- BYND is facing questions about long term consumer acceptance. In other words, are BYND's problems company specific or due to peaking demand for the product? Looking at the chart below, evidently the market has made up its mind, at least for now.
