A startup owned by Berkshire Hathaway aims to make the construction industry more like car manufacturing.
2 min
A startup owned by Warren Buffett’s Berkshire Hathaway Inc. aims to shake up the construction industry by making it more like car manufacturing.
MiTek Inc., a Missouri-based construction-technology company, is launching a new modular building venture with New York City-based architect Danny Forster & Architecture. The company plans to build entire rooms for hotels and apartment buildings in factories, and then send them to a construction site to be stacked on top of each other.
MiTek has more than 6,000 employees and sells building components, construction software and services like engineering. The company said it is investing tens of millions of dollars in the modular venture, and plans to start working on its first projects early next year.
Modular construction isn’t new, but companies have struggled to be profitable. Transporting entire rooms to construction sites can be expensive, and some finished buildings have suffered from leaky facades.
Other efforts to streamline the construction process have also had issues. Katerra Inc., a Silicon Valley-based startup, has been looking to move a bigger part of construction work to factories and become a one-stop shop that cuts out middlemen like plumbers and architects. But it has struggled under this model, and its main backer, SoftBank Group Corp., had to bail it out.
MiTek looks to modernize modular construction by requiring assembly by general contractors. Instead of building entire rooms in a factory and driving them to a construction site on a flatbed truck, MiTek wants to ship kits of manufactured building parts along with instructions.
General contractors would then construct rooms from these parts, which would include a steel cage forming the structural support for the room, in a warehouse or other type of industrial building near the construction site.
Shipping the parts, rather than entire rooms, keeps transportation costs low and allows MiTek to supply the country from its factory in Lebanon, Pa., said Todd Ullom, the company’s vice president of modular building solutions.
That companies continue to invest in modular construction despite the challenges speaks to the business model’s promise, proponents say. Construction is a massive industry, plagued by rising costs and inefficiencies. Anyone who manages to automate it the way Henry Ford once changed car manufacturing stands to make a fortune, some industry observers say.
“How come an entire industry is operating on mid-to-late-20th-century mode when we’re a quarter of the way, almost, into the 21st century?” said Barry LePatner, a New York-based construction attorney. “It drives me crazy.”
MiTek’s approach brings its own challenges. Relying on customers to assemble rooms based on written instructions can be tricky. Many general contractors are resistant to change, which could lead to friction and mistakes.
Mr. Ullom, who worked as a general contractor for more than 30 years, said relying on a single supplier instead of numerous subcontractors reduces risk, and the instructions are simple to follow. He said MiTek would offer on-site training.
MiTek also plans to automate much of its 225,000-square-foot factory, for example by using robotic welders, not unlike how auto makers assemble cars. Architect Danny Forster’s firm has designed what could become the world’s tallest modular hotel, a planned 26-story building for Manhattan. He said other modular-construction companies moved work from building sites into factories but failed to make it faster or more efficient.
“A lot of times it has been bringing the chaos of the construction site and just putting a roof over it,” he said.
Reprinted by permission of The Wall Street Journal, Copyright 2021 Dow Jones & Company. Inc. All Rights Reserved Worldwide. Original date of publication: May 18, 2021.
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Nvidia’s earnings will test Wall Street’s confidence in the AI boom.
3 min
Chip makers are fighting to assure investors that the artificial-intelligence boom is racing forward. Wall Street might not believe it until Nvidia’s NVDA -0.98%decrease; down pointing triangle Jensen Huang says so.
When Huang steps up to the mic for his company’s earnings call Wednesday, he will have the world’s attention. What he says about Nvidia’s present will preview the future of AI, dictate the path forward for a tech-crazed stock market and influence an American economy increasingly tethered to hopes that the boom won’t go bust.
The $5 trillion chip maker has provided the key building blocks for AI since the launch of ChatGPT in 2022 set off a race for dominance among OpenAI, Anthropic and established Silicon Valley giants. Now, as Nvidia backstops sprawling data-center projects and an exotic money pipeline to boost chip demand, the company’s influence is arguably bigger than ever.
But there are signs of trouble ahead. Political pushback to AI is growing. A bond selloff propelled borrowing costs to their highest levels in years. The hyperscalers that include some of Nvidia’s key customers—once cash-printing machines—are relying more on debt. OpenAI recently told investors its revenue rose by a tepid 18% in the second quarter while its losses deepened.
Nvidia is increasingly stepping in to shore up potential weak points across the market. Earlier this month, the company teamed up with six of Wall Street’s biggest firms on a $500 billion AI-financing plan, pledging to backstop lending to customers that can’t afford its chips otherwise. The chip maker last week also took a stake in Cloverleaf Infrastructure, which arranges power for data centers, and struck a $6 billion deal with startup Poolside aimed at developing a powerful open-weight AI model.
After watching shares in other chip makers and the so-called Magnificent Seven tech companies swing wildly in recent months, Wall Street is hoping Nvidia can beat expectations—again. The countdown is on.
“It’s kind of becoming more and more like the World Cup final than the Super Bowl at this point,” said Brian Mulberry, chief market strategist at Zacks Investment Management. “It’s just gotten to be that big.”
The company has smashed analysts’ earnings estimates for each of the 14 quarters since the AI boom kicked into high gear. Nvidia posted 210% annual growth in net income in its last three-month period, according to FactSet, making Wall Street’s 126% projection look pedestrian.
Expectations for a blowout second quarter have risen rapidly over the course of this year. All Nvidia will have to do to beat this target: outrun 95% annual earnings growth to more than $51.5 billion. Analysts project the chip maker will report record sales of $92 billion for the period, up from a forecast of $78 billion at the start of this year.
In July, big-tech earnings sparked volatility. Concerns about runaway capital spending spread across the sector after Alphabet’s and Tesla’s results, driving a $890 billion wipeout that contributed to the unwind of hedge fund Situational Awareness. Microsoft posted the largest one-day gain in market capitalization by any company, ever, after a quarter proving that it could still show investors the money. SpaceX rocketed higher after a record-breaking initial public offering, only to see $1 trillion in value evaporate.
Surging memory prices and borrowing costs have fueled fears that those and other companies will be unable to keep plowing more money into supplies including Nvidia chips. Shaia Hosseinzadeh, founder of OnyxPoint Global Management, has recently bought dips in AI-infrastructure stocks when Wall Street has strained to absorb massive debt issued by Silicon Valley.
“The macro data is really quite robust,” he said. “Of course, there’s a level at which everything breaks.”
Investors have kept pumping money into the AI trade despite concerns around chip consumers—and to the benefit of chip producers. That is why Nvidia’s outlook for semiconductor demand could send ripples through counterparts such as Micron Technology and Sandisk, developers of the data centers in which their chips reside, and a supply chain of power producers, contractors and other specialists that underpin the globe-spanning AI build-out.
“We joke internally that we’re all Nvidia analysts now,” said David Lefkowitz, head of U.S. equities at UBS Global Wealth Management.
The irony is that investors have tended to sell Nvidia stock immediately after blockbuster earnings, with shares falling each trading session after its four past quarterly reports. Some are betting that will be the case this time around, too.
The options market is pricing in a 5.3% swing, higher or lower, in Nvidia shares during the session following earnings, according to Option Research & Technology Services. That is higher than the 4.8% average move in Nvidia’s stock over the last 12 months after the company reports quarterly results.
In recent days, some of the most actively traded Nvidia options have been put contracts tied to the stock falling from its Friday value of $214.75 to $205 and $210 apiece, according to Cboe Global Markets data. Put options give the right to sell a stock by a set price and typically represent a bearish wager.
Many analysts remain optimistic. Frank Lee, global head of tech hardware and semiconductor research at HSBC Global Investment Research, recently raised his price target for Nvidia shares to $360 from $325, citing, among other things, Nvidia’s strategic partnerships with suppliers and its role as a top contributor to open-source AI.
