(Audio Discussion generated by NotebookLM) The source for NotebookLM1. The below content written and analyzed all by my human self2. RCA, NIFTY FIFTY, AOL and FANGs. July 6, 2020 | François Sicart Let’s go on a thought experiment journey together. Who is tired of hearing about the Jevons paradox? 🙋♂️ Stick with it one more time because I have not seen it presented this way anywhere else. Probably because no one is crazy enough or they didn't live through the dot-com boom bust. Well I am and I have. What is Jevons paradox? (Wiki) In a nutshell, it states that an increase in efficiency in using a resource leads to increased use of that resource, rather than to a reduction. Items or services that go from inaccessible to ubiquity, where the efficiency, cost and or access improves exponentially. Few examples: * Commercial airlines * Cell phones * Personal Computers * Cars powered by Petrol * Then EV Cars * The Internet * Televisions * The electricity grid All this talk about Jevons paradox in context that DeepSeek is somehow great for legacy tech co’s like Nvidia got me thinking. Ok, what if January 20, 2025 DeepSeek R1 day was the ignition of giving anyone with internet connection, or under funded businesses who can’t afford data centers and GPUs, to have access to advanced AI. Similar ignitions have happened before, so how did those companies and stocks perform in the past while going through a period of Jevons Paradox? Let’s time travel to the launch of the iPhone 1 and 3G/4G, offering mobile computing to the world. Who remembers watching this keynote on Jan 9, 2007? “It’s an iPod, it’s a phone, and an internet communicator” RIP Steve Jobs Let’s take a look at T-Mobile stock through three mobile industry milestones. I chose TMUS randomly amongst its peers. Shaded areas * iPhone brings computing to your pocket * Then 3G and 4G bring higher data speeds * 5G enables super fast seamless data anywhere for even lower prices No one today has a dumb phone anymore. We simply have become phone dumb. We can’t live without them. It is an appendage to our body. 2006 Today If the DeepSeek moment truly was akin to the Internet expansion or the mobile smartphone expansion, we may see NVDA and its peers repeat history, where the pioneers are all flushed out. After the iPhone launch, T-Mobile went from $50 to $7. Counter intuitive huh? Then rallied and crashed to $7 again, before it marched to 5G and beyond. Peak to trough, TMUS fell 86%, then rose more than 3,333%. Linear Chart What if history rhymes? I neatly fit the NVDA lifetime chart into the same period of TMUS fall after the iPhone launch for your imagination’s pleasure. If the performance rings true, NVDA would go to $17. Then march to $566. Internet Expansion How about the dot-com boom and bust? That surely was a period of massive change and the Jevons Paradox is applicable. You could easily argue that CSCO was the NVDA of that era, selling shovels to tech co’s becoming dot com companies. Nvidia Dot-com low = $0.06 cents! Huh? How you ask? Since its initial public offering (IPO) in January 1999, Nvidia has undergone six forward splits: June 2000: 2-for-1 stock split. September 2001: 2-for-1. April 2006: 2-for-1. September 2007: 3-for-2. July 2021: 4-for-1. June 2024: 10-for-1. And NVIDIA has already grown faster than any company. Also owns the two largest 1 day draw downs in stock market history the past few months! 10Y Return 26,000% 15Y Return 34,000% 20Y Return 65,000% MEh that was just T-Mobile you say and only 1 company during the dot com boom bust you say? Lets look at Amazon’s chart. The low in October 2001 was 28 cents after the dot com crash, with all the splits through today’s price! Amazon fell 95% from peak to trough If you bottom ticked the low you would be up 14,900% today Dot-com low = $0.28 cents! 15Y Return 3,800% 20Y Return 12,500% Microsoft fell 66% from peak to trough If you bottom ticked the low you would be up 3,200% today Dot com low = $12.45 15Y Return 1,800% 20Y Return 2,100% But not everyone won the Jevons paradox lottery. Cisco Systems CSCO fell 90% from peak to trough Took 19 years to break even if you held from the top If you bottom ticked the low you would be up 1,075% today, 23 years later Dot-com low = $5.38 15Y Return 299.86% 20Y Return 415.14% Even Worse… Intel INTC 😭 fell 82% from peak to trough Took 18 years to break even if you held from the top If you bottom ticked the low you would be up 152% today, 23 years later Dot-com low = $7.43 15Y Return 51% 20Y Return 40% Meh this was a one time thing that happened only in the 2000s. Right? Take a look at RCA in 1929 vs AOL’s draw down. “Investors in RCA at the top of the 1929 speculative boom were right about radio’s fundamentals: the number of households with radio sets grew from 2.75 million in 1925 to 10.25 million in 1929 and, through the Great Depression, to 27.5 million in 1939. But the investors were wrong about RCA’s stock price. As we see in the chart below, included in a November 2002 follow-up paper, the fate of AOL’s stock following the 1990s dot.com boom was not very different.” Source: Sicart Associates Conclusion Maybe the next winners won't even include NVDA and it becomes the next Cisco or Intel. Maybe the winners are the same as before, after another UNTHINKABLE drawdown via AMZN, MSFT, and GOOGL. Or maybe AAPL buys Tesla and xAi? Or Amazon buys Palantir and OpenAI? Now you are ready! Next time you hear “Jevons Paradox” on Finance TV while someone is touting AI, but without talking about the drawdown risks that have precedent in history, just roll your eyes. Homework Assignment: Sit where you are reading this. Take a deep breath and blink… When you opened your eyes, the future became the past. Sometimes they look familiar. Good luck and enjoy your weekend! 🥷🤞 Not Your Advisor Substack Featured 3X This is a public episode. If you’d like to discuss this with other subscribers or get access to bonus episodes, visit www.notyouradvisor.com/subscribe
