Thank you for your continued support and engagement. Each week, we're sharing what companies we're researching and the what, the who and the how that we think makes the companies interesting and unique. This roundup is brought to you weekly by a group of interns, creative minds, artists and investors who believe that through best in class investing along with the democratization of financial education we can do great things together. Enjoy, Explore and Share.

Equities fell this week as the Trump trade’s momentum faded — erasing half of the market’s post-election gains. Investors weighed valuation levels, uncertainty around the direction of fiscal policy, and the potential for inflationary pressures to resurface in 2025. This comes as consumer and investor sentiment turned higher around the election, with a Bank of America survey reporting the highest U.S. equity exposure since 2013.

After Federal Reserve Chair Powell noted this week that the Fed is in no rush to cut rates, the market reversed expectations for interest rates. Now, just a 50% probability for a 25 basis point rate cut is priced in for December compared to 80% last week. A higher share of investors see inflation as the biggest risk driven by the potential policy risks as well as a current Fed funds rate path that has yet to return price growth to the Fed’s 2% goal.

In economic data for the week, Tuesday's NFIB Small Business Optimism report beat expectations as the potential for tax cuts more than offset weaker views on sales momentum in October. Wednesday’s CPI report showed stubbornly high contributions from the cost of shelter and motor vehicle insurance segments, while prices seem to have achieved sustainable levels on most other categories. The CPI report came in line with economists expectations at 0.2% MoM and 2.6% YoY while the core CPI measures showed 0.3% MoM and 3.3% YoY. Thursday’s PPI report showed a 3rd consecutive monthly increase at 0.2% MoM and 2.4% YoY. The pressures come as the Fed tries to achieve the last leg of restoring its 2% goal, but tariffs are widely believed to add volatility and upside risk to these measures. Friday's retail sales report surpassed estimates, growing 0.4% MoM, as consumer spending remains strong heading into the holidays and the report was aided by a rebound in automotive sales.

With President Elect Donald Trump’s selection of Robert F. Kennedy Jr. to head the Department of Health and Human Services, PFE, BNTX, MRNA, and NVAX suffered losses on RFK Jr.’s anti-vaccine stance. Psychedelic therapy company ATAI gained following earnings and a pro-psychedelic stance by RFK Jr. With the expectation of a less burdened path to approval, some biotech stocks like FDMT performed well on a rebound this week. DTIL readied investors for in vivo clinical data on its lead chronic Hepatitis B program in 2025. Big tech stocks also fell this week as investors try to weigh the impact of tariffs against an easier regulatory environment.

Friday’s Close (Weekly Performance)

S&P 500 5,870.62 (-2.08%)
Nasdaq 18,680.12 (-3.15%)
Dow Jones 43,444.99 (-1.24%)

Thank you Blue Room Analyst JARED FENLEY.

The S&P 500 closed the week down 2%, though it remains higher than it was on Election Day. Earnings reports were a key driver of performance, but political developments—particularly out of Washington D.C. and Mar-a-Lago—also influenced market moves. Federal Reserve Chairman Jerome Powell indicated that the Fed is in no rush to lower interest rates, and with the 10-year Treasury yield rising since mid-September, equity investors are becoming increasingly cautious. Markets are currently trading near the upper end of historical multiples, so concerns about higher rates are adding to downside risks.

President-elect Trump’s controversial nominees for certain positions are also causing a stir in markets. For instance, what will Robert F. Kennedy Jr’s nomination to lead the Department of Health and Human Services (HHS) mean for pharmaceutical companies? Well, some investors in Moderna have been fleeing the stock with the heightened uncertainty of an anti-vaxxer leading HHS. Fortunately, we sold Moderna last month as it was down 21% on the RFK news alone.

The broader uncertainty in the pharmaceutical sector has weighed on performance, but we are closely monitoring our holdings. In fact, Min and analyst Jared were in San Diego this week meeting with management, expert clinical investigators and advisory board members of Fund One holding, Precision BioSciences. Min and Jared are excited to share their findings with our investors soon so stay tuned.

Unsurprisingly, some of our biggest contributors to performance this week were also related to earnings and Trump picks . For as much as vaccine stocks were down, psychedelics were up on the Kennedy HHS nod. Fund One holding, Atai Life Sciences, a clinical-stage biopharmaceutical company focused on mental health innovation, announced its Q3 2024 financial results, highlighting key advancements in its pipeline targeting treatment-resistant mental health conditions. Despite a challenging market, Atai maintains a strong financial position with $101 million in cash and cash equivalents, sufficient to fund operations through 2026. Atai also completed the acquisition of IntelGenx Corp. to enhance its drug delivery capabilities and is on track to initiate Phase 2 trials for VLS-01 (treatment-resistant depression) and EMP-01 (social anxiety disorder) by year-end 2024. The company is also progressing with its pipeline, including IBX-210 for opioid use disorder and other innovative treatments targeting unmet needs in mental health. Atai's strategic focus on novel delivery methods and AI-informed drug design underscores its commitment to developing next-generation therapies for patients with complex conditions. We are encouraged by Atai’s continued progress and are optimistic about the growing opportunities for psychedelics under the new administration. Given the company's strong pipeline and strategic developments, we recently increased our position in Atai and it was the largest gainer, up 14% for the week.

Thank you Blue Room Investing President JOHN FENLEY

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From Sci-Fi to the Street:

Navigating the Rise of
Self-Driving Cars

From Horse to Buggy (and now autonomy)

It may be hard to imagine that cars could soon be navigating winding roads all on their own, but imagine the skepticism and wonder that must have accompanied the transition from horse-drawn carriages to the first automobiles. For centuries, horses had been integral to transportation, commerce, and daily life, making the idea of a "horseless carriage" seem implausible to many.

Now, over a century later, society stands on the precipice of another transportation revolution: self-driving cars. Just as early adopters of automobiles faced challenges such as a lack of paved roads and a general distrust of new technology, today’s autonomous vehicles confront hurdles like regulatory uncertainty, safety concerns, and public skepticism. Yet, as history has shown, what begins as an unimaginable leap often becomes an everyday reality, fundamentally reshaping how we live and move.

While many companies have their own versions of autonomous driving software, not all autonomy is considered equal.

Level 0 (No Driving Automation)

Most vehicles on the road today fall under Level 0, meaning they are entirely manually controlled. The human driver handles all aspects of the “dynamic driving task,” though some vehicles may include driver-assistance features, such as emergency braking systems. Since these systems do not actively perform driving tasks, they do not qualify as automation.

Level 1 (Driver Assistance)

This is the most basic level of automation. Vehicles at Level 1 feature a single automated system for driver assistance, such as adaptive cruise control, which manages speed and maintains a safe following distance. However, the driver is responsible for steering, braking, and other critical driving tasks.

Level 2 (Partial Driving Automation)

At this level, vehicles feature advanced driver assistance systems (ADAS) capable of managing both steering and acceleration/deceleration. While the car can handle these functions simultaneously, it still requires the driver to remain engaged and ready to take control. Here the automation falls short of self-driving because a human sits in the driver’s seat and can take control of the car at any time.

Level 3 (Conditional Driving Automation)

Level 3 introduces significant technological advancements. These vehicles possess environmental detection capabilities, allowing them to make decisions, such as overtaking slower vehicles, without driver input. However, human oversight is still necessary, as the system may request the driver to intervene if it encounters a scenario it cannot handle. The shift from Level 2 to Level 3 is groundbreaking for automation but subtle from a driver’s perspective.

The jump from Level 2 to Level 3 is substantial from a technological perspective, but subtle if not negligible from a human perspective. Level 3 vehicles have “environmental detection” capabilities and can make informed decisions for themselves, such as accelerating past a slow-moving vehicle. But―they still require human override. The driver must remain alert and ready to take control if the system is unable to execute the task.

Level 4 (High Driving Automation)

The key distinction at Level 4 is that the vehicle can operate independently and intervene in the event of system failure, eliminating the need for human interaction under most conditions. However, manual override remains an option. These vehicles operate within specific geographic boundaries (a concept known as geofencing) and are typically restricted to controlled environments like urban areas with lower speed limits.

Level 5 (Full Driving Automation)

At this level, vehicles are entirely autonomous, eliminating the need for human attention or intervention. These cars lack steering wheels, pedals, and other traditional driving controls. They can operate freely without geographic restrictions, navigating any road or environment that a skilled human driver could handle. While Level 5 vehicles are undergoing rigorous testing worldwide, they are not yet available for public use.

Let’s take a look at the major players in the space.

Tesla

Estimated valuation: ~$300 billion (⅓ of TSLA’s overall market cap)

Autonomous miles driven: 2 billion (under driver supervision)

FSD requires driver supervision and requires the person to be ready to take control at any moment. While these systems are designed to evolve with software updates, their current capabilities do not equate to full autonomy and fall into the Level 2 category. Although FSD is still in early stages of development, the company generates over $1 billion in revenue per year for personal use of its FSD software, with $3.6 billion in deferred revenue that will get recognized as additional features get rolled out with higher levels of autonomy.

Tesla's autonomous driving technology integrates advanced hardware and software to deliver cutting-edge capabilities in its Full Self-Driving (FSD) systems. On the hardware side, Tesla famously removed ultrasonic sensors and radar units from its passenger vehicles — sensors that majority of other autonomous driving companies still use — and is working exclusively with multiple external cameras and advanced vision processing powered by Tesla Vision, a camera-based system that replaces radar for North American models. Tesla also designs specialized AI inference chips optimized for running FSD software. These chips are engineered for maximum performance-per-watt, ensuring efficiency and reliability. The design process includes rigorous architectural enhancements, timing and power analyses, and extensive testing to verify performance and functionality. Once validated, these chips are mass-produced and deployed in Tesla vehicles, supported by drivers that optimize chip performance and ensure redundancy for safety.

On the software side, Tesla applies state-of-the-art research in deep learning to train neural networks for perception and control tasks. Each vehicle processes data using per-camera networks for image analysis (semantic segmentation, object detection, and depth estimation) and bird's-eye-view networks that integrate video inputs from multiple cameras. This approach enables the system to map road layouts, identify infrastructure, and track 3D objects in real-time. Tesla's neural networks involve 48 individual networks that collectively require 70,000 GPU hours to train, delivering over 1,000 unique predictions per timestep. These models learn iteratively from Tesla's extensive fleet, ensuring exposure to diverse and complex driving scenarios. The key advantage for Tesla’s neural network approach as opposed to geofencing and mapping data is that if Tesla is successful, it expects that its system can scale faster and be deployed anywhere in the world because it doesn't need pre-mapped information.

Waymo

Estimated valuation: $45 billion

Autonomous miles driven: 22+ million

Waymo, founded in 2009, is a self-driving technology company owned by Alphabet, Google's parent company. Recently, it raised $5.6 billion in new capital, though the company's valuation remains undisclosed. Waymo achieved its first fully autonomous ride on public roads in 2015 and has since become a leader in autonomous vehicle services, currently delivering over 150,000 paid trips each week. The company is part of Alphabet's "Other Bets" portfolio, which also includes other ventures, reporting $388 million in third-quarter revenue.

Over the past decade, Waymo has developed an integrated system of sensors and computing designed to provide its autonomous driving platform, the Waymo Driver, with a comprehensive understanding of its surroundings. The system is optimized for all conditions, offering clear situational awareness day or night. Waymo recently unveiled a Level 4 self-driving taxi service in Arizona, where they had been testing driverless cars―without a safety driver in the seat―for more than a year and over 10 million miles.

The Waymo Driver’s cameras deliver a simultaneous 360° view around the vehicle, featuring high dynamic range and thermal stability to perform effectively in both bright daylight and low-light environments. These cameras can detect traffic lights, construction zones, and other objects from hundreds of meters away.

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These materials do not purport to be all-inclusive or to contain all the information that a prospective investor may desire in considering an investment. These materials are intended merely for preliminary discussion only and may not be relied upon for making any investment decision. Any discussion or information contained in this presentation does not serve as a receipt of, or as a substitute for, personalized investment advice from Blueroom or your advisor.

This publication does not constitute an offer to sell or a solicitation to buy any securities in any fund, market sector, strategy or any other product. Investing is speculative and involves substantial risks (including, the risk of loss of the investor’s entire investment). Past performance is not indicative of future results, and there can be no assurance that the future performance of any specific investment, investment strategy, or product will be profitable.

For more information about us and our general disclosures contact us directly.

Weekend Update #205

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From Sci-Fi to the Street: