The images below are of the Kentucky Speedway.
It’s the 1.5-mile speedway in Sparta, Kentucky, that’s famous for NASCAR stock-car racing.
And as you can see from the satellite image on the right, the trucks almost fill the 30-acre main parking lot. It can hold more than 5,000 cars.
Two satellite images show the Kentucky Speedway parking lot filling up with new Ford pickup trucks. Source: The Drive
The image on the left is from April. As you can see, the lot was empty. That’s what you’d expect – the speedway was closed due to the pandemic.
The image on the right is from May. Since then, the lot has been spilling over with brand-new Ford trucks.
Ford (F) can’t complete these trucks without chips – aka semiconductors.
It’s not just Ford. Almost every carmaker on the planet has had to pause production as a result of the supply crunch.
And a range of other key industries – including healthcare and defense – are also feeling the effects.
If you’ve been tuned in to the mainstream to figure out what’s going on, I (Chris Lowe) would forgive you for thinking Armageddon is upon us. Or that the chip shortage is about to send us back into the Stone Age.
But our tech expert, Jeff Brown, is a former chip industry executive. And as he’s been showing your fellow readers, the chip shortage is one of the most widely misunderstood events of the year.
Contrary to what you may be hearing in the press, it’s actually bullish for the best semiconductor stocks… and the bleeding-edge tech trends Jeff tracks.
Chips – aka semiconductors – are the “brains” in your smartphone, your laptop, your TV, your fridge, your dishwasher, and your oven.
And yes, your car…
Modern life doesn’t run without them.
Without chips, the farmers who grow your food can’t operate their tractors…
…the air conditioners that keep you cool in the summer can’t run…
…the ventilators at your local hospital stop working…
…and the missile detection systems that keep the country safe go offline.
And the pandemic left us with too few chips to go around.
First it disrupted supply chains.
Making a single chip often involves more than 1,000 steps. And that chip will pass through international borders 70 or more times before reaching an end customer.
So it’s no surprise that rolling economic shutdowns… hundreds of millions of COVID-19 cases… and the disruptions to shipping, border crossings, and international trade that followed hit supply hard.
Then demand ramped up as folks built out home offices… made sure all the kids had laptops or tablets for homeschooling… and turned to video games to escape the lockdown-induced boredom.
For instance, figures from research firm International Data Corporation show that global PC shipments grew by 55% year over year in the first quarter of 2021.
That caused an almighty crunch Jeff called a “tech shock” in a recent online briefing.
He worked in Asia as an executive at chipmakers Qualcomm (QCOM) and NXP Semiconductors (NXPI).
He’s been to Taiwan – the world’s most prolific chipmaker – more than 100 times. He also lived in San Diego and worked at the corporate headquarters of Qualcomm.
His experiences taught him an important lesson about the chip industry: It goes through cycles all the time. Jeff…
I worked in the semiconductor industry for two decades. I’ve never seen a cycle quite like this one. But cycles aren’t new to the industry. They’ve been with us forever.
The industry builds out access capacity. This leads to a surplus of chips. Prices fall. Eventually, supply meets demand for end products. Production slows down. And investment into building new capacity slows down as well.
Then, when demand picks up, prices rise again. And we realize we need more capacity. So tens of billions of dollars more flow into building out more capacity. Supply picks up. And the cycle starts again.
Jeff isn’t worrying about what’s going on. Instead, he’s more bullish now than ever on the right semiconductor stocks…
The level of investment taking place right now in the semiconductor industry is off the charts. Not only for basic manufacturing capacity, but also for what I call bleeding-edge chips – advanced semiconductors that go into our iPhones, self-driving cars, and artificial-intelligence (AI) applications.
This is great news for chipmakers… and for tech in general. It’s not only driving increased capacity. It’s also a catalyst for an explosion in innovation.
Meanwhile, consumer electronics, medical, industrial, and automotive companies are bringing new products to market faster than ever. And these products are using more chips than ever.
AI… 5G… self-driving cars… and other hot tech trends also require more semiconductors than ever before.
It’s why Jeff is recommending best-in-breed semiconductor companies to readers of our Near Future Report tech investing advisory right now.
With these tailwinds in place, he says the opportunity for investors is massive.
Including the name and ticker symbol of the top chipmaker on Jeff’s radar right now.
It’s up 200% since he added it to the model portfolio at our large-cap tech investing advisory, The Near Future Report.
But he says it still has plenty more room to climb as demand for chips soars.
In the meantime, make sure to check out Jeff’s free “tech shock” briefing. He explains in more detail what’s causing the bottlenecks… what’s going on with demand… and who the winners and losers will be.
And if you’re already a paid-up Near Future Report subscriber, you can catch up on his top semiconductor recommendations here.
Regards,
Chris Lowe
September 29, 2021
Barcelona, Spain