What was the most important financial event of 2020? Most folks would tell you it was the coronavirus pandemic and the economic devastation caused by government lockdowns.
But that’s wrong. For investors, the most life-changing thing that happened last year has to do with computer chips. In 2020, for the first time ever, the value of the computer chip industry surpassed that of the oil industry. The 30 largest semiconductor companies are now worth $2.5 trillion combined. Compare that to $1.7 trillion for the 30 largest oil firms.
This sent an important signal to investors. Oil is no longer the most important resource is the world. Computer chips are. Longtime RiskHedge readers know computer chips, also called semiconductors, are the “brains” of electronics.
There would be no iPhone, Amazon Webstore, or online messaging apps without them. Temperature sensors in air conditioners are powered by tiny microchips. Rice cookers cook rice to perfection because built-in semiconductors control the heat. The chip inside pacemakers sends electrical pulses to the heart to keep it beating regularly.
From flying across oceans to hailing a ride on our smartphones when we land, streaming movies to buying stuff online, checking out groceries to paying for dinner with your credit card: every modern system runs on chips.
You can’t grab a packet of microchips off the shelf at Walmart
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. But the latest cameras, TVs, washing machines, ovens, and refrigerators are all made “smart” by semis.
Last year, there were 300 billion computer chips sold. For perspective, we consumed roughly 34 billion barrels of oil last year. The five largest chip companies are now worth over $1.4 trillion combined. And chip stocks are ripping higher:
Source: RiskHedge
Semiconductors Are The Most Valuable Goods The World Has Ever Known
It took a staggering 498 people to prepare dinner for King Louis XIV. The French king was the richest of the rich, in the world’s wealthiest city at the time. What if I told you the average American today is “better off” than the 17th century king?
You likely don’t have a personal tailor like Louis did. But you can buy all kinds of clothes on the internet and have them dropped on your front porch in a few days. Louis travelled in a golden carriage with a personal chauffeur. You can fly to hundreds of destinations the king never dreamed of visiting.
Modern life is made possible by semiconductors. As I said, without them the internet and smartphones wouldn’t exist. Even airplanes rely on computer chips these days. They control autopilot, monitor jet-engine performance, and even measure the aircraft’s temperature.
How the heck did it achieve this act of “magic?” Traditional ultrasound machines use piezoelectric crystals, which turn electrical energy into vibrations in the form of ultrasonic waves. In short, this makes the machines bulky and expensive.
Butterfly’s world-class engineers reinvented how ultrasounds work and squeezed the technology onto a tiny chip. This is why their tech is called Ultrasound-on-Chip. Aeva (IPV) is achieving similar breakthroughs with self-driving cars. Aeva is one of the world’s top LIDAR companies.
LIDAR sensors that resemble a lawn sprinkler are affixed to the roof and front grill of the self-driving car. These sensors then send out roughly 160,000 pulses per second in all directions. And they can detect the smallest detail, like a leaf blowing in the wind. Aeva shrank the size of its sensor by 1,000X by bolting all the functions onto a semiconductor:
Source: Aeva
This helped Aeva slash the cost of a LIDAR sensor to roughly $500. That’s far cheaper than the tens of thousands of dollars you’d pay for the current top-of-the-range sensors.
Self-driving cars, artificial intelligence, computer vision, space tourism, and genomic medicine need faster chips. Semiconductor sales have only gone one way our entire lives: UP.
Chip companies are expected to rake in a record $470 billion this year. And all these future disruptions will likely push that well above $1 trillion.
Source: RiskHedge
Here’s My “Slam Dunk” Investment For The 2020s
A good exercise when sizing up a stock is to ask, “Could the world survive without this company?” The answer for the vast majority of firms is “Yes, we’d do just fine.” But if we woke up tomorrow to find NVIDIA
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(NVDA) had disappeared, the world would be a much worse place.
NVIDIA pioneered a new type of chip called graphics processing units (GPUs) back in the 1990s. GPUs were specifically made to improve video game graphics. But the disruptor achieved a major milestone in 2020. For the first time, artificial intelligence-related sales were its largest business. In the last three quarters, its AI business raked in $4.8 billion.
NVIDIA Is The “Brains” Behind The Most Important AI Projects
It powers several robocar startups, including Zoox and Google’s
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giant data centers are also packed full of NVIDIA GPUs. Medical imaging disruptor Paige is using computer vision to revolutionize the way we diagnose cancer. Using a dozen NVIDIA GPUs, it trained a machine to detect early signs of tumors.
I first recommended NVIDIA back in 2018. As I said at the time, if I could buy only one stock for the next five years, NVIDIA would be it. The stock has doubled since then, and it’s headed much higher in the coming years. That’s why it’s a current buy in my Disruption Investor advisory.
Last year, NVIDIA took the mantle of “America’s largest chipmaker” from Intel
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for the first time ever. This kicks off a new era, and my research suggests it will be one of world’s 10 largest companies by 2025. Investing in leading chipmakers like NVIDIA is the surest way to make money over the next decade.
Get my report “The Great Disruptors: 3 Breakthrough Stocks Set to Double Your Money”. These stocks will hand you 100% gains as they disrupt whole industries. Get your free copy here.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
