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Blockchain

Fortunes:
The Company at the Cusp of a 77,400% Windfall
Blockchain Fortunes:
The Company at the Cusp of a 77,400% Windfall

A
decade ago, in 2008, the United States faced the most devastating financial crisis since the Great
Depression. It all started when corporate banks began using their customers’ hard-earned deposits to
fund risky mortgage loans for “subprime” lenders — basically, people with poor credit histories.
This was in the early 2000s, when it looked like nothing could stop the housing market from booming.
Mortgage interest rates were also incredibly low at the time, so no one thought twice about taking out an extra
loan or refinancing their house in order to live a more lavish lifestyle.
Meanwhile, banks pooled these subprime loans and sold them as securities to investors. And for a while,
everyone was happy.
But then the housing market started to slump and interest rates shot up. Homeowners could no longer
afford to pay their expensive mortgages, so many simply stopped and waited for the banks to reclaim those
properties.
And that’s when things really went sideways.
Under normal economic conditions, banks could have resold those foreclosed-upon properties and recouped
their losses. But an oversupply in housing paired with struggling home values caused banks to take heavy losses
on their initial investments.
To make matters worse, all the money banks took from their customers to fund these bad loans had
disappeared — with no way to pay any of it back. People literally stood in line at ATMs to make withdraws
only to be turned away, wallets empty.
“Too big to fail” banks like Lehman Brothers eventually went bankrupt, while others were forced to take
massive bailouts from the government. People lost their homes, their jobs and, in some cases, their entire life
savings. In fact, it’s estimated that banks lost some $16 trillion in household wealth in the aftermath of 2008.
But the most devastating loss didn’t have a dollar value assigned to it. You simply can’t put a price tag on
trust and peace of mind, and people no longer trusted the U.S. government or the financial system it followed.
After all, what was to stop banks from once again taking customer deposits and using them to invest
in riskier investments, creating another economic disaster? With this thought in mind, people started
brainstorming ways to cut out the financial middleman.
And that’s how the idea of decentralization was born.

Blockchain: A Better Alternative


Following the financial crisis in 2008, a little-known article was released in the same year called “Bitcoin:
A Peer-to-Peer Electronic Cash System.” In it, writer Satoshi Nakamoto laid out the framework for a financial
database called blockchain that could be managed autonomously using a peer-to-peer network.

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This database would contain digital records, or blocks of transactions, using a secured method of
cryptography. In fact, the codes used to conceal these records are so advanced, it would take the world’s most
powerful supercomputers more than one billion years to crack them!
In one neatly packaged article, blockchain offered people a way to gain back the trust they’d lost to the
traditional banking system. That’s because blockchain functions as a digital financial ledger. It records every
transaction in an unalterable public space.
It’s also accessible to anyone, so long as you can connect to the internet.
Picture it like this. You and an unlimited number of friends make copies of every single record you have on
file. Then you encrypt that data and store it on your own computers all around the world. That way if one of
your computer files is ever hacked or stolen, not only can the thief not interpret your data, but you have an
unlimited number of backup files saved on your friends’ computers.
That’s how blockchain works. Each computer, or “block,” connects with a series of other computers to
create a network, or “chain.” Once information is processed through the blockchain, it is locked into every
computer in the network at the same time, creating a permanent, unalterable digital record.
Once the data is locked in, no one can change it … not even the companies that design and operate
computers for the blockchain database.
As you can imagine, this technology is a game-changer. For the first time in human history, we can create a
permanent record of every transaction, governed by the immutable laws of mathematics.

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In the words of PC Magazine:
Think of blockchain as a historical fabric recording everything that happens — every digital transaction;
exchange of value, goods and services; or private data — exactly as it occurs. Then the chain stitches
that data into encrypted “blocks” that can never be modified and scatters the pieces across a worldwide
network of computers…
This impenetrable “fabric” makes fraud, hacking, data theft and information loss impossible. And that’s
what makes blockchain such a good platform for transactions.

The Rise of Cryptocurrencies


Back when blockchain was first introduced to the public, a digital currency called bitcoin was proposed
along with it. A lot of people think that both terms are synonymous, but that couldn’t be further from the
truth.
Remember, blockchain is a digital ledger. Bitcoin, on the other hand, is a cryptocurrency (also called digital
currency) that allows peer-to-peer transactions without the need of a third party.
So, bitcoin transactions get recorded on the blockchain just like any other purchase made with a digital
currency.
Created by Nakamoto, bitcoin was the first cryptocurrency to come on to the market. But now there are
well over 1,000 cryptocurrencies people can mine or exchange “real world” money for.
Mining is the term used to describe the act of discovering new crypto coins, but that doesn’t mean people
with pickaxes are digging through rocks in their backyards looking for money.
Crypto coins are mined
by people with high-powered
computers solving complex,
encrypted mathematical
equations. When a miner
solves one of these equations,
he’s given a “block reward”
that gets paid out in virtual
coins.
As you can imagine, these
coins are incredibly valuable
because the process of mining
them is so complex and time-
consuming. In fact, crypto encryptions require so much computing power that it would take an individual
miner almost 100 years to solve a single block of bitcoin.
That’s why miners band together and share their resources. Hundreds, sometimes even thousands, of people
from all over the world participate in groups called mining pools. Each person contributes power and data
processing to the pool, and then gets a cut of the profit when the group earns a block reward.
With so many people now participating in the crypto market, the industry has ballooned since the first days
of bitcoin. In the beginning of 2018, the total cryptocurrency market cap surpassed $600 billion. And some
estimates put this valuation at $1 trillion by the end of the year.
This means that companies contributing to the crypto market are going to see a huge increase in revenue as
demand for better and faster computer technology rises.
But keep in mind that cryptocurrencies serve as only one of the ways that blockchain technology can be
used. Let’s take a look at some of the other possibilities in the works…

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Creating an Open-Source World
In the future, everything you do … every bank transaction you make, every shipment you track and every
record you keep … will be recorded on a blockchain network.
This technology will replace the decades-old, backward-looking ways of the past.
Think about it. Our economy is still practically stuck in the Stone Age, relying on paper contracts and
proof-of-identity cards for everything — from getting your driver’s license and voting to buying a house and
traveling out of the country.
At best these records are easy to lose track of, and at worse they’re easy to manipulate, leading to issues like
identity theft and loss of income.
Some industries like health care have moved their records online, but even those databases aren’t safe from
professional hackers.
The point is, our personal identities aren’t anywhere near as safe as the government would like us to believe.
But blockchain offers a solution. With it, we can change the way we store personal information and make
transactions for goods and services.
Blockchain will make life simpler and safer at the same time. Hence why the biggest companies in the world
are all scrambling to become early adopters of this new tech.
In fact, my research shows that a combined $4.5 billion have already been put toward the adoption of this
technology, with money flowing in from companies such as Google, Overstock, JPMorgan Chase & Co.,
American Express, Reuters, Intel, Walmart, Nestle, Hitachi and Dole … just to name a few.
IBM has also openly pledged to lead this technological revolution.
Microsoft has launched a multimillion-dollar project to promote this new tech, stating: “We are seeing a lot
of momentum and excitement in this space.”
And the CEO of Nasdaq called blockchain “the biggest opportunity we can think of over the next decade or
so.”
But it’s not just tech companies that are taking notice.
America’s 10 largest banks have already invested $267 million into companies behind this innovation. Last
year, less than 15% of all banks used blockchain. Now, 80% of financial companies expect to adopt it within
the next 24 months.
Add to that a recent study by IBM which revealed that 90% of all governments worldwide are moving to
implement blockchain by the end of this year.
And it doesn’t stop there:
• The Center for Disease Control is planning to use blockchain to keep more accurate and easy-to-access
medical data, potentially saving thousands of lives.
• Governments around the world are in the early stages of using blockchain to manage real estate titles. In
fact, the state of Vermont recently authorized the first-ever real estate transaction on a blockchain.
• Shipping companies are already using blockchain to manage their supply chains. Penske, FedEx and
dozens of other companies have signed on to the Blockchain in Transport Alliance.
• Small companies plan to go public and raise capital directly on a blockchain, eliminating the need for
initial public offerings that require them to pay Wall Street’s exorbitant fundraising costs.
• Even fundamental government functions like voting and recording marriage licenses could be done on a
blockchain network in just a few years.
Like I said before, the possibilities that blockchain offer are nearly limitless. But there is one catch — and it
has to do with the computers that give us access to the blockchain network.

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The Key to Unlocking Blockchain
Every computer has the same basic parts, like a motherboard and a memory chip. And while these
components are important, they pale in comparison to a part of your computer called the graphics processing
unit (GPU).
GPUs use special programs that help them analyze and store data. This makes them perfect for performing
certain tasks — one of which is figuring out complex mathematical and geometric calculations.
This makes GPUs perfectly suited for crypto mining and running blockchain applications. Because of
this, the GPU industry has exploded as both companies and individual users alike have begun to integrate
blockchain technology.
Industry research shows that GPU growth is going to rocket higher over the next several years. Allied
Market Research estimates that global GPU sales will bring in $157 billion by 2022, growing at a rate of 35%
per year.
However, this figure is largely based off the growing crypto market because, currently, GPUs are mainly
used to mine coins and make crypto transactions. However, as I just described, there are many more uses for
blockchain that go far beyond cryptocurrencies.
And as more industries develop blockchain technologies, they’ll need super powerful computers to help run
those applications. Right now, the entire blockchain industry has a net worth of $4 billion. But it’s expected to
ramp up to a $3.1 trillion industry as new tech develops in the years ahead.
That’s an incredible 77,400% rate of growth, and the kind of market opportunity that we want to take
advantage of.
Remember, large organizations like IBM all the way down to individual crypto miners are all competing
with one another to get on the ground floor of the blockchain revolution. And that means they’re all vying for
the fastest GPUs on the market.
Right now, only two companies on the market make GPUs with anywhere near the computing power
necessary to handle blockchain’s complex algorithms at a competitive rate. And this makes them both
incredibly valuable.
However, while one of these companies is a well-known Wall Street darling, the other is a smaller, cutting-
edge firm offering the same GPU capabilities at a more affordable price point. And by my calculations, this
company’s product line is going to dominate its larger competitor.

Unparalleled Power, Affordable Pricing


Advanced Micro Devices Inc. (Nasdaq: AMD) is a global semiconductor device company based out of
Santa Clara, California. It specializes in manufacturing products for microprocessors, chipsets, graphics video
and multimedia products.
While AMD is participating in several emerging markets, the segment I’m most interest in is its
computing and graphics operations, which is the part of its business that builds GPUs for PC desktops and
notebooks.
AMD offers multiple tiers of GPUs for its clients to choose from, but arguably its most popular processor
is its Radeon RX graphics card. This is appropriately comparable to Nvidia’s GeForce GTX card, which is the
company’s main competitor.
Where Nvidia traditionally beats AMD in terms of power for its higher-priced products, AMD makes up
for this with its competitive pricing in its lower and mid-range products.
Typically, AMD’s GPUs are a couple hundred dollars cheaper than comparable models in Nvidia’s line. And

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while this may not sound like much money in the
long run, the savings add up when you consider how AMD’s Mounting Total Revenues
many chains of computers are required to solve just . . . Up 50% in 2 Years
one block of data in blockchain. For crypto miners in billions
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building their own computer rigs at home, those $7.15
$6.70 $7
savings can go a long way. $5.99
$6
Back in 2013, AMD made the strategic decision to $5.33
$5
revamp its product line, focusing the core of its business $3.99
$4.27
$4
on its PC segment. Since that time, the company’s
annual total revenues have gone up by 50%, up from $3

$3.9 million in 2015 to $5.9 billion today. $2

Analysts are currently forecasting that total revenue $1

could climb to $7.1 billion in 2019. And if it does, $0


12/2015 12/2016 12/2017 3/2018 12/2018 12/2019
that would be a 79% increase in sales over 2015! Estimated
SOURCE: Bloomberg
Better still is AMD’s ability to turn a profit on the
income it’s generating. As of its most recent earnings
report, net income for AMD is up $151 million
AMD’s Soaring Net Income
from $33 million at the end of 2017, and is up $669
$800
million since 2015. $715
$600
Now, one of the things that I always look for when $519
making a new recommendation is future growth. $400

One way to determine that is to look at the $184 $200


industry the company participates in to see if it’s $33
$0
on the rise. Considering that the entire market for
-$200
blockchain could soar by 77,400% or more — I’d say -$219
this industry is more than healthy! -$400
-$485
The second thing I look at is a company’s product. -$600
12/2015 12/2016 12/2017 3/2018 12/2018 12/2019
More specifically, I look at whether or not the product Estimated
or service being offered is in line to grow with SOURCE: Bloomberg

burgeoning market demand.


Looking at AMD’s future net income projections, management is forecasting that future sales will total
$519 million in 2018 and $715 million in 2019. That’s quadruple its current income.
No one knows a business better than a company’s own management team, so this gives me great confidence
in the fact that we’re buying into a healthy — and sustainable — business.

A New Product Line in the Works


Considering the massive amount of data that computers linked to blockchain need to process, more server
farms are being dedicated to crypto mining and other blockchain-related services.
Aiming to suit the needs of these server farms is a brand-new AMD product line called the Radeon Instinct
Vega series, which adds to the company’s growth prospects. These are chip-laden cards geared specifically
toward the artificial intelligence and machine learning techniques used in today’s server systems.
AMD hasn’t released all of the specs for this new series yet, which is supposed to roll out by the end of
2018. However, analysts expect that this new series will show up in a variety of different workstations.
As you can see in the charts below, the Vega series of chips are more than twice as powerful as anything
AMD has ever released — while still reducing how much electricity is used by the system.

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This efficiency is key to the future success of the Vega lineup. Faster, stronger chips cut down on the amount of
energy needed to run through these algorithms. They’re also cheaper and more efficient, meaning that hobbyists
and professional miners alike are going to choose AMD’s products over more expensive options like Nvidia.
So when you have a server farm consisting of hundreds of server systems, AMD’s products let miners and
blockchain companies save on the initial cost of buying the chips, as well as the power to keep the systems
running.
An increase in sales means more money is going to flow toward AMD’s bottom line, which will cause its
share price to rise. And that means more money in our pockets.

A Premier Play on the Blockchain Revolution


Advanced Micro Devices has a current market cap of just $13 billion. I can tell you from my 25 years of
experience that this company is way undervalued, especially when you consider that both the GPU/CPU and
blockchain markets the company competes in are set to soar.
Even if AMD ends up capturing a small percentage of this market share, early investors are still going to see
a sizeable return on their investments. You could end up making five to 10 times more from your money on
just this one stock alone … and that could add up to millions of dollars for those who want in.
But we want to get in on this trend now, before more companies and government bodies start adopting
blockchain into their infrastructure.
That way, as the industry grows and more computing power is needed, we get the benefit of AMD’s stock
soaring to new levels as people turn to its processor solutions.
Action to take: Buy Advanced Micro Devices Inc. (Nasdaq: AMD).
I’ll keep you informed on the coming blockchain revolution and how it effects AMD, so make sure to check
your inbox for regular updates on this stock in Profits Unlimited.
Regards,

Paul Mampilly
Editor, Profits Unlimited

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