The Weekend Edition is pulled from the daily Stansberry Digest.
In life, we're used to people rarely going above and beyond what's required...
Think about it...
Has a contractor ever completed work for you early and under budget? Has a lawyer ever billed you for fewer hours than expected? And how many investment advisers' hunches and prognostications have actually paid off, delivering better returns than you expected?
Sure, all these people exist... But they're few and far between.
As humans, we're used to disappointment. We expect "lipstick on the pig" instead of someone exceeding expectations... "Promises kept" is often the exception to the rule.
However, as regular readers know, our mission at Stansberry Research is to deliver on all of our promises to subscribers... It's what we would want if our roles were reversed. And more specifically, when it comes to my Stansberry Venture Technology service, I strive to go above and beyond what's required.
In this essay, I'll introduce you to one of the best-performing stocks I've ever recommended. It's still in my Venture Technology model portfolio today.
But as I'll explain, this company must overcome three major threats moving forward... And related to that, I recently used my "venture capitalist" approach to pinpoint another great way to get ahead of this trend.
Before we get into all the details, though, we must learn a little bit about my approach...
Since the inception of my research service, I've aimed to keep my promises – and more...
My method isn't a secret, either...
First, it's based on hard work. That's why the first iteration of this service was called Diligence. And two decades later, after relaunching as Venture Technology, I'm still doing the same comprehensive research.
Most of my working life has been dedicated to the technology and biotech spaces.
I've worked as an independent technology analyst in the past. I spent close to a decade researching and writing about technology at five major universities. Plus, I currently hold three active patents... And I've also developed, packaged, and sold some of my ideas to one of the largest consumer-electronics companies in the world.
I don't want to toot my own horn too much, but this stuff is in my blood. And I don't want to just keep it all to myself... It's my passion to help others succeed in these spaces, too.
My goal for Venture Technology was to create a venture-capital-style experience – but with far more liquidity and far less risk. Basically, the goal was to bring venture-capital investing to the public markets.
I believe I've delivered in a big way for my subscribers over the past seven years... Nearly one-third of all the recommendations in my Venture Technology model portfolio have doubled.
However, rather than just letting our winners run, our method follows a strict guideline... Once a position doubles, we recommend selling half. That way, your capital at risk with that stock falls to zero. You get a full payout, yet still keep unlimited upside moving forward.
One of my best-performing recommendations is an already-profitable company with world-changing new technology...
Nvidia (NVDA) already had a market cap of about $25 billion when I first recommended it in May 2016. Today, it's a roughly $540 billion company.
Including dividends, the open leg of this position in the Venture Technology portfolio is currently up around 1,870%, and the combined position is up 716% as of Wednesday's close. Subscribers have locked in gains of 106% and 779% on closed portions of Nvidia since 2016.
When we made our initial recommendation, we loved that Nvidia's silicon chips already supported three cutting-edge markets...
- Artificial intelligence
- Lifelike video games
And at the time, these same chips also powered another, much more hidden market – cryptocurrency mining. This purpose brought demand for silicon chips that even Nvidia didn't see coming.
Nvidia still spends more on research and development for graphics cards than its rivals Intel (INTC) and Advanced Micro Devices (AMD)... So it still makes the best graphics cards. It also makes the most graphics cards. That's a winning combination.
Unfortunately, Nvidia isn't a company that you can just buy and hold forever...
I believe Nvidia faces three threats on the horizon right now...
They're not necessarily catalysts to sell today... So if you own NVDA shares, don't panic.
But to keep being successful moving forward, Nvidia's management team and savvy investors must understand these three threats.
First, there's Apple (AAPL). The consumer-electronics giant wants to replace the traditional personal-computer ("PC") chips in its laptops and desktops with mobile-class silicon chips.
And as you know, Apple is a key trendsetter... So if this move works, other laptop and PC makers will follow.
To try to avert this threat, Nvidia agreed to pay $40 billion in September 2020 to buy chip designer Arm Holdings from Japanese conglomerate SoftBank. Arm makes the logic for the world's smartphone chips.
If this deal goes through, it will mean that Nvidia could still count Apple – and everyone else – as its customers.
Second, there's Intel. In 2022, the rival chipmaker is planning to launch its own high-performance graphics cards – called "Arc cards."
Now, this is still a theoretical threat at the moment. But it's clear that Intel wants to cannibalize Nvidia's place in PCs and laptops, as well as in cloud-computing.
To combat this threat, Nvidia is working with a better chip manufacturer than Intel – Taiwan Semiconductor Manufacturing (TSM). Put simply, Taiwan Semiconductor can make smaller transistors than Intel... which leads to faster and more efficient chips.
But that brings us into what I believe is the third and most pressing threat for Nvidia right now... China.
The government of the world's most populated country could quash Nvidia's pending acquisition of Arm in the regulatory-review process... And more profoundly, China could annex Taiwan and effectively take out the business operations of Taiwan Semiconductor.
If that one-two punch were to happen, Nvidia's supply of chips available to sell could fall to zero... That would be very bad news for the company.
To mitigate this threat, we suspect Nvidia would resort to the world's second-best chip supplier – Samsung. Since Samsung is based in South Korea, there would be no China-related risk... at least in the short term.
But ultimately, we believe Nvidia will need to partner with a high-end chipmaker in the U.S. or Europe. That way, Nvidia's chip supply will remain intact – despite the threats from China.
And frankly, it's more than just bluster from China in regard to Taiwan...
China's military ambition should not be overlooked... It's currently building dozens of quiet submarines, scores of stealth fighter jets, and hundreds of light tanks.
Light tanks can't stand up to heavy tanks in the heat of battle – but they still do very well against unarmed crowds. More important, you can drive two light tanks into a transport aircraft, fly them to an open airfield, and then just drive them out and begin using them.
Seeing what China has done in Tibet – and what it's doing now in Hong Kong – should show that Chinese ambition is boundless... That's not good for Taiwan's independence.
Right now, an independent Taiwan makes half of the world's contract silicon chips. But all these factories – and all the trade secrets that go into all of these chips – won't survive a fortnight if and when China invades.
That explains why the U.S. Senate recently approved $52 billion in handouts to U.S. chipmakers. So far, the House of Representatives hasn't matched this offer... And of course, both chambers of Congress would need to agree for it to happen.
Still, these efforts make it clear that inside the Washington, D.C. beltway, it's understood that Taiwan can't stand on its own when it comes to the world's supply of silicon chips. So the best hope moving forward is to make them here in the U.S. or in Europe.
And that brings us back to the venture-capital-style investing we do in Venture Technology.
We've recently identified an opportunity for everyday investors to get in front of this trend...
In effect, this company is the "smallest house in a great neighborhood."
One of the keys to success in real estate is buying the smallest house in a great neighborhood. That's because the smallest house has the most upside and the least downside potential...
Imagine you buy a 1,200-square-foot house for $300,000. That's $250 per square foot, which also happens to be the current average sales price in this hypothetical neighborhood.
But then you decide to add another 1,200 square feet of living space at a cost of $150 per square foot. The total costs of these improvements would be $180,000. Combined with the $300,000 initial purchase price, you would be on the hook for $480,000 at that point.
However, since houses in this great neighborhood are selling for $250 per square foot, the value of your new 2,400-square-foot home is $600,000... That's a gain of $120,000 in value just from upgrading the smallest house to be on par with others in your area.
All the external factors are in your favor. From there, it's what you make of it.
In Stansberry Venture Technology, we recently found the smallest chipmaker in the great, up-and-coming chipmaking neighborhood of America...
This company makes its chips domestically, not in Taiwan or anywhere else overseas. So whether China flexes its military might or not, it doesn't matter for this company's operations. That makes chip-design firms very comfortable to work with this business.
And we believe silicon chip manufacturing will soon expand rapidly... Over the next 10 years, we expect $1 trillion to be invested in this space in the U.S. It all starts with the $52 billion currently on the table – some of which will flow into the company we've pinpointed.
In fairness to my loyal Venture Technology subscribers, I can't say any more than I already have. It wouldn't be right for me to just give away the name and ticker symbol in today's essay.
However, whether you're already a subscriber to my research or if you're just learning about it today, I hope you'll walk away from today's essay with this important takeaway...
Unlike the contractors, lawyers, and investment advisers you've encountered in your life, I always strive to go above and beyond what's required... And I intend to keep that promise.
Editor's note: Recently in his Stansberry Venture Technology service, Dave located the smallest chipmaker that stands to benefit from surging chip demand... and it's based here in America. The chip-manufacturing industry is about to take off, and "Venture Opportunity No. 73" is the perfect way to play this trend. For a limited time, you can get all the specifics about Dave's newest recommendation... plus a full year of his research... at a $3,000 discount to the regular price. Click here to get started.