– The future of the semi-conductor industry; Shouldn’t the current cyclical trends within the industry be overcome at some point in the future due to Moore’s law and hence increasing barriers to entry, because your building machinery over machinery. The increase in sophistication of the production of these memory storage chips and their increased sophistication of the chips themselves will lead the industry into steady margins and flexible pricing strategies due to the lack of choice availability, for buyers, when seeking the highest functional conductors. This will probably lead current players, who invest heavily in R&D, into respective monopolies within the industry. It is naïve to classify the whole chip making industry as ‘one’ industry bcs of its wide-ranging scopes and its composition of many separate fields i.e. self-driving car semiconductors, AI chips, iPhone chips, bio tech, computers etc.
– To assume that their will only be a one or two last man standing is also, in my opinion, a naïve statement; for a single entity to be able to capture, and capture to a higher degree than competitors, means an extremely intricate managerial oversight in a field where the scope is too wide ranging and hi-tech. SO my earlier statement of multiple monopolies within the field, I stay away from the word oligopoly as I do not consider it ‘one’ industry. Another naïve statement, in my opinion is simply; ‘the semiconductor industry” due to its wide scope and intricate independent subsets.
From an investors standpoint, to capitalize on this emerging trend, there are a few things that one may consider, an easy way to do it is to invest in the SOXL. That’s what I would do now, especially after the demand shock due to corona holiday. Another way is to find multiple individual companies and spend equally on each one with a 10-year horizon span. Key factors to consider 1. Heavy RandD 2. Competition within the subfield 3. Low price to book 4. A mix between low and high P/e 5. High BETAS to benefit from upside. 6. In the AI semiconductor industry. 7. companies with steady relationships between buyer and seller i.e. hypothetical does Microsoft buy consistently over a 5year + period from chip maker X, if yes, then better (basically the less variable and turnover of the B2B customer the better.
With the upcoming ‘executive assistant’ centralized daddy we can expect rapid growth within this field as memory storage is far from a slowing down industry. Let’s call it a “lubricating fluid” of efficiency, a productivity shock per say, a sharper pencil or a sharpener. That should be discharged equitably, not equally. as there are fundemental differences in intellect, values and honorary motivations of each individual, and to those Algorithmica glorica deems to be worthy souls like mr tikka himself rather than be reflected through sharp price hikes and to be eaten up by those with many. As it must be oozed in accordance to UMT principia. The semiconductor players will be the sack of meat for the hungry lioness. In summary, An SOXL, or if you have small the SOXX etf, or 4 companies with capital spread evenly and a long term buy and hold strategy is good addiction to one’s portfolio. UNLESSS YOU LIKE RICHARD MILLE WATCHES, then you should probably invest in HEINZ KETCHUP.
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