Chamath Palihapitiya's BIG bet on 3D printing - Desktop Metal Stock

hi guys and welcome back to viable futures in this video i will be sharing my background research on the metallic 3d printing sector and then discussing desktop metal a company chamath pali habitia has recently been tweeting about i want to briefly discuss some of desktop metal's main competitors and put forward some views on why chamath is backing the stock specifically as always the note that i am not a manufacturing expert and i have done my best to make this video suitably detailed and accurate to understand the investment potential of desktop metal if i have made any errors or oversimplified then i apologize and ask that you do let me know in the comments as i am always keen to learn oh and the standard request of please like the video if you do in fact like the video now i can't understand why this industry isn't being talked about more often it is pretty clear to me now that we are on the verge of a manufacturing revolution i think the impact 3d printing will have on the manufacturing sector will be similar in relative scale to the impact electric vehicles are having on the automotive sector the majority of people will have heard of 3d printing but for those that haven't 3d printing or additive manufacturing as it is called in the industry is the process of constructing an object by depositing material in very thin layers layer by layer until the desired shape is formed the process of additive manufacturing has been around in useful form since the 1980s and was mainly used for prototyping only recently have the machines or the printers that produce 3d objects been suitably advanced that additive manufacturing has become a viable option for industry on for mass production the manufacturing industry is a 12 trillion dollar u.s giant which accounts for 60 percent of the us gdp additive manufacturing is set to revolutionize this industry and if the current expectations are met there is a lot of money to be made additive manufacturing seems to be moving more and more into the tech spotlight perry 3m and others are printing houses spacex is printing the raptor engines and ford is using metal 3d printing to drive the automotive factory of the future the automotive and aviation industries are examples of sectors which are turning to am as the advances in the technology are already making their businesses and products more efficient this comes in the form of supply chain efficiency by either reducing the number of suppliers or by vertically integrating the suppliers and bringing the process in-house but it also comes from the ability to combine parts that was previously not possible a famous example that is widely cited was back in 2016 when airbus was able to produce fuel nozzles using additive manufacturing the am process was able to produce the nozzle reducing the number of parts from 20 down to 1 saving 25 percent of the weight and reducing the assembly time to understand why additive manufacturing is going to revolutionize the industry it's important to first understand how the parts are currently being made simply put there are two main methods casting and machining casting is where molten metal usually aluminium copper zinc or an alloy is forced into a steel die or mold that contains a hollow cavity of the desired shape and allow to cool the dye is then removed and the product is formed machining is where you start with a block of metal and cut out the product you want machining is often used to shape the moulds used in the casting process a key limitation to machining and casting when compared to additive manufacturing is the constraint on the shape that can be made with machining a designer is limited to producing a shape that the cutting tool can reach with casting the designer is limited again to producing a shape that the molten metal can reach so a designer needs to consider the manufacturing process when they are producing their designs a designer may be able to come up with a leaner more efficient design but it can't if it can't be actually made then it's pointless so what is so great about additive manufacturing well put simply am is a transformative approach to industrial production and made possible by the transition from analog to digital processors it uses computer models to direct hardware the printer to deposit material layer upon layer in very accurate shapes as the name applies additive manufacturing adds material to build up an object it is proving to produce cheaper products provide a more flexible design phase where prototyping and design changing is more is quicker it produces a lighter more lean design and can provide supply chain efficiency structures can now be produced where material is only deposited deposited where material is needed designers are becoming free from the shackles of casting to produce products that were never possible before and this is one of the main reasons why lighter products are being produced but another key reason is due to supply chain efficiency the fuel nozzle example mentioned earlier used to require 20 different parts possibly from different manufacturing companies across the globe these parts would probably need to travel to another factory to be assembled to assemble the part would either be welded or bolted together all this adds weight making a product less efficient 3d printing or additive manufacturing is able to produce these complex shapes in one reducing the number of connections and thus producing the weight and we must now talk about artificial intelligence because i see this as another key factor for the migration to am artificial intelligence is being integrated into design software packages further assisting designers in producing the designs that are a lot more efficient it has been suggested that the cad technicians of tomorrow will be able to produce more efficient designs than the top designers of today all thanks to ai we are starting to see products and structures look more like things in nature like tendons in the human body and this is because ai is able to determine the most efficient form of a structure and ensuring material is only present where it's needed now it's really important to stress at this point that additive manufacturing isn't going to suddenly make casting and milling redundant it should be seen as a powerful addition to these existing methods but as additive manufacturing technology develops i do believe we will be seeing a significant shift from the traditional methods towards am now there are seven main types of additive manufacturing methods and i think it's important to briefly discuss them as it won't become apparent why desktop metals products are superior if you have nothing to compare them to now the seven types a laser-powered bed fusion material extrusion binder jetting directed energy deposition material jetting sheet lamination and that polymerization now i only really want to go into detail on the first three of these as they are generally the main ones in the industry powered bed fusion is by far the most widely used method currently and it involves directing either a laser or electron beam to melt and fuse metal powder together once the first layer has been melted and fused together another layer of loose metal powder is added and the laser starts up again adding adding to the next layer material extrusion is where metal is drawn through a nozzle heated and is then deposited layer by layer the nozzle moves horizontally and the platform moves up and down vertically after each layer is deposited and binder jetting is similar to the standard inkjet printers we know today a printer head moves from left to right depositing two materials a metal powder and a binder once a layer is added it's dried and the object is lowered and the next layer is added on top once the object is printed a couple of post-processing steps are required the first is the curing stage which increases the strength of the part so it isn't destroyed in the next stage called sintering so after curing the part will be highly porous and the metal part is relatively weak sintering is where the part is placed in the furnace and heated for approximately 24 hours until the binder is melted away and the metal is fused together now i don't want to go into too much detail on the pros and cons of each system but there are two key points i do want to make binder jetting is fast way faster than laser powered bed fusion and metal extrusion with binder jetting each layer can be printed with rapid speed just like a sheet of paper whereas with laser or extrusion you are constrained by the single laser or nozzle head and speed is much much slower now binder jetting may be much faster but it does require the sintering processes process which takes time currently i see this as one of the bigger constraints to binder jetting but with the rate of ineffect innovation i think we will see this become more and more efficient and less of an issue desktop metal have selected the binder jetting method for their production system they say it is over a hundred times faster than that of a laser-based system finally bringing down the cost by significantly increasing productivity so who is desktop metal well it's a company founded in 2015 by leaders in advanced manufacturing metallurgy and robotics to make 3d printing accessible for all engineers designers and manufacturers on the 10th of december 2020 dm went public through a spac and the deal value dm at 2.5 billion us dollars the transaction provided up to 575 million dollars in gross proceeds comprised of the spax 300 million of cash and 250 million us dollar fully committed common stock pipe which chamath said he led existing shareholders will retain 74 of the company with the spax trust shareholder the spax trust shares holding 12 pipe equity at 11 and found the shares at two percent dm has produced four main products the fiber the shop and the studio systems are now all released with the production system due for release in the second half of 2021. the production system is the most exciting and is really the first 3d printing system for mass production like the shop system it uses a single pass jetting technology which makes it the fastest printing system in the world delivering that 100x 100x efficiency mentioned earlier it produces excellent quality competitive costs repeatability and supports a wide range of metals for me the takeaway here is that dm has now produced a product that provides better value to the traditional methods for certain applications their single pass jetting technique is industry leading and i can see this company innovating quickly and bearing in mind that the 3d printing sector has barely scratched the surface of what the sector believes is possible this machine is very exciting and the key stepping stone to future revenue streams archinvest believes that additive manufacturing is still in its infancy here we can see that am is fairly well established in the prototyping sector achieving a 40 to 50 market penetration however the real money is in the end use parts where arc estimates that there is 490 billion dollar market potential am is currently only penetrating one percent of this arcs research also suggests that am will grow to a 97 billion dollar industry by 2024. that's an annual rate of growth of 65 this chart shows a plot of existing technologies with geometry complexity on the x-axis and quantity on the y-axis the plot bubbles show a comparison of traditional manufacturing techniques and laser powder bed fusion as an example now overlaid is how desktop metals products will compete and disrupt this whole sector desktop metal is very well positioned to lead this industry they expect the am market to grow 11x over the next decade and their first three products are already on sale with a production system due for release in the second half of this year their products are very energy efficient plug and play and they provide almost zero waste in the printing process as such dm have positioned themselves very nicely to take this sector growth in their stride another key reason that they are well positioned is they already have a global distribution network in over 60 countries and their customers are all in the main sectors from automotive and aerospace to heavy industry in an interview last year their ceo stated that they're exceedingly happy that their customer base is very horizontal and that no customer accounts for more than 10 of their revenue the leadership of dm is talented and is founder-led headed by rick furlop rick is a serial entrepreneur who is the founder of six technology companies and forbes has called eli sax co-founder and technical technical fellow the living embodiment of 3d printing many of the team are engineers and more than 25 employees hold phds relevant to this sector now touching on the financials and this is year end 2019 the company achieved 26.4 million dollars in revenue and they expect this to increase to 941 million by 2025. now this seems ambitious currently approximately 86 of revenue comes from studio systems with consumables and 14 from software and support services it's going to be interesting to see what the revenue percentage is for the production system when we get the interim results this year to note 89 percent of revenue is generated in north america and key customers include bmw and ford who have both provided investment into desktop metal but also google the us military lockheed martin and bosh the company made a loss of 121 million but are expected to make a profit of 508 million by 2025. the company has 625 million in cash and 9.9 million in debt so would i invest in desktop metal time to pull out the three questions is this really addressing a fundamental human need i think it absolutely is additive manufacturing is able to facilitate leaner designs decrease cost reduce weight reduce waste and shorten the time to production as such am provides a more sustainable method of manufacturing and opening manufacturing up to the masses could this be used by a billion people in 30 years time absolutely i'm confident that in 30 years time a large proportion of the human population that buys a manufactured item will find that the majority of that item will have been 3d printed and desktop metal is currently positioned very nicely in this sector and is there somebody really special here well there is a highly qualified team led by some of the leaders in the industry and most with an engineering and manufacturing background backed by legendary investors this is a strong hand now for the key risks number one the competition there are many am companies out there but very few that are providing even comparable systems though companies to watch are hp who are expecting to announce a bioenergetic printer soon x1 3do stratasy velo3d and digital metals are all other key players in this area x1 is worth touching upon in a bit more detail they for a time have the fastest printing system on the market and they have a history of experience and their latest model is the tenth iteration this should not be dismissed i also think that their revenue project projections are ambitious but chamath has included their revenue predictions in his one pager so i'm going to trust him on this one and finally dm's production system is the first iteration of this size printer for them it looks fantastic don't get me wrong and although the people at dm has fantastic experience it is a relatively new company and the first iteration of this size product on the market this can also be a positive so let's see now i have a position in desktop metal i think this is a relatively safe long-term investment they currently have cash and it is widely rumored that they are eyeing up competitors for acquisitions the share price today is approximately 20 us dollars and i am looking forward to re-watching this in a few months time to see if my thoughts have changed and to see how the stock price is trending i should also mention that for those that prefer to invest in an etf arc invest have a specific etf for 3d printing worth checking out surprisingly to me desktop metal isn't included in this and i really can't understand why any thoughts please let me know in the comments and a huge point i forgot to mention earlier and this actually may be one of the biggest points for the sector saving the best or last i guess no tariffs designs can be sent across the world for free and printed in the country of assembly this in itself is just so important to factor in into the future viability of the sector now i appreciate this video was a bit longer than the others and i didn't set out to make it this long but felt it was necessary to cover this in detail but this really only scratches the surface of the sector and i have very much simplified some areas but if you found it useful please do like the video and subscribe to the channel as it really really helps and it brings a smile to my face thank you for watching and see you in the next one

Channel: Viable Futures

Views: 20,838

Rating: 4.9796333 out of 5

Keywords: Chamath Palihapitiya, 3D printing, Desktop Metal, Additive Manufacturing, $DM, SPAC, ARK Invest, Cathie Wood, top stock, Desktop Metal Stock

Id: Q0lzvS5ow0k

Length: 18min 26sec (1106 seconds)

Published: Wed Jan 13 2021