It’s Tuesday, but part of me is still replaying Sunday’s Superbowl, a game that will be remembered for a go-ahead touchdown scored by the Los Angeles Rams with less than two minutes on the clock.
Great teams like the Rams possess the skill and confidence necessary to see beyond the moment and to seize victory, even when the odds seem grim. With that idea in mind, I hope you’ll have a chance to look at two fascinating articles by Eric j. Savitz in Barron’s. Both articles focus on the chip shortage and both suggest there are winning hands to play in the long game.
“Hassane El-Khoury, CEO of automotive chip specialist ON Semiconductor, told investors on his company’s earnings call this past week that the supply-demand imbalance in the chip sector will persist through 2022 and continue into 2023. Meanwhile, Toyota Motor recently cut its vehicle production forecast for 2022 by 500,000 units, citing both uncertainty related to Covid-19 and the ongoing chip shortage,” Savitz writes in one of the articles. “The bottom line? The case for owning chip fab stocks, including GlobalFoundries and Taiwan Semiconductor, is very compelling.”
I like the way Savitz looks past the horizon to find potential winners. In the other article, he sets the stage and highlights a company that seems to be making all the right moves.
“Since the start of 2020, chip stocks are up 82%, easily beating the 54% gain for the Nasdaq Composite. Big names like Advanced Micro Devices and Nvidia have gotten much of the attention, but a little known chip maker has beat them all: San Jose, Calif.–based Synaptics,” Savitz writes. “Once a low-key provider of chips used for PC touchpads, mobile phone screens, and fingerprint scanners, Synaptics has turned itself into a play on the Internet of Things, which aims to bridge the physical and digital worlds.”
As Savitz rightly observes, chips are in everything from cars to PCs to thermostats. Investing in chipmakers is probably a good idea. Even after the current chip shortage is resolved, there will still be a need for chips. Indeed, the demand for chips is unlikely to diminish anytime soon.
Will every chip maker be a winner? I doubt it. But there will be plenty of opportunities for investors who are willing to look beyond the usual suspects and find lesser known chip makers that are defining the next waves of technology innovation.
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