LK99 and Quick Bites
LK99 is the new buzzword
I hesitate to write about this because it’s an unproven technology and, therefore, will not impact markets if it does not live up to its promise. However, I’ve found in conversations over the last week that while it’s an extremely popular topic in some circles, it’s still not quite made it out in the mainstream, and I think it’s worth discussing the implications and how it compares to history.
LK99 refers to a superconductor compound that can operate at room temperature. The name refers to an experiment by scientists Lee and Kim in 1999. In other words, the name is not a reference to its properties or capabilities.
MRIs use superconductor materials cooled to 4 Kelvin (-269 Celsius, -458 F) or just a bit higher than the coldest temperature possible. For context, “High temperature” superconductors can operate at a maximum temperature of 77 Kelvin (-196C, -320F). LK99 superconductivity aims to operate at a room temperature of around 300K (25C, 75 Fahrenheit).
Cooling MRI magnets to their operational temperature is expensive, relatively complex and requires a fair amount of helium which is not a superabundant resource. Helium can only be harvested via natural gas extraction. An MRI with a room-temperature semiconductor would not require helium or cooling equipment and would presumably be significantly less expensive and more accessible globally.
Superconductors are able to transmit current with no resistance and, therefore, no heat loss. Data centers built with this material would not need expensive cooling systems and would use far less energy, given that energy would not be lost to heat during operation. Electricity transmission without loss would add enormous electricity savings. MA state loses roughly 8% of its electricity in transmission and distribution, for example.
A discovery of this magnitude would have a similar impact as the introduction of indoor lighting, railroads, synthetic fertilizers, antibiotics, transistors, the internet, and so on. In other words, it would add a new simple base material to our collective civilization’s tool kit, opening up an entirely new world of technologies previously out of reach. If there is even a 1% chance of the discovery happening in 2023, then it’s worth at least a little extra excitement.
The investment implications are broad and nearly universally beneficial. Investors would not need to immediately chase companies that specialize in LK99 technology. We’ve already seen a basket of LK99 stocks rally (for no serious reason). The positive economic impact would take time and range across many companies and sectors.
The Atlantic coined a term this week called foomscrolling, which is supposed to be the opposite of doomscrolling, or endlessly consuming pessimistic content. Foomscrolling is a cynical term meant to target obsessive optimism. Fomo is not a good investment strategy, and neither is cynicism. The middle-of-the-road approach works best and it appears that we may be close to a room-temperature superconductor breakthrough, or maybe not. Fusion is in a similar category. However, fusion appears likely to roll out within the next two decades, which will also have profound implications for society, materials, geopolitics and economics.
- Yield Curve Slope: The 10-year treasury is back up to 4%, and the 20-year is up to 4.33%. This indicates the possibility of a mildly upward-sloping yield curve if you exclude the shortest-duration yields controlled directly by the Fed’s rate hikes. TLT, the 20+ year treasury fund, is back to a -43% loss from the Nov 2021 peak, a completely understandable but shockingly negative return for a treasury-related asset. The TLT chart is a direct representation of the impact of rate hikes on long-duration assets.
- Semis, China, Taiwan and Geopolitics: The NYTimes recently published a long and detailed take on one of the most important risk factors globally. We’ve written about this topic many times over the past few years and I’ve often highlighted it as the number one risk globally. If you’re interested, you can read more about it here.
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