The Weekly Beacon June 6, 2025

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Self driving boom

Last week Tesla announced that their self-driving robotaxis would launch in Austin, Texas on June 12th. The company has been testing its driverless vehicles in Austin and is a month ahead of schedule for their launch. They will start with 10 or 20 vehicles in Austin which has seen strong demand from driverless robotaxis in recent months. Tesla has been teasing this product offering for almost a decade and many believe this launch could be Tesla’s next growth story.

The industry is growing rapidly in select markets where the technology has launched. Google-backed Waymo has seen its trip count in California alone grow from 100,000 trips per month a year ago to 700,000 trips.

In San Francisco, Waymo’s market share of rides has surpassed Lyft and only trails Uber as of April 2025.

The capability of this technology is growing, and consumers are adapting to it and in some cases preferring these vehicles rather than a traditional ride-sharing service.

Robotaxis are currently only available in a few major U.S. cities, but providers are looking to launch in more places very soon. Waymo is available in Phoenix, San Francisco, and Los Angeles, and is available in Austin exclusively through Uber.

Although Waymo is ahead of Tesla in this field, it could quickly play catch up if the technology is right. Waymo’s vehicle costs are much higher than Tesla’s. Tesla’s current self-driving vehicle reportedly costs between $20,000 and $40,000 versus Waymo units which cost approximately $100,000. The cost difference comes down to the fundamental technology in each vehicle. Waymo uses LIDAR technology which they have developed, and Tesla uses a network of cameras and sensors which are much cheaper in production. Tesla’s cost per mile is also much lower than Waymo’s according to industry experts. Waymo does not currently have any plans to sell its vehicles to the public. We do not often quote Ark Invest and Cathie Wood but here is some data her firm compiled on the robotaxi industry just a few months back:

The cost differences are substantial.

We will have to see who wins this race, but it certainly looks like it will impact the ride-sharing industry moving forward. We will also say Waymo gives Google another potential revenue arm as the company continues to diversify its revenue streams.

Silver makes it move

On Monday, silver prices surged at the open, moving 5% higher. The price of silver almost hit a 52-week high after this move. The price performance of silver has greatly lagged behind gold over the last 12+ months. We have continued to believe that a blended approach to precious metals is the best way forward. Our clients have not only had exposure to gold and gold miners over the last year but also silver and silver miners, and even platinum (another precious metal).

Silver will obviously never replace gold, but we think there is a place for it in terms of a store of value. Many investors who have missed out on gold over the last year should consider adding some silver exposure as gold and silver prices are historically heavily correlated. The price of performance of the two precious metals has diverged over the last year. We along with many, think Silver will play catch-up moving forward.

The fundamentals in the silver market support this move as well. Silver has many applications across numerous industries, and the market is tight. The market has been in shortfall over the last few years and demand for the precious metal continues to increase as electric vehicle, and solar energy technology advances and expands.

We think the writing is on the wall for a strong move in silver moving forward. However, we would be quick to sell down exposure to gold. We think both precious metals belong in most investor portfolios.

For information on how we expose our clients to precious metals and other assets, contact us today for a discussion with one of our portfolio managers.

Disclaimer: MacNicol & Associates Asset Management hold physical silver and shares of silver miners across various client accounts.

Meta goes nuclear

After a few months of quiet in the nuclear energy industry, a huge deal was announced between Meta Platforms (Facebook) and Constellation Energy on Tuesday morning. The deal caught our eyes as investors with an interest and focus on uranium and nuclear energy.

The deal provides Meta with nuclear power from Constellation Energy for 20 years beginning in 2027. The technology giant will purchase 1.1 gigawatts of power from Constellation Energy’s Clean Energy Center in Illinois on an annual basis. If this deal was not signed (or something similar) there were fears that the plant could close over the next few years. The terms of this deal were not publicly disclosed but the plant’s output is expected to expand as a part of this deal. The power from this plant will help power Meta’s grid and the local grid around their facilities.

Meta Platforms has a 100% clean energy target, and this nuclear deal will help the company move in that direction. This deal marks Meta’s largest power deal to date and according to reports, the company is increasingly interested in nuclear power to run its operations, seeking proposals for up to 4 gigawatts of new U.S. reactors.

This is the newest deal between a technology giant and a nuclear energy company as tech giants look to secure clean and reliable energy due to increased energy consumption stemming from AI. Last year, there were all sorts of deals announced like this one. The deals included Amazon taking a large stake in an advanced nuclear reactor developer, Constellation Energy restarting Three Mile Island under a 20-year deal with Microsoft, Google pledging investment into three new nuclear sites alongside a nuclear reactor developer, and various other smaller deals.

Remember, artificial intelligence consumes more energy than what these technology companies traditionally use. These deals help secure reliable and steady supplies when demand continues to increase.

The reason deals like this have not been announced for a few months have nothing to do with nuclear energy. They have been impacted by a Chinese company (which we all remember), DeepSeek which originally looked like they upended the AI industry by slashing power consumption by more than 75%. However, the optimism and capabilities of that company have slowly dissipated, and energy consumption has emerged as a focus for the tech giants leading the way in the AI industry.

Upon this announcement, Constellation shares rallied by more than 15%.

The technology industry has not been the only large backer of nuclear energy in 2025. This year President Trump has signed four executive orders aimed at speeding nuclear deployment, setting a target of quadrupling U.S. nuclear energy over the next 25 years. The White House has also called for faster regulatory approval for reactors.

Nuclear energy is not going anywhere and the pullback that we have seen over the last 9-12 months presents a very attractive opportunity if you have yet to dip your toes into the nuclear industry.

Disclaimer: MacNicol & Associates Asset Management holds shares of uranium miners, producers, and shares of ETFs and Mutual Fund Trusts that hold uranium-themed assets including physical uranium across various client accounts.

Big IPO

Circle Internet Group, the issuer of the USDC Stablecoin upsized the pricing of its initial public offering and range of its IPO according to SEC filings filed early this week.

Stablecoins are designed to maintain a constant value, usually a 1:1 dollar peg, and are commonly used by crypto traders to move funds between tokens.

The company now plans to sell 32 million shares at a price range of $27 to $28/share. The company’s valuation would come in at $7.2 billion and it would raise $880 billion. Last week’s filings indicated a $600 million raise so this change indicates some strong demand despite market uncertainty.

The IPO will occur at the end of this week and shares will trade on the NYSE. Circle originally looked to go public back in 2021 through a SPAC, but its plans fell through. At the time, regulators questioned whether the firm should register as an investment company and if the USDC (which is pegged to the U.S. Dollar) was a security. However, under the new leadership of the SEC, a friendlier approach to crypto has been taken.

Crypto brokerages like Coinbase have seen their shares boom this year while other brokerage and crypto investing firms have also gone public this year including eToro (raised $310 million at a valuation of $4.2 billion) and Galaxy Digital. Crypto prices have also performed quite strongly under this pro-crypto administration.

These factors bode well for Circle and are major reasons the company chose now to go public.

According to filings, Circle reported earnings of $64.8 million in the first quarter of revenue of $578.6 million.

Circle has partnerships with Coinbase and BlackRock and has received investments from Fidelity as well as venture capitalist firms such as Oak Investment Partners, General Catalyst Group, and Accel.

Circle faces an uphill battle as the leading U.S. stablecoin. Tether also issues a USDT stablecoin which has $153 billion in circulation versus $61 billion for Circle’s USDC.

We will have to wait and see what happens with Circle when the dust settles. If history tells us anything regarding crypto IPOs, it could be a rocky road for investors in early trading sessions.

Private equity heads across the pond

As the private equity world gathers in Berlin for the world’s largest PE event, the sentiment on the ground is reportedly very bullish according to reporters. Sentiment has completely reversed about European PE compared to last year. The shift comes as fewer companies are seeking to go public and President Donald Trump’s volatile policymaking is on the other side of the pond.

The co-president of Ares Management stated that the European market is very attractive right now at the conference. Positive factors that make Europe attractive include a massive fiscal package from the German government, falling interest rates, and the relative stability of European policy versus American policy.

This optimism comes as institutional investors slow their private market investments. Private credit fundraising in Europe has declined by 69% compared to 2021. However, the depressed fundraising did not impact overall sentiment which paint a picture of European private market exceptionalism. Numerous managers highlighted the defense industry as an area they will be focusing on moving forward. The focus on defense comes as Europe rushes to increase defense spending to meet unilateral promises and demands from Trump.

Numerous managers highlighted the relative difference in valuations between U.S. and European companies comparing it to valuation gaps seen in 2008.

We have not dived headfirst into the European market yet but continue to look for opportunities all over the world.

Patient during the storm

For just over a year now, we have been talking about a value play in the AI space. We have mentioned that we like the position and think the company has major growth prospects and minimal risk factors. That company is Hewlett-Packard Enterprises. For those of you who do not remember, HPE is a multinational technology company that works in servers, storage, networking, consulting, and support. HPE has launched and invested in several AI-driven professional services including a private cloud. Over the last few months, the stock has pulled back as overall market volatility and trade uncertainty have led HPE shares along with many other stocks lower.

Over the last year, shares are up only 1.2% after they have pulled back by 17% in 2025. However, that pullback was much larger during the lows of April 2025. Shares reached a multi-year low, yet we did not worry. The fundamentals remained strong, we just had to wait out the volatility. Fast forward 7 weeks from the April lows and HPE shares have rallied by almost 50% off the lows. Shares remain well off highs, but they have regained their momentum.

Enough with performance, we are writing about HPE this week because they reported earnings and we went through the report and remain bullish on the company’s prospects. If you do not believe us, numerous Wall Street firms raised their price targets this week for HPE despite share price weakness in 2025.

HPE beat earnings and revenue expectations. HPE’s report reaffirms its priority of profit, particularly in the AI market. This prioritization of profits contracts all HPE’s competitors which are focused on growth. Year over year revenue jumped by 6% (revenue grew across every HPE product segment) however, HPE margins slightly pulled back this quarter just like many other AI companies including Nvidia. However, HPE maintains a strong yield and a sustainable payout ratio. HPE also issued a strong outlook where they see 9% revenue growth in fiscal year 2025 supported by AI-driven storage and enterprise demand. HPE revenue and earnings per share are expected to jump over the next few quarters.

Shares moved up slightly after the earnings release.

HPE exited the quarter with $3.2 billion in AI systems order backlog. HPE also continues to look to reduce costs as they target a 5% workplace reduction by year-end.

HPE also reiterated that they will be fighting the Department of Justice’s challenge to its pending acquisition of Juniper Networks and still believe the deal will go through. If this deal does go through it will be highly accretive for HPE. The deal will boost gross margins, EBIT margins, and earnings per share. HPE reaffirmed that they believe there will be $450 million in annual synergies after the acquisition.

On a relative basis, HPE trades extremely inexpensively on multiple basis’s that we use when analyzing equities. HPE trades at 10x forward earnings, dirt cheap when you’re looking at AI and technology stocks.

Overall, we remain bullish on HPE in the long run and will continue to ignore the short-term noise.

Disclaimer: MacNicol & Associates Asset Management holds shares of Hewlett-Packard Enterprises Company (HPE) across various client accounts.

MacNicol & Associates Asset Management                                                             

June 6, 2025

The Weekly Beacon -June 6 2025