Bill Gates claims that Climate Change and Green Technology could create eight to 10 new companies the size of Tesla Motors (NASDAQ: TSLA). The Microsoft (MSFT) founder also thinks will add companies the size of Amazon (AMZN), Alphabet (GOOGL), and Microsoft to the markets.
“There will be eight Teslas, 10 Teslas,” Gates said at the SSOV Climate Tech Summit. “And only one of them is, is well-known today.”
“There will be, you know, Microsoft, Google, Amazon-type companies that come out of this space,” Gates said of climate technology. CNBC says Gates is bullish about climate technology.
How Much is Climate Technology Worth?
If Gates is correct, a handful of climate tech companies could be worth $15.564 trillion to $18.064 trillion. To explain, those are the numbers I got when I added eight to 10 Tesla market caps with the market hospitalizations of Amazon, Alphabet, and Microsoft.
To explain, Microsoft (NASDAQ: MSFT) had a market capitalization of $2.328 trillion, Alphabet (GOOGL) had a market cap of $1.53 trillion, and Amazon (AMZN) had a $1.706 trillion market cap on 26 October 2021.
Meanwhile, Tesla Motors (TSLA) had a market cap of $1.25 on the same day. Therefore, I calculate eight ten Teslas could have a market capitalization of $10 trillion to $12.50 trillion.
Mr. Market seems to agree with Gates. On 22 October 2021, he paid $909.68 for Tesla (TESLA) shares. Additionally, Tesla makes money. It reported quarterly revenues of $13.757 billion, a quarterly gross profit of $3.66 billion, and a quarterly operating income of $2.004 billion on 30 September 2021.
Impressively, Stockrow estimates that Tesla grew by 56.85% in the quarter ending on 30 September 2021 and 98.11% in the quarter ending on 30 June 2021. Moreover, Tesla had Total Assets of $57.834 billion and cash short-term investments of $16.095 billion on 30 September 2021.
Hence, Tesla’s financial numbers support Gates’ argument. Climate technology companies can make enormous amounts of money.
Tesla Motors is a Climate Technology company. To explain, Tesla manufactures electric vehicles, solar panels, and storage batteries. Tesla even builds massive energy storage systems for utilities.
What are the Climate Technologies?
Investors who listen to Gates could make money if they identify Climate Technology companies and invest in them early. However, skeptics will ask, “how do you identify the Climate Technology companies?”
I think it is too early to identify the Climate Technology companies. However, we can identify the Climate Technologies that could make money.
Some moneymaking Climate Technologies could include:
Hyperloop
The Hyperloop is a giant tube that pod shaped trains move through. Hyperloop could be the next great transportation breakthrough pods could move through it at 760 miles per hour.
Hence, Hyperloop could move people and freight across the ground at speeds rivaling jet air travel. More importantly, Hyperloop offers speeds rivaling jets without burning fossil fuels. Unlike jets, the Hyperloop runs on electricity.
Hyperloop will be expensive because they will have to build long tubes and bury many of them. In addition, they will have to develop several new technologies for the system.
In particular, they will need to develop safety technologies and figure out how to load and unload Hyperloop. Plus, Hyperloop achieves high-speeds because they pump all the air out of the tube to create a vacuum. Therefore, Hyperloop companies will need to build thousands of air pumps.
Hyperloop is technologically possible. The first human passengers Josh Giegel and Sara Lucian rode it on 8 November 2020. Several companies, including HyperloopTT, Virgin Hyperloop, and Hardt Hyperloop are trying to commercialize the technology.
Hyeprloop is a climate technology because it could replace several fossil fuel burning transportation technologies. Those technologies could include airplanes, trucks, ships, and diesel locomotives. Industries Hyperloop could replace or disrupt include airlines, trucking companies, and traditional railroads.
In particular, Hyperloop could replace airlines as the primary means of long-distance travel. For example, travel between New York and Chicago, or London and Rome.
I think a successful commercialization of the Hyperloop is a decade off. However, Virgin Hyperloop and HyperloopTT demonstrate it could work.
The only Hyperloop Stock I can think of is the engineering, construction, and design company AECOM (NYSE: ACM). AECOM built the Hyperloop test track at SpaceX’s Hawthorne, California, headquarters.
AECOM also worked on Virgin Hyperloop’s test facilities in North Las Vegas, Nevada. Hence, AECOM helped build the first Hyperloop track to carry passengers.
I consider AECOM (ACM) the best Hyperloop stock because it could design and build a Hyperloop system no matter which Hyperloop company succeeds.
In the long term, I think either Virgin Hyperloop or HyperloopTT could grow into an Amazon sized company if its technology works. A successful Hyperloop company could easily gain a monopoly on freight and passenger transport in an entire region such as North America, which will raise many ethical questions.
Nuclear Fusion
In essence, nuclear fusion is an attempt to duplicate the processes that heat the sun and stars here on Earth. Scientists have been trying to develop commercial fusion since World War II with little success.
However, in recent years, several companies and research organizations have made important fusion breakthroughs. For example, Commonwealth Fusion has built the world’s most powerful high-temperature superconducting electromagnets to contain the super hot plasma they need to generate a fusion reaction. Similarly, the US Energy Department’s National Ignition Facility has built a laser that generates 70% of the energy they need to ignite fusion reaction.
New technologies that could make fusion possible include powerful graphics processing units (GPUs), and superconducting materials. In fact, one fusion researcher MIT’s Dennis Whyte thinks engineers could build a working fusion reactor with off-the-shelf technology by 2025.
A company organized by Whyte’s MIT colleagues, Commonwealth Fusion Systems hopes to test a commercial fusion reactor in a few years. Commonwealth built the first most powerful high-temperature superconducting electromagnets and is constructing a fusion R&D facility in Devens, Massachusetts.
I think fusion could create the company that Gates identifies as the new Amazon, Alphabet, or Microsoft. To explain, fusion could generate enormous amounts of electricity without burning fossil fuels or emitting radiation.
Fusion could replace coal, oil, nuclear energy, and natural gas in electricity production. The US electric utilities energy generated $390.7 billion in revenues in 2020, Statista estimates. I think fusion could become the primary method of electricity production in the US, which could capture a large portion of that energy.
The biggest use of fusion could be to replace coal-fired and natural gas burning power plants. The International Energy Agency (IEA) estimates coal-fired power plants created 10% of the world’s carbon dioxide (CO2) emissions in 2020.
Fusion could replace coal and natural gas because it could be far more efficient. For example, a fusion power plant could need no railroad connection, or heavy equipment to move coal around. In addition, fusion plants could require no mining and no huge payments to coal companies.
In theory, fusion could be cheaper and more efficient than coal. In addition, they could build fusion plants in the center of cities to provide steam heat and electricity. You could build a fusion plant in a city because they are non-polluting.
Potentially, they could use fusion to power ships. Fusion could generate enough electricity to power electric airplanes or the Hyperloop. If it works, fusion could destroy the fossil fuel industries.
Significantly, Gates’ hedge fund Breakthrough Energy Ventures has invested in Commonwealth Fusion Systems. I think Commonwealth Fusion Systems could grow into a Tesla or even a Microsoft-sized company if its technology works.
However, the only decent fusion investment for ordinary people I can think of is NVIDIA (NVDA).
Researchers at the University of Washington are using a NVIDIA graphics processing unit or graphics card to run an experimental fusion reactor. Strangely, NVIDIA’s gaming components provide the raw computing power fusion researchers need. Hence, you can now buy some fusion research equipment at Best Buy (BBY). Thus, Whyte’s prediction of fusion with off-the-shelf components is coming true.
I consider NVIDIA (NASDAQ: NVDA) a terrific stock. Over the past year, its share price grew by over $100. Mr. Market paid $131.41 for NIVIDA on 26 October 2020 and $247.17 for NVIDA on 26 October 2021. In addition, NVIDIA shares will pay four quarterly dividends of 40¢ over the next year.
Clean Steel
Metals are an enormous source of pollution. Steel production alone comprises 5%-8% of the world’s carbon dioxide emissions, Forbes estimates. Steelmaking is also responsible for 7% to 9% of fossil fuel emission, GreenBiz estimates.
In addition, steelmakers created 10% to 15% of the world’s coal demand, Forbes estimates. There are several efforts to replace coal in the steel industry.
For instance, Sweden’s HYBRIT is experimenting with a steel mill that uses hydrogen gas to make steel. The hope is to make steel without emitting carbon dioxide. Swedish steel maker SSAB (OTCMKTS: SSAAY) owns HYBRIT. GreenBiz reports SSAB’s share price rose from $26.61 to $27.48 in September 2021 because of media reports about the hydrogen steel production.
Another potential solution is electrification of steel mills. The problem here is that you to heat materials to very-high temperatures (over 700 degrees Fahrenheit) to make steel. Coal is still the cheapest and easiest fuel to burn to achieve those temperatures.
Steel production requires enormous amounts of electricity. Unfortunately, the most common fuels in electric production are still coal and natural gas. Hence, steel mill electrification could increase the demand for coal.
I think the only way to electrify steel production is to generate enormous amounts of cheap electricity. Hence, you will need something like fusion or nuclear fission to make it possible.
There are some ways to reduce CO2 emissions from steel plants. For instance, by burning natural gas or hydrogen gas instead of coal. Burning gas is more efficient. You can replace conveyor belts with pipes, but it still pollutes.
Unfortunately, I cannot think of any stocks for clean steel beyond SSAB. However, clean steel could be a moneymaker. The global steel market could grow to $1.01 trillion by 2025, Grand View Research estimates.
Clean Cement
Cement, one of the world’s most popular building materials, is an enormous source of greenhouse gases nobody thinks about.
Cement plants burn fossil fuels to generate the high temperatures they need to make concentrate. McKinsey estimates that cement production created 6.9% of the world’s greenhouse gas emissions in 2017.
There are several proposals for low-carbon cement. Energetically Modified Cement (EMC) which requires less energy to make. Moreover, MIT researchers claim they have a new chemical process that can make Portland cement without greenhouse gas emissions. However, nobody has tested the process to see if it is commercially viable.
Carbon-free cement could be a huge moneymaker because the world uses incredible amounts of cement. Yet-Ming Chiang, the Kyocera Professor of Materials Science and Engineering at MIT, estimates humanity makes three to four gigatons of cement a year. A gigaton is one billion tons. The demand for cement is vast. Chiang predicts people will build the equivalent of one New York City each day between now and 2060.
Thus, the company that commercializes greenhouse gas free concrete will make a fortune. Unfortunately, I do not know what that company is.
Electric Airplanes
No electric airplanes are not just a gag from Iron Man 2. Several companies and many researchers are working on them.
The European aerospace giant Airbus SE (OTCMKTS: EADSY) is developing electric propeller aircraft. In fact, an Airbus electric plane crossed the English Channel in 2015. Airbus hopes to build an electric vertical takeoff and landing (VTOL) aircraft.
Uses for electric VTOL aircraft include the military and urban transportation. For example, they could use electric VTOLs, for firefighting, as ambulance, limousines, police vehicles, taxis, and delivery vehicles in cities. The military could use them for sneak attacks, rescue operations, ambulances, and commando raids.
Airbus is working on several electric aircraft including the Vahana, the City Airbus, the EcoPulse, and the E-Fan X a passenger plane.
In addition, electric jets could be possible. A team of researchers at Institute of Technical Sciences at Wuhan University in China claim to have built an electric pulse engine that could operate in Earth’s atmosphere. In other words, an electric jet. However, it appears nobody is commercializing that innovation yet.
Electric planes’ effect on greenhouse gases could be small. Our World in Data estimates aviation accounts for 2.5% of global carbon dioxide. However, electric VTOLs could reduce carbon emissions by replacing polluting ground vehicles such as diesel burning delivery vans. Airbus is obviously the best electric airplane stock.
Next Generation Nuclear Fission
Nuclear fission is a proven technology with a long-history. We’ve been building and using nuclear reactors for power for almost 70 years.
However, nuclear fission comes with horrendous historical and cultural baggage. For example, Hiroshima, Fukushima, and Chernobyl. Nuclear fission generates radiation and creates dangerous waste.
Worst of all, nuclear fission can create the building blocks for nuclear weapons. Nobody wants to give the next generation of lunatics nuclear bombs.
However, nuclear fission is the only proven technology that can generate enormous amounts of electricity without emitting greenhouse gases. Additionally, people safely use nuclear reactors in several settings.
For example, the navies of the United States, Russia, France, the United Kingdom, and China deploy nuclear submarines. In addition, Russia has nuclear icebreakers and France and the USA have nuclear aircraft carriers.
Yet, navies are a controlled environment with crews under military discipline. Navies also have the luxury of selective recruiting, assigning only the smartest and most competent sailors to nuclear ships.
The US Department of Energy is promoting Small Modular Reactors (SMRs) as an alternative to enormous nuclear plants. SMRs are small power plants similar to the reactors navies use in nuclear submarines. For instance, today’s nuclear power plants generate around 1,000 megawatts of electricity. An SMR could generate 50 to 100 megawatts.
The US Nuclear Regulatory Commission approved the first SMR design from a company called NuScale Power in September 2020, Scientific American reports. NuScale hopes to build a 60 megawatt SMR and test it by 2022. The Utah Associated Municipal Power Systems hopes to test the NuScale SMR at the Idaho National Laboratory by 2027.
The advantages to SMRs is that they are mobile and easier to deploy. A steel mill could use an SMR to power electric furnaces, for example.
I think a major use of SMRs could be to power ships. Currently, maritime shipping is responsible for 3% of the world’s greenhouse gas emissions, Yale Climate Connections estimates. Naval use demonstrates that maritime nuclear is workable.
Shipping is an enormous industry responsible for the movement of 80% of the goods in the world. Maritime shipping can be lucrative. Statista estimates the value of seaborne trade at $14 trillion in 2019.
I think the idea of bringing back sailing craft is a fantasy. Instead, I think nuclear could be the future of shipping.
One person who is bullish on nuclear is Bill Gates. Gates launched his fission company, TerraPower in 2006. TerraPower is developing a next generation reactor they call Natrium using a Traveling Wave Design and a Molten Chloride Fast Reactor. They could also use Molten Chloride for Energy storage.
The US Department of Energy, Southern Company (NYSE: SO), and TerraPower plan to test the Molten Chloride Fast Reactor at TerraPower’s Everett, Washington Facility, in 2022.
You can buy stock in Southern Company (SO). The Southern Company is a utility that supplies electricity and gas to nine million customers nationwide. However, I can think of no credible investments for Small Modular Reactors or next generation nuclear.
Yet, I think next generation nuclear could produce Tesla sized companies if the public accepts it. I think Both NuScale and TerraPower could grow into Tesla sized companies if their technologies work. However, I think the commercialization of SMRs is four to five years away.
So yes, I think Bill Gates is right. I believe there are several climate technology fields that could produce enormous moneymakers. Yet I do not think the next Tesla will appear around 2030. It could also take decades for that company to make money. It took Tesla and Amazon (AMZN) over 20 years to grow into moneymakers.
Thus, only people who can afford to lose money should invest in climate technology companies other than Tesla now. The rest of us need to watch and wait for the lucrative climate technology stocks will appear.
Originally published at https://marketmadhouse.com on October 26, 2021.
