Day: September 23, 2024

(Bloomberg) — Apollo Global Management Inc. has offered to make a multibillion-dollar investment in Intel Corp., according to people familiar with the matter, in a move that would be a vote of confidence in the chipmaker’s turnaround strategy.

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The alternative asset manager has indicated in recent days it would be willing to make an equity-like investment of as much as $5 billion in Intel, said one of the people, who asked not to be identified discussing confidential information. Intel executives have been weighing Apollo’s proposal, the people said. The size of Apollo’s potential investment could change or discussions could fall apart, they said.

The development comes after San Diego-based Qualcomm Inc. floated a friendly takeover of Intel, people with knowledge of the matter said on Saturday, raising the prospect of one of the biggest-ever M&A deals. Neither deal has been finalized.

Representatives for Apollo and Intel declined to comment.

Under Chief Executive Officer Pat Gelsinger, Intel has been working on an expensive plan to remake itself and bring in new products, technology and outside customers. Still, the company is headed for its third consecutive year of shrinking sales and its shares have lost more than 50% of their value this year. While Apollo may best be known today for its insurance, buyout and credit strategies, the firm started out in the 1990s as a distressed-investing specialist.

Intel’s shares rose as much as 5% in premarket trading in New York on Monday before giving up some of those gains. The stock had closed 3.3% higher at $21.84 on Friday, giving the company a market value of $93.4 billion.

The company’s shares bounced last week after Gelsinger made a series of announcements to accelerate the turnaround. Those included a multibillion-dollar deal with Amazon.com Inc.’s Amazon Web Services cloud unit to co-invest in a custom AI semiconductor and a plan to turn its ailing manufacturing business into a wholly owned subsidiary. Intel also said it would pull back on some projects, including shelving plans for new factories in Germany and Poland for now.

Intel and Apollo already have a relationship. Santa Clara, California-based Intel agreed in June to sell a stake in a joint venture that controls a plant in Ireland for $11 billion to Apollo, bringing in more external funding for a massive expansion of its factory network.

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Apollo also has other experience in the chipmaking space. Last year, the New York-based firm agreed to lead a $900 million investment in Western Digital Corp., buying convertible preferred stock.

–With assistance from Shadab Nazmi and Yasufumi Saito.

(Updates premarket share trading in sixth paragraph.)

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Although Bitcoin (CRYPTO: BTC) is sitting as of this writing almost 25% below its all-time high of $73,750 reached earlier this year, there are plenty of bullish crypto investors who are still convinced that Bitcoin will skyrocket over the long run. Among them is Michael Saylor, founder and executive chairman of MicroStrategy (NASDAQ: MSTR), who recently doubled down on his prediction that a single Bitcoin would be worth $13 million by the year 2045.

At last report, MicroStrategy owned 226,500 Bitcoins with a market value around $14 billion. It touts itself as “the largest corporate holder of bitcoin and the world’s first bitcoin development company.” Bloomberg reported last month that Saylor himself owns about $1 billion worth of Bitcoins.

Based on Bitcoin’s recent price of $55,000, a $13 million target represents an astronomical 23,000% return if you buy today and hold for the next two decades. Obviously, a lot has to happen for that to become a reality. Let’s take a closer look.

Bitcoin’s long-run performance

Yes, seeing a $13 million price tag for Bitcoin can induce a fair amount of sticker shock. But if you dig into the numbers, the math actually starts to make sense. And a lot of that has to do with the compounding power of money. If any asset is allowed to compound in value for a long period of time, the results have the potential to shock.

In the case of Bitcoin, it would require a compound annual growth rate (CAGR) of 30% for the magic to happen and it to jump from $55,000 now to $13 million in 2045. In other words, if Bitcoin can increase in value by 30% per year, for the next 21 years, an upfront investment of $55,000 would turn into $13 million.

And, while it may be unlikely, a CAGR of 30% for Bitcoin is not out of the question. From 2011 to 2021, Bitcoin delivered annualized returns of 230% per year. And Bitcoin returned approximately 150% in 2023. Already this year, Bitcoin is up more than 30%. Over the past five years, the only blemish was 2022, when Bitcoin fell nearly 65%.

So what can investors realistically expect? In an interview this month with CNBC, Saylor predicted that during the next two decades, Bitcoin’s annual return would steadily fall over time, from about 44% a year to 40% to 35% to 30% to 25% to… well, you get the idea. The final long-run number for Bitcoin, says Saylor, would be the annual return of the S&P 500 plus an extra 8% to compensate investors for the extra risk.

At some point, of course, it’s worth taking a moment to ponder what a price tag of $13 million really means for Bitcoin. Based on its current circulating coin supply of 20 million, that implies a future market cap of $260 trillion. That dwarfs the value of any tech stock today, and in fact, it dwarfs the value of the entire S&P 500, which today sits at around $45 trillion.

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Even if we assume that U.S. stocks will grow at a rate of 10% per year over the next 20 years, a price tag of $13 million still implies that Bitcoin would represent an astonishing amount of the world’s wealth in the year 2045. For that reason alone, it’s worth having a healthy dose of skepticism about Bitcoin’s future price trajectory.

Bitcoin as an asset class

For much of its history, Bitcoin has been uncorrelated with any major asset class, and that has made it very unique from a risk diversification perspective. Quite simply, Bitcoin can zig when other assets zag.

Thus, Bitcoin is growing in favor with billionaire hedge fund managers, who increasingly view it as a way to hedge risk. In some cases, that risk might be economic, such as the risk of inflation. In other cases, that risk might be geopolitical. In the CNBC interview, Saylor uses the example of missile strikes to illustrate this point. What do you do as an investor if you wake up one morning and hear that there have been missile strikes somewhere in the world?

Until recently, the answer to that question might have been: Buy gold. But there is growing popularity in the notion that Bitcoin is “digital gold.” Some investors are buying Bitcoin, and not gold, as a hedge against worst-case scenarios popping off around the world. It sounds surprising, but Bitcoin might actually be a safe haven asset.

All of which is to say: The more that Bitcoin can cement its status as a valuable, stand-alone asset class, the more likely it is that its price could skyrocket during the next two decades. That’s because investors will be willing to allocate a greater and greater share of their portfolio to it.

Risk factors

Of course, there are several factors that could derail Bitcoin during the next two decades. For example, if Bitcoin’s annual returns decline significantly for an extended period of time, investors might just decide that they can get the same type of return, while taking on much less risk, simply by buying hot tech stocks.

Or, even worse, the U.S. political and regulatory establishment might shift against Bitcoin. For example, there might be a crackdown on Bitcoin mining, given the concerns over its environmental impact. Or, regulators in the U.S. might decide to ban Bitcoin entirely, as they’ve done in China and other nations. At the very least, the government could make things difficult for Bitcoin owners simply by making a few quick changes to the U.S. tax code.

That said, I remain bullish on Bitcoin’s long-term prospects. As long as it continues to deliver anywhere close to the type of performance that it has delivered over the past decade, investors are likely to be very pleased at Bitcoin’s valuation 20 years from now, even if it’s nowhere close to the astronomically high valuation predicted by Michael Saylor of MicroStrategy.

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This Cryptocurrency Could Soar by 23,000% Over the Next 2 Decades, According to MicroStrategy’s Michael Saylor was originally published by The Motley Fool

(Bloomberg) — Gold climbed to a fresh all-time high ahead of US economic data that may offer clues on the path forward for further rate cuts by the Federal Reserve.

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Bullion was little changed after earlier rising as much as 0.4% to a record $2,631.40 an ounce, beating the previous all-time high posted on Friday. Gold has advanced since the Fed lowered its benchmark interest rate by half a percentage point last week, building on what was already a record-setting year for the precious metal.

Traders will scrutinize comments from Fed speakers including Raphael Bostic and Austan Goolsbee later Monday, before turning their attention to US personal consumption data and jobless claims later in the week. Those could inform the central bank’s thinking on future rate cuts, which are often seen as positive for non-interest bearing gold.

“The market looks increasingly in need of consolidation, but at this point, a deep one is needed to rattle hedge funds holding the largest bet on higher prices since 2020,” according to a report from Saxo Bank A/S.

Fed Governor Christopher Waller said Friday he’d likely back quarter-point cuts at each of the next two central bank policy meetings in November and December, if the economy evolves as he expects.

Bullion’s 27% rally this year has also been supported by robust purchasing by central banks and haven demand amid ongoing conflicts in the Middle East and Ukraine.

Spot gold was steady at $2,622.49 an ounce by 11:33 a.m. in London. The Bloomberg Dollar Spot Index rose 0.1%, while the US 10-year Treasury yield was little changed. Palladium, platinum and silver all fell.

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