As Unifimoney Board Advisor Max Osbon explained to us while introducing his Themes for the Unifimoney Self Investment section, he believes in thematic investing because it allows you to bet on the sectors you believe will win the future. Osbon does not believe in trying to chase the fleeting profits of daytrading — his goal is to understand what will steadily grow over the next decade or more. “If you want to look at your investing in terms of hot growth sectors, consider what will provide the next level of innovation and productivity breakthroughs,” he said. “Consider sectors that have natural tailwinds.”
That’s why Osbon selected Semiconductors and AI as one of the Unifimoney Themes. Here’s why we believe it’s a sector that can help grow your wealth over these next ten years.
The Semiconductor Industry is famously cyclical, growing or shrinking dramatically based on supply and demand. In late 2018, the space took a downturn — mainly because of a dip in memory chip sales — and rode that rough quarter into a truly disastrous 2019.
As Investor’s Business Daily explained: “In 2019, the global semiconductor industry suffered its worst year in almost two decades. Semiconductor revenue fell 12% to $412 billion.”
But even with the arrival of Covid-19, 2020 was a bounceback year for the industry. World Semiconductor Trade Statistics charted a 5.1% increase for 2020 and projects an 8.4% for 2021.
Clearly, the market for semiconductors is on the rise after suffering the worst dip in almost 20 years in 2019. And the growth tracks given the ever-growing rise of smart devices. As Deloitte explained in a 2018 report, semiconductors will be the backbone of the Internet of Things (IoT) revolution — as more and more devices become connected to the internet, there should be more growth within the sector. The report explains that the issue with massive profits is the margins are relatively small — however, they argue that through mergers and acquisitions and growing into the more profitable IoT space, certain companies in the Semiconductor Space can take off.
The rise of AI is yet another profitable market that can help spur the Semiconductor industry. As Osbon told us: “For Semiconductors & AI, semiconductors are the building blocks of all modern computing and AI happens to be intimately linked to semiconductor companies. AI, of course, is something that everyone is very excited about as a way to unlock future productivity and possibility.”
There’s still a segment of the population that hears Artificial Intelligence and goes right to the worst-case scenario futures we’ve seen in sci-fi movies. But while AI is a growing sector, it’s important to remember that it’s already here. Machine learning and neural networks are already powering companies across the world — as the technology improves, it has the potential to change the way almost every sector does business.
According to a report by Grand View Research, the worldwide AI market was valued at $39.9 billion in 2019. That’s a big number, but they believe it will be a fraction of what the market will reach by 2027. With massive investments from the biggest tech companies on the planet — Apple has bought 20 AI companies since 2010 and Microsoft, Google, Amazon and Facebook have also made big buys in the space — the AI sector is primed to take off. Grand View Research projects a compound annual growth rate (CAGR) of 42.2% from 2020 to 2027.
The excitement around AI comes partly from the diversity of problems it can solve across markets — from the mundane of troubleshooting for consumers to the celestial of space exploration. A February 2020 post by Gartner predicted that AI will completely change the Customer Support space: “Gartner predicts that by 2022, 70% of customer interactions will involve emerging technologies such as machine learning (ML) applications, chatbots and mobile messaging, up from 15% in 2018.” For NASA, it can change the way they explore the universe. In November 2019, NASA asked a question that shows the true potential of AI: “Could the same computer algorithms that teach autonomous cars to drive safely help identify nearby asteroids or discover life in the universe?” If it can do all that, what other problems might it solve?
The key to thematic investing is to identify an opportunity and commit to your theory. An industry like Semiconductors may be cyclical, but if you believe they’ll power the future of AI, then it’s worth putting money into the space. The same is true for AI — if you think the investment from Apple, Amazon, Microsoft, Google, and Facebook signals that the sector will continue to spread until it’s the engine of a wide range of industries then it’s a good time to bet on AI companies.
On the Unifimoney app, Osbon has selected 20 publicly traded companies that he’s interested in in the Semiconductor and AI Space. If it’s a Theme you’re interested in, sign up for Unifimoney and start trading right within the money superapp today.
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