THE BITCOIN BUG

BY DAVID FOREST, EDITOR, STRATEGIC INVESTOR

THE

BITCOIN BUG

YOUR CHANCE TO PROFIT FROM THE TECH WORLD’S UNSEEN FLAW

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THE BITCOIN BUG: YOUR CHANCE TO PROFIT FROM THE TECH WORLD’S UNSEEN FLAWStrategic Investor

Dear Strategic Investor,

A shortage of one tiny thing caused mass panic in 1999…

You may know it as Y2K or the “Millennium Bug.”

Yes… Everything worked out in the end.

But if left unchecked, the Millennium Bug would have shut down everything from Social Security to major airlines… hotels… and theme parks… to major retailers and grocery stores.

And now the same thing is happening again – but on a much larger scale.

The shortage of one tiny item – computer chips – is to blame.

This time however, the source is different. Bitcoin is at the heart of it.

Massive demand has created a new chip shortage. And what happened the last time there was a massive chip shortage?

Prices soared as much as 566%, to be exact.

Yet, it wasn’t bad news for everyone.

Because companies that raced to produce the necessary chips made themselves and their investors a massive amount of money.

For example:

• Qualcomm shot up as high as 20,191%...

• Intel surged as much as 7,782%...

• And Cisco Systems exploded 104,340%... (That turns every $1,000 into more than $1.04 million.)

And that was over 20 years ago… What’s happening now is far bigger.

I call it “The Bitcoin Bug.”

And if it isn’t patched soon – it will slow Bitcoin’s growth to a crawl… go down as the worst tech disaster in decades...

And slam every major tech company in the world, triggering a new stock market crash.

But if history repeats – we will have little to fear and everything to gain.

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Read on to find out how you can be on the right side of this wealth shift.

The answer might surprise you… but stick with us, we’ll explain it all.

Keep walking the path,

David ForestEditor, Strategic Investor

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HOW WE’LL PROFIT FROM THE WORLD’S UNSEEN FLAWThe semiconductor industry is in a pickle. There’s not enough capacity to fill the current demand for chips. That’s causing lead times for chips to continue hitting record highs.

Add in a fire at a Japanese facility and a shutdown at Samsung’s Texas facility and we could see things get worse before they get better. And that doesn’t even take into account future demand.

According to Boston Consulting Group, the global semiconductor industry will need to invest $3 trillion in research and development and new facilities over the next 10 years to meet demand.

That’s where Intel (INTC) comes into play. (Now, some of you might be surprised… maybe even disappointed. But stick with us… this company is going to No.1 in chips in short order…)

We all know the legendary story of Intel. In 1968, three engineers from Fairchild Semiconductor wanted to develop technology for silicon-based chips. After some internal fighting at Fairchild, Robert Noyce, Gordon Moore, and Andy Grove split from the company.

Intel was born.

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Eventually, Intel became the most innovative and largest semiconductor company in the world. But even giants don’t necessarily hang on forever.

Intel took some knocks over the past several years. Chip designers like Nvidia and AMD, plus chip foundries like Taiwan Semiconductor and Samsung put pressure on the iconic company. Bad decisions by the two previous CEOs didn’t help matters.

That’s where new CEO Pat Gelsinger enters the picture. Gelsinger is a 30+ year Intel veteran. He’s an engineer. He knows what it takes to innovate in the electronics world. In fact, he designed the architecture for the Intel 486 processor in the late 1980s.

Intel 486 Processor

It was so cutting edge at the time that rival AMD decided to make a clone to keep up.

Eventually, Gelsinger served as the company’s first Chief Technology Officer before moving on.

But after multiple missteps, Intel brought Gelsinger back in January to right the ship. He immediately got to work to help Intel get back to the top.

A ROADMAP BACK TO NUMBER ONEIn March, Gelsinger announced his plan to get Intel back on track. He calls it “Intel Accelerated.”

Part of that is getting the company back to its roots of innovating. That means bringing “Moore’s Law” back to the forefront.

Moore’s Law is what makes the semiconductor industry move forward. Its name comes from Intel founder Gordon Moore. It basically says that processing speeds double about every two years.

For years, Intel was the best at it. The company’s process technology – the way its systems work to help it operate smoothly and innovate – helped put it there.

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Any company that can lead in process technology will probably lead its industry. Intel lost that lead when it screwed up its development process over the last several years. Moore’s Law took a backseat.

Gelsinger is looking to take that lead back. His plan is to bring five new products – or process nodes – online in the next four years.

It all starts with the Intel 7 processor and quickly moves to Intel 4 and beyond.

Source: Intel

It’s an aggressive goal. It isn’t just Moore’s Law in action. It’s Moore’s Law on steroids.

However, that’s just a start. Gelsinger’s plan also includes something else that sent shockwaves across the industry…

MADE IN THE USAOne thing that Intel has that most other chip companies don’t is production facilities.

Most chip companies, like Nvidia and Qualcomm, are “fabless” producers. That means they’re basically design firms masquerading as a true chip company like Intel. So they need a foundry to make their product for them.

That can be inefficient and costly. Especially if you can’t get your product when you need it.

As we showed you above, the lead time for chips today is at a record high. There’s a massive shortage causing companies like Toyota to slash production by 40%.

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Gelsinger recently said he thinks the current shortage would level out later this year. But it could take two years to catch up with demand. Some of that has to do with the way the semiconductor manufacturing supply chain works.

According to the United Nations International Trade Database, making semiconductors is a true global process.

Source: UN Comtrade

But as 2020 showed, that can be a massive problem. Not just because of all the touchpoints involved, but because lockdowns exposed that the manufacturing process is flawed. When you need to send your product around the world three or more times with shipping ports shut down, that delays everything.

The other major looming problem is that about 65% of chips today come from one place: Taiwan. The 800-pound gorilla is Taiwan Semiconductor (TSMC). It owns over half of the foundry market. It makes products for companies like Apple and Qualcomm.

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TSMC’s innovation and process technology helped it zoom past Intel. It’s why so many fabless chip makers turn to them. The company can make chips for some of the most cutting-edge technology out there today.

According to Peter Hanbury, a partner at Bain & Company, “The industry is incredibly dependent on TSMC, especially as you get to the bleeding edge, and it is quite risky. Twenty years ago there were 20 foundries, and now the most cutting-edge stuff is sitting on a single campus in Taiwan.”

However, that’s a massive problem. China is making it clear it intends to reunify Taiwan with the mainland. That means most of the best information and knowledge in making computer chips that define the very essence of your life today come from one company in a country that China wants to take over.

China isn’t silent about wanting to become the world’s greatest superpower. Taking over the infrastructure of the country that dominates the chip industry is one way to do that.

If that happens, it could change the dynamics of the entire industry. The supply chain problems from that event would make today’s problems look like mosquito bite. Sure, it’s annoying, but it’s better than losing an arm and a leg.

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Pat Gelsinger sees this. That’s why he recently had meetings at the White House, according to The Wall Street Journal. In the report, Gelsinger is pitching the possibility of increasing domestic manufacturing with help from D.C.

It’s a smart move coming on the heels of the Senate passing legislation that would invest $52 billion in the domestic semiconductor industry.

The WSJ also reported he’s making similar pitches across Europe. The European Union said earlier this year it’s looking to spend $150 billion to increase the European digital industry.

So one of his goals is to make Intel the number one foundry in the world. Right here on U.S. soil.

In March, Gelsinger announced Intel will spend $20 billion and build two new factories in Arizona and New Mexico. According to Intel, the foundry business will reach about $100 billion by 2025. That would be 17.6% higher than its current $85 billion last year according to TrendForce.

If the goal is to become the number one foundry in the world by market share, Intel could capture tens of billions of dollars in additional sales.

It won’t be easy to knock TSMC from its perch, but Intel is up to the task. So far, the company signed up rival Qualcomm as its first customer.

Then, rumors swirled that Intel was in talks to buy GlobalFoundries – the third largest foundry based in New York – for $30 billion. We think it’s unlikely to happen as GlobalFoundries moves closer to an IPO, but it shows how serious Intel is.

In fact, Gelsinger confirmed this recently after saying, “There will be consolidation in the industry… and I expect that we’re going to be a consolidator.”

Finally, last week, Intel announced it won a contract with the U.S. Department of Defense (DoD). As part of the contract, Intel will lead the first phase of DoD’s RAMP-C program. The DoD is saying the chip industry is critical to national security. The intent is to establish a domestic commercial foundry infrastructure. That would help ensure companies and the military won’t have to rely on a foreign country for cutting edge chips.

It also means Intel isn’t just playing to keep up. It’s playing to win.

BY THE NUMBERSDespite the recent missteps by the company, Intel is still a machine. Revenue is up 44% over the last 10 years, or about 4% per year.

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It’s slow and steady growth.

But company profit is up even more. When we talk about profit, we’re really looking at the company’s Free Cash Flow (FCF). It’s a true measure of how much money Intel is making. It’s what’s left after paying all the bills.

We like to look at FCF because the company can’t lie about it. You can game the earnings per share figures. Just ask GE investors during Jack Welch’s reign.

But you can’t game FCF. Here’s what FCF looks like at Intel since 2011.

In 10 years, FCF doubled even though revenue grew less than half that rate. That’s the mark of a true long-term compounding machine.

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This year, Intel expects to bring in $73.5 billion in revenue with FCF coming in at around $11 billion. That may seem like a step backwards, and it is. But that’s also by design.

With the company ramping up its Capital Expenditures (Capex) – what it spends on its facilities – we expect FCF to take a dip. That’s part of Intel Accelerated.

The great thing for us is analysts look at what’s happening at the company now. Not what will happen in the future. When these new facilities come online after spending tens of billions of dollars, that will eventually translate into FCF.

We’re not here to play the next month or the next quarter. We’re here to play the long game when it comes to Intel. And the long game is to dominate.

Eventually, that will translate into higher returns for investors, both through a higher share price and higher dividends. It’s been a rough ride for Intel shareholders over the last few years, but the future is looking brighter.

With chip manufacturing having a hard time keeping up with demand and becoming a matter of national security, Intel isn’t waiting around to see what happens. The company is making moves to once again be the dominant force in the industry. We want to be along for the ride.

Action to Take: BUY shares of Intel (INTC) up to $75.

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