semiconductor companies like NVIDIA Other techs say Moore’s Law is over. This was his first prediction nearly 60 years ago that the number of transistors on a chip would double every two years from his 18 months. Essentially, the computer technology industry has for decades benefited from rapid and steady increases in computing power at the same or less cost.
This effect is deflation For technology and the economy as a whole. However, once Moore’s Law ends, semiconductors may start to: inflationary for the global economy.
If this happens, it could set a new investment standard for technology investors.If inflation really starts to hit chip stocks, metals and mining exchange-traded funds (ETFs) could be an amazing way to invest in continued advancements in the tech world. iShares MSCI Global Metals & Mining Producers ETF (Choose 4.63%).
surprise!Computers may be turning into inflation
For decades, computers were highly deflationary. Not only has the absolute price of high-tech hardware fallen (a 40-year-old personal computer could have cost thousands of dollars), but at the same time, what you can accomplish has increased exponentially. This has helped many businesses save money. Or at least computing technology increased efficiency so that we could invest in cost savings elsewhere.
But the demise of Moore’s Law could be a game changer. Transistors are being developed that are only 2 nanometers in size. This means that the physics for further transistor scaling will soon become the limiting factor (individual atoms are a few tenths of a nanometer in size).
Indeed, computing power may continue to evolve over the next few decades. But software development itself may need to be the source of this computing efficiency gain. And other solutions related to the hardware itself can really be inflationary.
For example, we have quantum computing, but it is still years away from being commercially viable (and quantum computers are huge and very complex to build). Replacing silicon with a new material as the primary material for building the chip also helps improve performance.
But silicon is plentiful and relatively cheap. Other materials (Gallium Arsenide and Silicon Carbide, just to name two) are not so cheap. Not only can the capabilities of individual chips drive improvements in computing, but we can also build systems across chips. But more and bigger chips (meaning more raw material is used) will also be inflationary.
The semiconductor industry itself may be the best indicator of this. Global semiconductor sales are expected to reach $1 trillion annually by 2030, from approximately $600 billion in 2022.
Mining Stocks Enter Stage Left
Simply put, computing technology could start demanding more raw materials to sustain computing growth for decades to come. Higher demand could mean a gradual increase in prices, which could be a bullish development for mining companies.
But investing in individual mining stocks can be difficult. This is a highly regulated industry and international competition is fierce. Small shifts in supply and demand can dramatically change the prices of metals and commodities, causing the fortunes of many businesses to skyrocket or collapse rapidly.
That’s where the iShares MSCI Global Select Metals & Mining Producers ETF could have a place in a technology portfolio. The fund is one of the world’s largest ETFs investing in mining companies.This his ETF is an Australian BHP Group (BHP 3.04%) When Rio Tinto (Rio 3.95%),Brazil veil (veil 2.74%)When Freeport-McMoran (FCX 4.91%) Here in the United States, these top-ranked stocks make up the majority of the fund’s investments.
However, the ETF also invests in many smaller companies focused on the metals and materials used in chips.For example, small copper producers first quantum mineral (FQVLF -0.73%)the top platinum producer impala platinum (Inpuy 8.85%)and a start-up lithium company lithium american (rack 5.43%) is also the top holder.
The iShares MSCI Global Select Materials & Mining ETF has a total of 252 shares and charges a 0.39% annual fee (or $3.90 is deducted from the fund’s performance for every $1,000 invested). The recent annual yield of the fund’s portfolio over the last 12 months was 9.8%.
Semiconductors are not the only end market for metals and mining companies. However, many other recent related technologies could also cause inflation in basic mined commodities. Renewable energy development is also a big consumer of raw materials and metals, especially as new methods of power storage and transmission are being built.
To be fair, some commodity prices have moderated from record levels in recent months. Easing supply chains and aggressive interest rate hikes by the US Federal Reserve aimed at keeping very high inflation in check have dampened the mining stock party.
Data from YCharts.
But the demise of Moore’s Law this decade will only contribute to inflationary pressure as the world invests in new infrastructure to support technological change. While picking individual mining stocks is difficult, investors have instant access to the entire industry through his iShares MSCI Global Select Metals & Mining Producers ETF. Inventories of these basic material producers can fluctuate, but they can be a great hedge if inflation becomes part of the technology sector’s equation.