Silver is the Only Tech Play

In 2013 CNBC’s Jim Cramer coined the term FANG stocks. It’s likely even he had no idea how exponential a rise the likes of Facebook, Amazon, Netflix, and Google would have over the coming decade. He later added Apple, to expand the acronym to FAANG.

The best part of the last decade has been dominated by these tech stocks and hundreds (if not thousands) of other companies have tagged along for the ride. Thanks to these companies and the ecosystems around them the world has effectively moved online. The way we shop has been transformed, the way we work has been transformed, the way we socialize has been transformed, and even the way we date has changed.

However, post-pandemic and as we return to normal life, FAANG stocks are no longer the darlings of the investment world. Performance in the last month has been dire, to say the least.

It is not dramatic to feel like tech stocks swing from one piece of bad news to the next. Delian Asparouhov, a principal at Founders Fund, tweeted: “sign of the times I now hear about layoffs more often than new rounds.”

Things are certainly getting ugly. “An entire generation of entrepreneurs & tech investors built their entire perspectives on valuation during the second half of a 13-year amazing bull market run,” Bill Gurley VC at Benchmark tweeted. He went on to say, ”The ‘unlearning’ process could be painful, surprising, & unsettling to many. I anticipate denial.”

But whilst the likes of Meta and Alphabet are learning some hard lessons, no one is preparing for them to go bust. We still rely on the tools and services powered by FAANG stocks. We just don’t expect to see the bananas valuations that we have seen for the last decade or so.

The thing about tech investments is that people justify their investments in them because they consider tech to be inevitable. Google is the internet. Smartphones are life. Electric cars are a requirement. AI is the future. And so on….and that is all very true. But when you invest in tech, you don’t actually invest in tech. You invest in the company that makes the tech. You are relying on Alphabet, Apple, Tesla, and IBM to keep developing, to do everything above board, to manage their cash flows, employees, etc. It is no different from investing in a gold mining company or silver futures. You are relying on counterparties to manage your investment for you.

And what of the tech that serves these companies? What is really powering them? Have you ever thought about the actual materials that make up the semiconductors, the microchips, the servers, the cables, and so on and so on?

This is where the real value lies. And because we’re not going to be reducing our reliance on technology, this is where the opportunity lies. Companies may go up and down in value but ultimately our demand to use the underlying infrastructure will continue to grow.

Earlier this year Merrill Lynch argued it was time for FAANG 2.0. Rather than a set of companies, it is a set of sectors that are well-positioned in this new era of geopolitical uncertainty and strong resource demand. They explained: “It’s within these areas of the market – fuels, aerospace & defense, agriculture, nuclear and gold/metals/minerals – that we find future value given the defining market rotations we expect.”

So, with this in mind. How can you continue to take advantage of the tech revolution whilst keeping in mind FAANG 2.0? Metals and minerals, that’s where.

We like silver, for example. The more tech-reliant we become the more silver we will use. As the Silver Institute says, ‘If it has an ‘on/off’ button it’s likely silver is inside.’ Why is it so useful? It is highly conductive, malleable, ductile, can function at high temperatures, has antibacterial properties, is used as a catalyst, and is very reflective.

All of these mean that buying silver not only has a role in our past and our present but is vital for the future, as well.

In 2021 demand for silver increased in every sector for the first time since 1997. Demand exceeded pre-pandemic levels and reached levels not seen since 2015: 1.05 billion ounces, a 19% climb over the previous year. This led to a supply deficit not seen in six years, of over 58 million ounces.

The Silver Institute expects industrial demand to climb by 5% to a new high of 552 million ounces. Of this industrial demand, technology is the fastest growing.

One of the major growth sectors for silver demand is renewable energy technology. From solar panels to electric vehicles, from nuclear power sources to appliance charging, they are all heavily reliant on silver.

For example, electric vehicles contain 25 – 50 g of silver. Bloomberg NEF expects EV sales to represent 10% of global car sales by 2025 before reaching 58% in 2040. In 2025 alone the automotive industry is expected to require 90 million ounces of silver. Currently, the photovoltaic industry (supplier of solar panels) consumes around 113 million ounces. But, by 2050 the US is expected to rely on renewable energy for 40% of its power, so imagine the amount of silver that will be required to meet the capacities required.

Last year, industrial demand accounted for half of the total demand. So you have to ask if the world is going to be forced to switch to renewables, is there enough silver in the world to satisfy demand?

So, given silver is at the heart of a multitude of these industries and products, given that it is the technology in many respects, why would you not just own silver? Why would you rely on a company like Canadian Solar Inc., Cisco, or Samsung to protect your hard-earned cash? After all, they’ll be well-stocked up on silver, so why don’t you just go straight to the source?

Cut out the counterparties.