🔬 The Historic Rise of the Chip Sector... in pictures
🔬 The Historic Rise of the Chip Sector... in pictures
Plus: Timeline of Boeing's disgrace, the choc-apocalypse in Cocoa prices; and much more.
"Waste no more time arguing about what a good man should be. Be one"
- Marcus Aurelius
"If you think nobody cares if you're alive, try missing a couple of car payments"
- Earl Wilson
Bla day out there for the big US markets (S&P 500 -0.3% and Nasdaq -0.3%) on a particularly slow news day.
8 of 11 sectors finished higher, led by Energy (+0.9%) and Utilities (+0.5%), while Industrials (-0.7%) and Tech (-0.5%) were at the bottom.
WTI Crude popped +1.6%, while Bitcoin had a monster day (+5.4%).
United Airlines sunk 3.4% after FAA announced they were clamping down following several safety incidents.
The SPAC taking Trump’s Truth Social public ($DWAC) leaped 43% (including after-hours trading) on the pending listing of the shares.
Street Stories
The Chip Saga… in pictures
Trying to illustrate just how unique and rare the growth of the chip sector has been over the last few years is difficult, as the magnitude of the transformative technology and sheer value creation lacks parallels. I’ll still give it a whirl tho.
Just looking at the biggest ten companies in the iShares Semiconductor ETF ($SOXX), they have combined to add $4.1 trillion in market capitalization over the last four years. Sure that sounds like a big number but just how big is it? Well, the nominal GDP of Germany - the world’s third largest economy - was also $4.1 trillion in 2023 (World Bank). The FTSE 100, the 100 largest companies in the United Kingdom, comes in at only around $2.5 trillion. Basically peanuts.
Over the last three years, these 10 companies averaged annual revenue growth of 18.5%. That figure is 67% higher than what the S&P 500 managed, and even it was pulled up by most of these chip names. Moreover, that includes Texas Instruments and Intel, which haven’t exactly been stellar places to put our money.
And it’s not like that the end of it. If anything, growth is actually expected to increase in the coming years for many of those companies, with Wall Street forecasting average annual revenue growth rate of 14% - just around double what the S&P is expected to do.
When looking at earnings, though, that’s when things really get spicy. Even including duds like Texas Instruments, the 10 are expected to average earnings per share growth of 38% over the next three years. Or nearly 3x the S&P. What we are witnessing is one of the truly transformational events in the history of investing and the world.
Choc-apocalypse Now
Cocoa prices have surged, exceeding $9,000 per ton for the first time, driven by a supply crunch due to poor harvests and disease in West Africa. Ghana, which along with neighboring Ivey Coast are the two biggest suppliers, has seen it’s 2023/2024 production forecast cut to ~425k tons. About half of their initial forecasts.
The supply squeeze has meant that the key chocolate ingredient is now worth more than copper - arguably the word’s most important industrial metal.
Boeing Loses Another CEO
Boeing CEO Dave Calhoun announced his resignation at the end of 2024, alongside other major leadership changes, including the departure of Stan Deal, the president and CEO of Boeing's commercial airplanes unit, in response to increasing demands for reform following quality and manufacturing issues and a recent accident involving a Boeing 737 Max. Stephanie Pope will take over Deal's position, and Steve Mollenkopf will become the new chairman, tasked with leading the search for a new CEO. Sorry, not sorry.
Something that struck me as quite interesting is that despite the groundings and rumored contract loses, analyst estimates have barely budged for Boeing since the Alaska Air door plug incident.
Joke Of The Day
I always tell new hires, don’t think of me as your boss, think of me as a friend who can fire you.
My resumé is just a list of things I hope no one ever asks me to do.
Hot Headlines
Business Insider / Drug use at work is becoming commonplace, with Silicon Valley and Elon Musk as it’s figureheads. What ever happened to just sneaking to a dank pub on lunch break? Guess I’m just old school like that.
ForexLive / February new home sales of a 662k missed consensus for 680k. This marked a surprise 0.3% decline from January's 664K print, though still up 5.9% from February 2023 levels.
CNBC / Trump’s net worth reportedly soars to $6.5 billion after media company stock jumps. Including the after-hours trading, the shares gained 43% yesterday.
Bloomberg / Retailers turn to ‘extreme bargains’ to lure shoppers as consumer spending underwhelms. After soft holiday spending, things haven’t picked back up.
Reuters / Bankrupt Fisker’s deal talks with big automaker collapses and stock set to delist from NYSE. Another sub-par EV maker bites the dust.
Trivia
This week’s trivia is on Warren Buffett.
When Warren was just a kid in Washington, D.C., he was making more money than most of his teachers doing what?
A) Doing landscaping
B) Flipping houses
C) Day Trading
D) Delivering the Washington PostAfter graduating from the University of Nebraska in three years, Warren was rejected from Harvard. This ended up being one of the best things that ever happened to him as he then applied to this university where he learned from his future mentors Benjamin Graham and David Dodd.
A) Columbia
B) Princeton
C) Stanford
D) University of ChicagoWarren lives a famously modest life, including living in a house he bought for $31,500 in what year?
A) 1948
B) 1958
C) 1968
D) 1978
(answers at bottom)
Market Movers
Winners!
GoodRx Holdings (GDRX) [+7.4%] Upgraded at Wells Fargo from equal to overweight. Optimism for its resilience and improved visibility offsetting slower growth.
Foot Locker (FL) [+6.1%] Raised to outperform from in line by Evercore ISI. Positive channel feedback and anticipated significant supplier investments noted, along with a strong inventory stance.
Global Business Travel Group (GBTG) [+5.9%] Acquires CWT, a leader in business travel and meetings, valuing CWT at approximately $570M.
Lucid Group (LCID) [+5.4%] Receives a $1B investment from Ayar Third Investment Company, connected to the Saudi Public Investment Fund.
Century Aluminum (CENX) [+5.0%] Chosen by the US Energy Department for a $500M investment to establish a new, eco-friendly aluminum smelter, marking the first of its kind in the US in 45 years.
Losers!
Dyne Therapeutics (DYN) [-7.7%] CEO Joshua Brumm resigns to enter healthcare investing, succeeded by John Cox from Bioverativ.
Take-Two Interactive (TTWO) [-4.1%] Kotaku sources hint Grand Theft Auto 6 may delay to late 2025 or early 2026 from its initial "early 2025" schedule.
United Airlines (UAL) [-3.4%] FAA enhances oversight after several safety incidents, considering route expansion restrictions and flight bans on new aircraft, per Bloomberg.
Market Update
Trivia Answers
D) Warren delivered the Washington Post.
A) Dodd and Graham taught at Columbia.
B) Warren bought the house in 1958.
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The semiconductor industry remains one of my highest conviction investment sectors. Got around 20-25% direct exposure. I just love this industry, and it has such great potential indeed!