If you had invested $10,000 in tech giants 20 years ago, your returns would be staggering:
- Microsoft would now be worth $140,000
- Google would now be worth $250,000
- Amazon would now be worth $1,000,000
These software stocks, along with many similar companies, have experienced exponential growth over the last 2 decades.
But the next 20 years won’t mirror the last 20.
A new market dominance is emerging now, and today’s stock market panic is providing a unique opportunity to position yourself for it.
At Bravos Research, our job is to find the best asset sectors and stocks regardless of market conditions.
Our current performance speaks to this approach:
- Up over 50% on 3 of our gold trades
- Up over 30% on our BYD trade
- Up over 50% on UAMY, which is benefiting massively from the trade war with China
Now we’re eyeing the next big trade opportunity.
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The Rise and Plateau of Software
In 2002, the software industry comprised about 5% of the S&P 500 index, with companies like Microsoft, Oracle, and Adobe leading the way.
Fast forward 20 years, and software now makes up approximately 27% of the S&P 500, dominated by giants like Microsoft, Alphabet, Amazon, and Meta.
Software has gained a massive share of the US stock market, but evidence suggests it may have reached its peak.
Other better-positioned industries are poised to displace software’s dominance.
Why Software Dominated in the First Place?
To anticipate the future, we need to first understand why software dominated in the first place.
Extreme demand growth: The internet boom triggered unprecedented demand for software.
Businesses needed websites, emails, e-commerce capabilities, digital accounting, and data analysis – all requiring software solutions.
Limited supply: Despite high demand, software supply was constrained.
The barrier to entry was extremely high leading to limited competition.
Few people knew how to code in the early 2000s, and without cloud computing, software businesses needed expensive physical servers.
The result?
An industry with an extremely rapid growth rate and minimal competition – the perfect formula for market dominance.
Software’s New Reality
Today, the situation has fundamentally changed:
- Growth slowdown: The software industry is still growing, but at a much slower pace than before because most companies have already adopted the necessary digital tools.
- Intensified competition: The number of software developers has 4x over the last 20 years.
- Lower entry barriers: No-code platforms and AI now allow users to build applications without coding knowledge, lowering the barrier to entry to practically zero.
Between 2002 and 2020, the software sector outperformed the S&P 500 by an impressive 239%.
But since 2021, software companies have actually underperformed the S&P 500 by 15% – that’s 4 consecutive years of underperformance.
While the software industry will continue to grow, it’s unlikely to match its spectacular performance of the past 2 decades.
The Next Dominant Sector
What industry will outperform all others over the next decade?
We need to identify a sector that mirrors software’s earlier advantages: extremely rapid growth and high entry barriers that limit competition.
At Bravos Research, we are always on a lookout for attractive market opportunities.
We’ve navigated these markets with remarkable success in the past year:
- 129 total trades completed
- 85 winning positions
- 44 losing trades, with controlled risk
- Diverse portfolio spanning multiple assets
We just booked profits on $UGL (+48.97%) $WPM (+43.58%), and $AEM (+45.96%), despite the tricky market conditions.
You can view our entire track record for free here.
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So, what industry will outperform next?
In our opinion, Semiconductors fit the requirements perfectly.
Demand for semiconductors has grown exponentially over the last 2 years and will likely continue at a rapid pace.
Similar to how businesses needed software in the early 2000s, today’s companies need to adopt AI – and the biggest bottleneck for AI adoption is the semiconductor industry.
The semiconductor space has extremely high barriers to entry:
- Limited talent pool: Very few experts exist in the specialized field of nanochip manufacturing required for AI semiconductors.
- Capital intensity: Building a semiconductor fab costs approximately $10-20 billion, making competition virtually non-existent.
With limited competition, semiconductor companies can easily increase their pricing and profit margins.
We’ve already seen this happen – the sector’s profit margins have surged from 25% in early 2023 to almost 40% today.
The semiconductor industry has grown from about 6% of the S&P 500’s market cap in 2022 to approximately 12% today.
While impressive, this pales in comparison to software’s 27% market share.
So, there’s still a lot of room for growth.
For historical perspective, in the early 1900s, industrial giants like US Steel, Standard Oil, Ford, and General Motors collectively comprised approximately 40% of the total US stock market capitalization.
Could AI create a similar dominance for semiconductor companies in the S&P 500?
We’re certainly not ruling it out.
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At Bravos Research, we’re closely watching the semiconductor sector and will be selecting names that we believe will outperform the market.
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