Lou Basenese is selling his Digital Fortunes newsletter ($149/yr) with a pitch about “Area 52” — which is a nice hook, it sounds like top-secret alien stuff, but is mostly about a quantum computing test project in Illinois.

And as I see it, that “Area 52” doesn’t really have anything to do with the company he’s teasing, either… but more on that in a minute.

Here’s a little excerpt of the pitch:

“‘Area 52’ — a 52-mile stretch of the Chicago suburbs, where a ‘godlike’ super-technology is undergoing top-secret government tests.

“The U.S. Military along with six top media outlets call it a ‘Holy Grail’ technology.

“Discover Magazine calls it the ‘Garden of Eden.’

“The Department of Energy calls it ‘transformative to our entire way of life.'”

And the hype is laid on pretty thick…

“I could easily describe the technology inside of Area 52 as…

>> On par with the discoveries of fire, the wheel, the internet, and flight…

>> Critical to America’s national security over the next 100 years…

>> Vital to global economic growth over the same period…

>> Worth 10X the existing internet…

>> The first technology I’ve ever valued above a quadrillion dollars, and therefore…

“The single greatest investment you’ll ever make in your life.”

And yes, as you’ve probably already guessed, Lou Basenese is telling us that the secret winner of this quadrillion-dollar technology is “one little company” …

“Because a rising technology superstar — a small-cap company valued at 0.03% the size of Amazon — could hold the key to Area 52’s commercial success. Therefore, it stands to reason that this same tiny company could trigger a $1,000,000,000,000 global economic boom, which I’ll cover here today.”

And he talks about a massive surge in revenue that is on the way…

“In the global race to “get ahead” on Area 52’s awesome technology….

“I believe the little company I’m tracking — a company whose shares could make you rich in 2022 — is already ahead… way ahead!

“Its sales are set to rocket from $400,000 in 2021…

“To upwards of $58 million in the days ahead.”

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And, of course, that this surge in revenue will make the stock price soar, and you’ll be swan-diving into your money bin before you know it…

“… turning a $5,000 investment into $15,000 on the low end… and as much as $450,000 on the high end.”

So what is “Area 52?” Well, I already let the cat out of the bag a little bit with that “quantum computing” phrase up top… this is indeed about quantum computing. Sort of. Here’s more from Basenese:

“When you consider that Area 52’s technology can crack the world’s most complex algorithms in under 4 minutes — algorithms that 100,000 desktop computers would need 10,000 years to crack…

“Then you can appreciate how ‘dumb’ iPhones, Teslas, F-22 Raptors, and cryptos actually are.”

So that’s about quantum computing, which is essentially the exponentially faster “next level” of computing power that has been under development for decades but has gotten a lot more attention in the past five or six years. If you don’t know anything about the topic, my (very basic) understanding of quantum computing is that it’s an evolution of binary code — current chips and computers work on a binary system, meaning every single thing they do is based on transistors that process a series of signals that are either on or off, each one is either 1 or 0.

Quantum computing leverages the quantum world, where there’s more than one state of being for an electron — it can be charged or not charged, of course, but it can also be many different things at once. That opens up the possibilities for a much more powerful thinking machine, because instead of each unit of “thought” being a 1 or a 0, it can be any of dozens of things, with the storage or processing being based not on an on or off signal but on the combination of many different physical states of a subatomic particle in the quantum realm. Basically, just think of it as a way for a computer to become dramatically more capable.

There are lots of different theoretical models for quantum computing, and I don’t really understand any of them. The hope is that they will be hugely helpful for major projects that would overwhelm a conventional computer, even a supercomputer, like simulation of complex systems or cryptography. They would also have the potential to dramatically speed up artificial intelligence processing and “learning.” There’s a pretty readable Medium article here from a couple years ago that tries to explain the basics, if you’re interested, and there’s a widely recommended book called Q is for Quantum that effectively explains quantum mechanics without any upper-level math. There’s also a good New York Times article here, which focuses on Google’s development of the quantum Sycamore processor and their initial claim of “quantum supremacy” (this was back in 2019).

And if you want a little caution, here’s a quote from a Scientific American column published a little over a year ago (also a good read, “Will Quantum Computing Ever Live Up to Its Hype?“)….

“Lots of other technologies—genetic engineering, high-temperature superconductors, nanotechnology and fusion energy come to mind—have gone through phases of irrational exuberance. But something about quantum computing makes it especially prone to hype, [Scott] Aaronson suggests, perhaps because ‘”quantum” stands for something cool you shouldn’t be able to understand.'”

Here’s how Basenese loops this quantum idea into his pitch:

“Area 52 is my own codename.

“Codename for what?

“For the location of the U.S. government’s 52-mile test loop for a ‘National Quantum Internet’ ….

“As CNBC reports, ‘beneath the suburbs of western Chicago lie 52 miles of optical fiber, which promises a novel, richer way to process information — like moving from 2-D graphics to 3-D graphics.'”

That’s true, though the “quantum network” that’s being used as a testbed has been extended a bit, they now say it’s 124 miles. The quantum loop was first built in 2020 by Argonne National Laboratory, and now it has six nodes where researchers can access and test the network and transmit quantum particles, largely between Argonne and a couple University of Chicago locations.

More from Basenese:

“… the Quantum Internet is the offspring of a miracle technology — like how automobiles were the offspring of the combustion engine… or how smartphones were the offspring of wireless technology… or how Amazon is the offspring of the existing internet.

“Therefore, for out-of-this-world profits in 2022…

“For a chance to pocket up to 89x your investment…

“I’m urging investors to go straight to the source of the Quantum Internet’s miraculous power…”

And then he implies that this particular little company is key to the commercial rollout of quantum technology — and boasts that he’s the only one who knows it…

“… while I applaud the Main Street media for covering quantum technology…

“You’ll be hard-pressed to find any genuine investment insights…

“Or reporting on quantum technology’s irresistible sales and profit projections…

“Or deep analyses of which quantum stocks to buy (and which ones to avoid)…

“Or mentions of specific companies like IonQ (IONQ) — an open position in my model portfolio, which recently doubled in price.

“Or coverage of Defiance Quantum (QTUM) — a quantum-based ETF that also recently doubled in price (and could double 10 more times in the blink of an eye)…”

IonQ gets teased from time to time as well, and they did double in price during the nuttiness last year but, of course, have given up all those gains and more so far in 2022 (they went public via a SPAC merger at $10, effectively, but are now down to $5). As with many SPACs, it’s a cool technology, and lots of different folks claim to have the lead in implementing quantum computing, but it’s not really a commercial technology at the moment. The Defiance Quantum ETF is so diversified, including most any computer or semiconductor company you can think of (Nokia, IonQ, Taiwan Semiconductor, Microsoft, Honeywell, Alphabet, etc.), that its chart looks like an almost exact copy of the Nasdaq 100 (QQQ).

And more from Basenese….

“Not in a million years will the media cover the little company I’ve listed as a ‘Screaming Buy,’ whose product could hold the key to quantum technology’s commercial rollout.”

He also claims some “quantum supremacy” of his own…

“I consider myself the market’s foremost quantum expert…”

Well, good for you, Lou. I consider myself the most handsome Detroit Lions fan in New England, but so far I haven’t been able to get anyone in my family to second that claim.

And he goes further into describing the huge breakthroughs that will power quantum computing to mass adoption…

“… the three superpowers of quantum technology — a) it’s inherently unhackable… b) it’s faster than light speed… and, c) its godlike intelligence allows for millions of calculations to be performed at once. On such merits, it’s the first technology ever worthy of a valuation above $1 quadrillion.”

And then, finally, we get some clues…

“It’s time to reveal my #1 stock of the decade…

‘Invest only in what you know,’ says Warren Buffett.

“Well, in the spirit of Mr. Buffett…

“I’m recommending that you invest in something you know plenty about — microchip technology.

“Heck, you’ve been living with microchips all of your life… and some of the best investment gains ever — stocks like NVIDIA, Qualcomm, and Broadcom — came from pure-play microchip companies.”

OK… so it’s some kind of chip company. What else?

“Quantum microchips perform the same tasks as existing chips…

“Only quantum microchips have the potential to be many millions of times faster.

“Faster than the speed of light, according to some experts.

“Given such immense speed and power…

“Without quantum microchips, I believe the most promising economic drivers of the 2020s — i.e. artificial intelligence, self-driving cars, advanced robotics, regenerative medicine, augmented reality, renewable energy, unhackable networks, Mars missions, and beyond — could become historic flops.”

And who makes these chips?

“As it stands, only five companies have developed fully operational quantum microchips — Google, IBM, Intel, Rigetti, and IonQ… yet none of them are licensing their chips for wide-scale consumer applications.

“Fortunately, a little Silicon Valley-based company is seizing the moment…

“With its proprietary quantum science, guarded by 298 patents…

“This rising superstar (pictured below) is helping major chip manufacturers produce quantum microchips for broad-based usage.”

And we get some photos from the company’s labs, as well as an overhead shot of their headquarters — so that will help us be definitive about our answer, in a moment. First, though, a few other clues…

“This company is small — trading on the Nasdaq for only 0.03% the size of Amazon….

“I believe a major licensing deal could be announced any minute — on (or before) August 3rd, 2022….

“If I’m correct, the licensing deal will be with one of the following deep-pocketed, Big Tech giants…

Samsung
Micron
Intel
Broadcom
Toshiba
Texas Instruments
Skyworks

“According to this little company’s own internal forecasts (not mine)…

“Upon inking a major manufacturing deal…

“Sales could blast from $400,000 in 2021…

“To as high as $58 million in the days ahead, representing a staggering increase of 14,400%.”

And one last bit of hype for you before we get to our “reveal” …

“I already own shares of this little company inside of my own personal brokerage account, in hopes of making a fortune from its cutting-edge technology.

“I liken investment here to Apple just as it launched the iPhone (2007)…

“Or Amazon just as it launched its Prime membership (2005)…

“Or Netflix just as it launched its streaming service (2007)…

“Or Tesla just as its fully electric Roadster first hit showrooms (2008)…

“Or Moderna just as it’s preclinical mRNA vaccine trials ramped up (2018).

“Looking back, those five events foreshadowed the biggest stock gains of the 2010s.

“If you missed out, you have a rare second chance…”

The promise is that their next earnings announcement, which is this week, is going to include a big deal being announced… which will send the share price soaring…

“I believe an announcement is imminent, meaning we could be days away from a price spike to $50 per share… and then to $100-plus per share.”

So what’s the stock? This is, sez the Thinkolator, a little company called Atomera (ATOM), which we’ve looked at before. It’s not really a quantum computing company, not directly, they’re not working on quantum chips… but it is a company that is trying to commercialize what they call a “quantum engineered material” called Mears Silicon Technology (MST). Here’s how they describe themselves:

“Atomera Incorporated is a semiconductor materials and intellectual property licensing company focused on deploying its proprietary technology into the $450+ billion semiconductor industry. We have developed Mears Silicon Technology (“MST”), which increases performance and power efficiency in semiconductor transistors. MST can be implemented using equipment already deployed in semiconductor manufacturing facilities and is complementary to other nano-scaling technologies already in the semiconductor industry roadmap.”

So no, they’re not processing qubits or dealing with different quantum states of electrons to make computing exponentially faster. They explain their technology in their latest investor presentation, if you want a quick overview – it’s essentially an extra layer of silicon nanomaterial that can improve transistor performance and reduce costs for chipmakers. Their goal is to convince chipmakers and foundries to use the technology, earn engineering fees as they integrate it and license fees as they begin to use the techology, and then build up to larger commercial agreements that allow them to earn per-chip royalties for the use of the technology.

It has been pretty slow going — they are “working with” 50% of the top chipmakers in the world, and have been for years, but those are mostly early stage “engagements.” There have been a couple customers whose names they were allowed to use, including STMicro and one or two smaller companies, but most of their “engagements” are completely confidential and don’t have any real time line attached.

They now have one customer in “Phase 4” development, which is new this year — that means testing installation of MST deposition equipment and technology on the customer’s own foundry lines, which can meaningfully speed up the process of getting to qualification (since they don’t have to ship wafers back and forth to Atomera, they can do test runs and make adjustments more quickly)… but the other 18 customers are in various phases of planning or setup of their chips to be tested on Atomera’s equipment, without any big aggressive moves to adopt MST, which, to my eye, is where they’ve kind of been stuck for several years. “Phase 5” is actually getting qualified by a foundry for commercial production, presumably leading to production (which would be Phase 6).

Atomera is not currently focused on the leading edge semiconductor producers who have made the smallest chips and are pushing the envelope, at least not as it appears to me — the MST process could theoretically also be used on the highest-end chips, but the appeal of their technology right now looks like it’s mostly in bringing older chip designs, using older equipment, up to a higher level of performance (ie, letting a producer stay with a legacy 40nm node design and still get improvement, rather than upgrading to 28nm or 14nm, or whatever). But it is a very small company, and it’s true that if they get any fairly large licensing deals they could turn that into a profitable operation pretty quickly.

The last time I looked at Atomera was when Chris Wood was touting this stock almost exactly two years ago, for essentially the same reason as Basenese today — well, that’s not exactly true, he didn’t overpromise on the “quantum” angle like I think Basenese is doing, but he did say that a big licensing deal with a major chipmaker was imminent, and that such a deal would bring riches. Here’s what I said the status was back then:

“9/14/2020: They have steadily increased their “number of engagements” with customers at different levels, and have moved some of the early stage projects into Phase 3 engagements… but they also had three “Phase 3” engagements at their IPO in 2016, and ten three years ago, and that has not led to commercialization to a meaningful degree. Their last investor presentation now says they have 19 customers and 26 engagements, more than half of which are in “Phase 3” (as of the last quarter, one more moved to “Phase 3,” for a total of 17 in that category), and they continue to say that they are “working with 50% of the world’s top semiconductor makers.” Apparently, change comes very slow to these high-volume and finely-tuned operations.

“If you’re curious about what those “phases” mean, here’s how they have described the phases in the past (this is from the Q2 2019 conference call, about a year ago)…

‘Phase 1 includes customers under NDA who are planning an evaluation of our technology. In Phase 2, we deposit MST film on customers’ wafers and conduct physical characterization. Phase 3 is where customers incorporate MST on their wafers during an R&D run in their fab and use the test results to justify licensing our technology. It is generally in Phase 3, that we are most likely to sign license agreements with customers. Phases 4 and 5, our customers install our technology in their fab, execute manufacturing and distribution licenses and transition to production’

“They have signed three license agreements so far, but nobody has made it to Phase 4 or 5 yet.”

Since then, they’ve made some progress — they signed a joint development agreement (JDA), with great fanfare, in January of 2021, and as of the first quarter of 2022 they have still exactly the same number of customer engagements that they had in 2019, and the same percentage are in “Phase 3” — the only real difference is that last year, in 2021, they moved one “engagement” to Phase 4, and this year, right around the time of their first quarter earnings call, they added a second JDA with a different customer, and they also got a milestone payment for that first JDA when they finished meeting the requirements of the customer’s R&D division, which means they can move forward to working with that customer’s actual business units to integrate MST into their work and then, hopefully, move into qualification and production, eventually. Here’s how they put it on the last conference call (in April):

“As you recall, we entered into a joint development agreement in January of last year with a large market-leading semiconductor provider.

“The goal of the agreement was to install MST capability in their fab to work with their R&D team to validate MST’s performance benefits while simultaneously proving that it could meet their manufacture ability requirements. This opportunity arose because one of this customer’s business units had found MST’s capabilities compelling and subsequently referred us to their R&D arm, whose job it is to vet incoming technologies. This customer invested a lot, including production tool resources, engineering, time, and money into the initiative. And working together, we were able to install the MST technology in their fab.

“Two weeks ago, we were proud to announce that we had successfully met or exceeded all of the requirements of the JDA, resulting in two important outcomes. One is, obviously, the milestone payment from the customer, which are recognized as revenue in the first quarter. The more important step is the ability to work with the customer’s business units to eventual production. As you know, Atomera’s No. 1 goal is to ship MST-based products, resulting in royalty payments. Successful outcome to this JDA was necessary so we can start moving those business units forward on MST integration and toward commercial royalty-bearing production. Comparing the phases in this JDA with our standard business model is not appropriate as BUs will have to go into integration before moving into qualification and later into production. We will continue to provide updates as best we can, but as our followers know, there’s a high degree of confidentiality demanded in this industry and this customer is especially sensitive.

“Further, as everything in this JDA has taken a bit longer than our initial expectations, we’re not guiding to a time frame on these next steps.”

Here’s what they said about the second JDA, the new one announced this year:

“In our business, we expect each engagement to differ and therefore each JDA to have unique properties. So I’d like to note that this JDA is different from our first in some important ways. First, it’s not being administered by a central R&D group but by one specific technology area. So we believe this customer has the ability to move faster than our prior JDA partner on a first product.

“Second, this contract was structured to smooth the path toward productization after we pass the next milestone. So there is no revenue associated with signing. The customer has committed to prioritize our wafers and dedicated team who can help move the process to production quickly. And it clearly spells out the revenue expectations coming in the later phases of JDA.

“As I said, if we’re successful on this JDA, we believe the customer will move expeditiously toward commercialization, because all the legal and contract delays should be behind us.”

So there’s progress, but still a high degree of uncertainty. Atomera thinks that the current state of the semiconductor industry is likely to boost their prospects, largely because they can help the lower-end foundries that have older equipment to improve their output. This is, to be clear, not a “we’re going to win by leading in quantum computing” argument, it’s more like, “we’re going to make old equipment and fabs produce better chips, and with the US focusing on increasing supply that could generate some big orders.”

Both the cash burn (about $3-4 million a quarter) and the revenue (still almost always zero) have been about the same for the past two years — their revenue has pretty much all been driven by that first JDA, an initial $400,000 fee for signing the agreement and another $375,000 for a “success fee” for passing the initial R&D hurdle, and they are intentionally not charging high up-front fees because they want to encourage their licensees and partners to make progress, and they’d much rather do what they can to speed up and streamline the testing steps, get to production, and earn royalty and licensing payments on commercial products… so that means big chunks of revenue are probably unlikely in the near future. They only provide guidance one quarter into the future, since they don’t know when they’ll sign new deals, and their guidance for the current quarter was still “zero revenue.”

They have about $20 million in cash these days, most likely, so they are probably OK for a little while… but unless they get a big licensing payment from someone they’re likely to need to raise cash in the next two or three quarters. The only real guidance they’ve given for how fast progress will be is that it is possible to get to “Phase 5” with their first customer in 2022… but they didn’t imply that it was particularly likely, it all depends on how fast that customer can do the integration testing for specific products (and, of course, what the results of that testing are — each testing run might take several months, so if there are some back-and-forths because of problems that arise in the deposition, that can easily extend to years… they don’t talk much about the timeline of steps these days, but right after the IPO they talked about each test run taking 3-6 months, and said that going from Phase 4 to Phase 5 would probably take 8-12 months… incidentally, Lou Basenese was on that first conference call they held in 2016, so he’s at least been following the story for a long time).

They also have not ever disclosed what the royalties might be for any of their signed agreements, since customers want to see how MST can improve their output or efficiency before they agree on what they’re willing to pay for it, so it seems to me that there’s a lot of guessing going on about both timelines and potential revenue, particularly because I assume that the slow movements of these customers to test the technology mean that they probably wouldn’t roll out with it in a major product line to start, presumably they’d want to start with something smaller.

There is only one analyst who covers Atomera, and he’s from Craig Hallum, which has also been the company that helped ATOM with recent secondary offerings — that generally biases analysts to be positive, but he does expect them to have meaningful revenue next year of $5.7 million. There’s nothing linear about the company’s revenue, it’s just sporadic milestone fees at this point, so that’s really entirely a guess about when and how they might reach commercial agreements with licensees and begin to see meaningful revenue. Getting to even that level of revenue next year seems a bit optimistic to me, given how long these “engagements” have been percolating, but it’s certainly possible that a commercial agreement will finally break through.

And yes, they do report this week, so we’ll learn a little more soon — and it’s not actually August 3, they report tomorrow, August 2, after the market close. Investors will mostly be watching for any updates in the progress of their R&D partnerships or licensing deals, and listening for any change of tone about how much longer the wait will be before someone finally makes a product using MST.

This has for six years been a story of analysts getting excited about progress and deal talk, and the company talking about lots of interest from foundries, filing new patents, talking about different areas in which MST can improve chip production… but the long hoped-for commercial production deals remain firmly off on the horizon. Maybe they’re getting closer now, they continue to say that they’re “gathering steam,” and it always look to me like they’re making progress, but it’s also an industry that is extremely slow to adopt new technologies… and there doesn’t seem to be any particular urgency from the 20 or so companies they have worked with so far.

So is Atomera worth a tumble these days? You’ll have to make that call — I’d suggest reading through their presentations and the transcripts of their conference calls going back a few years, that gives a real sense of their long-term hope but also their short-term vacuum of information. We don’t know when, we don’t know how, and we don’t even really know if Atomera’s MST will be commercialized, so you’ll have to make yourself comfortable with what you think the odds of success are, and you may have to settle in to wait a spell. They were waiting for the first big breakthrough when Barron’s dove into the story in 2017, and they’re still waiting now.

Get the quantum computing stuff out of your head first, though — that’s not really related, “Area 52” will have no impact on Atomera, and Google or IonQ developing the next wave of quantum breakthroughs will have nothing to do with Atomera convincing a semiconductor manufacturer to use its coating technology to improve chip production and efficiency. And don’t make your call while daydreaming about going from $400,000 to $58 million in revenue next year… that’s not terribly likely, since even the one optimistic analyst is penciling in $5.7 million, and the projection for the quarter being announced tomorrow is still zero. The impact of a big commercialization deal could indeed be very large, if that ever happens, but the numbers and timeline are guesses… so far, the defining characteristic of any Atomera investor has had to be “patience,” and I’d be surprised if that changed.

Feeling bullish or bearish about this one? Let us know with a comment below… thanks for reading!

Disclosure: Of the companies mentioned above, I own shares of Google parent Alphabet and Warren Buffett’s Berkshire Hathaway. I will not trade in any covered stock for at least three days after publication, per Stock Gumshoe’s trading rules.