After a blistering 28% rise in 2019 for the S&P500, investors are once again riding the wave of optimism that dominated last year. News that China will inject $115 billion into the economy to bolster the financial sector, coupled with the possibility of a partial US-China deal being signed on the 15th, which set the tone for a gainful entry in 2020. Admittedly, the early days of the year are important for gauging the macro behaviour of the markets over the next twelve months, so it is curious to see how the technology sector will behave in the first two weeks of January.
Photo by Christian Wiediger.
Particularly from the semiconductor group which has experienced a 60% increase in the last 12 months and about 380% since 2009, achieving double the S&P500 appreciation in the same period, a remarkable performance given that it was a sector many anticipated that could stagnate after strong growth from 1990 to 2007, when global revenues rose from $50 billion to $220 billion. A growth that becomes more impressive considering that it was mainly after 2016 that the sector started to leave behind the S&P500, since until then it had followed it almost to the millimetre. In the last two years, despite all those fears, the consequences of the trade war in the market much depend on Chinese customers and its revenues. The direction has undoubtedly risen with revenues of $434 billion and expected to reach $655 billion by 2025.
However, will the good winds continue for these products that are present today in almost everything we use, keeping semiconductors the king of the market? Ten years is an “eternity” in today’s economy, the fundamentals tell us that at least the next five years is very likely to be so, for the same reason that led the sector to expand since 2016.
Photo by Harrison Moore.
The 5G, a disruptive technology that is just now taking its first step and will be an avid semiconductor consumer, not only for the huge mobile telecommunications market, but also for the many billions of devices that will flood the market due to technology, devices that they form what is called the ‘internet of things’. A business component that is expected to be worth $114 billion by 2025, four times the amount of 2015. In another words, it will certainly be a sector to be considered in the short to medium term.
