I’ve been a trader and investor for 44 years. I left Wall Street long ago—-once I understood that their obsolete advice is designed to profit them, not you.
Today, my firm manages around $4 billion in ETFs, and I don’t answer to anybody. I tell the truth because trying to fool investors doesn’t help them, or me.
In Daily H.E.A.T. , I show you how to Hedge against disaster, find your Edge, exploit Asymmetric opportunities, and ride major Themes before Wall Street catches on.
Table of Contents
H.E.A.T.
Every AI cycle has a tell. The 1849 Gold Rush minted more millionaires from picks, shovels, and Levi’s denim than from gold itself. The 1990s internet boom paid out more reliably to Cisco than to the dot-coms riding its routers. And the 2020s AI buildout is rhyming — except this time the picks and shovels are slurries, photoresists, and ultra-pure solvents.
The market has correctly identified the obvious chokepoints: GPUs, HBM memory, and — more recently — photonics and optical interconnects. The trade in each of those names is now crowded, expensive, and reflexive.
But there is one bottleneck the consensus is still mispricing, hiding in plain sight inside every leading-edge fab from Arizona to Hsinchu: the chemistry that makes the chip possible in the first place.
A single contamination event — a particle measured in nanometers, an unwanted ion at the parts-per-trillion level — can brick a $30,000 advanced package before it ever reaches a server rack. As process nodes shrink toward 2nm and packaging stacks grow more complex (CoWoS — TSMC’s flagship advanced packaging line — hybrid bonding, 3D-IC), the tolerance for chemical impurity collapses toward zero. The chemicals layer is no longer a commodity input. It is a precision component.
And the urgency is right now. The U.S. is mid-build on the largest concentrated cluster of leading-edge fabs in industrial history — Arizona, Ohio, Taylor — and every one of them is qualifying the same short list of chemical vendors into their flows this year. Once a name is designed in, it is structurally protected for the life of the node.
Wall Street still values these names like specialty industrials. They behave like infrastructure monopolies. That gap is the trade.
“You cannot run a 2nm fab on ‘good enough’ chemistry. There is no second supplier, and there is no substitute.”
THE THESIS
The bottleneck migrates. That has been the rule of every AI infrastructure cycle since 2022. Compute scarcity gave way to memory scarcity. Memory scarcity gave way to power and interconnect scarcity. The next leg — the one currently being underwritten in fab capex announcements — is materials scarcity.
TSMC’s Arizona fab alone is a multi-tens-of-billions buildout. Intel’s Ohio campus, Samsung’s Taylor, Texas facility, and the broader U.S. CHIPS Act footprint together represent the largest concentrated semiconductor capex cycle in history. Every one of those facilities runs on the same short list of qualified chemical suppliers — names that take years to design-in and effectively cannot be swapped out mid-node.
That is the definition of a structural moat. And it is selling at industrial multiples.
~$165B GLOBAL FAB EQUIPMENT SPEND 2025E SEMI | $30K+ VALUE OF A LEADING-EDGE PACKAGE Industry est. | <1 ppt ALLOWABLE METAL CONTAMINATION SEMI specs |
FOUR NAMES, ONE BOTTLENECK
These are not interchangeable bets. Each one sits at a different layer of the chemicals stack — from raw purity to packaging chemistry to system materials. Treat them as a basket, not a single ticker.
ENTEGRIS (ENTG) — THE PURITY PLAY What it does: Filtration, fluid handling, and ultra-pure materials — the plumbing that keeps contaminants out of every wafer. Why now: ENTG content per wafer scales with node complexity. Arizona, Ohio, and Taylor are all qualifying ENTG into their flows. The setup: The stock has lagged the AI infrastructure rally despite arguably better unit economics than the comp set. If Nvidia is the chip, ENTG is the oxygen — invisible, unsexy, and absolutely non-optional. |
MKS INSTRUMENTS (MKSI) — THE PACKAGING CHEMISTRY PLAY What it does: Specialty chemicals, photoresists, and process control for advanced packaging (the Atotech acquisition is the engine here). Why now: Advanced packaging is where the Moore’s Law substitution is happening. CoWoS demand is structurally short of supply through 2027. The setup: MKSI carries debt the market hates, but the chemistry segment is a compounding annuity tied directly to the packaging buildout. |
ROGERS CORP (ROG) — THE SYSTEM-LEVEL MATERIALS PLAY What it does: High-frequency laminates and engineered materials used in optical transceivers, high-speed switches, and EV power electronics. Why now: Every 800G/1.6T transceiver, every co-packaged optics module, every AI-class switch needs the kind of low-loss substrate ROG specializes in. The setup: An indirect, second-derivative bet on the same photonics theme that has already sent the obvious names parabolic. ROG hasn’t re-rated. |
ELEMENT SOLUTIONS (ESI) — THE DIRECT PACKAGING PLAY What it does: Electroplating chemistry and assembly solutions for advanced packaging — the literal chemistry deposited between dies. Why now: Management has flagged organic growth in the electronics segment running at the highest rate since the COVID-era surge. The setup: The cleanest, most direct exposure to advanced packaging dollar volume of any name on this list. And it trades like a paint company. |
WINNERS — TIERED BY CONVICTION
TIER | NAME | ROLE IN THE STACK | WHY IT WINS |
Core | Entegris (ENTG) | Ultra-pure materials and filtration | Highest content-per-wafer leverage to leading-edge node ramps |
Core | Element Solutions (ESI) | Advanced packaging chemistry | Most direct line to packaging dollar volume; organic growth re-accelerating |
Satellite | MKS Instruments (MKSI) | Specialty chemicals + packaging process | Atotech franchise is structurally tied to CoWoS scaling |
Satellite | Rogers Corp (ROG) | High-frequency laminates | Indirect optical/photonics exposure not yet priced in |
PRESSURE POINTS — WHERE THE TRADE COULD GO WRONG
These are not “losers.” They are the timing and margin risks the basket has to navigate. Naming them is the price of admission for taking the position seriously.
RISK | WHAT IT LOOKS LIKE | MITIGATION |
Capex digestion | Memory and logic capex pause in 2026 if AI training demand normalizes | Names with packaging exposure (ESI, MKSI) outrun a pure capex pause |
China substitution | Domestic Chinese chemical capacity displaces imports at trailing nodes | Leading-edge moat (Arizona, Hsinchu) is geographically insulated |
Margin compression | Energy and feedstock costs squeeze gross margin in a flat-volume year | Pricing power is real at the leading edge; less so in trailing-node SKUs |
Equity multiple gap closes too slowly | Names re-rate over 18–24 months, not 6 | This is the bull case for size, not speed |
CONFIRMED VS. DIRECTIONAL
Where this thesis stands on data we can source versus where it leans on industry direction.
CONFIRMED | DIRECTIONAL |
TSMC Arizona, Intel Ohio, and Samsung Taylor are funded and under construction (public filings, CHIPS Act disclosures). | ENTG and ESI content-per-wafer growth at 2nm vs. 5nm — directionally up, but exact magnitudes vary by source. |
Element Solutions management has publicly cited electronics organic growth at the highest rate since 2021. | MKSI Atotech segment margin trajectory through the next packaging cycle — modeled, not guided line-by-line. |
CoWoS capacity is sold out through at least 2026 per multiple sell-side desks. | ROG’s share of the optical transceiver substrate market — implied from product mix, not disclosed at the SKU level. |
THE HONEST BEAR CASE
If you are going to take the trade, you have to take the bear case seriously. There are three real ones.
First, the chemicals layer is not a pure-play story. ENTG, MKSI, ROG, and ESI all have legacy exposures (industrial, automotive, general electronics) that can mute the AI signal in any given quarter. You are buying a portfolio of segments, not a clean theme.
Second, the AI capex cycle is not infinite. If hyperscaler training demand plateaus in 2026, the back half of the fab buildout slows. Materials names lag equipment names down as well as up.
Third, the multiple gap exists for a reason. The market may be pricing these as industrials because they grow like industrials between buildout cycles. The re-rating thesis depends on the cycle being durably longer than the last one. That is a thesis, not a fact.
WHAT TO WATCH — THE DASHBOARD
If you want one leading indicator for whether this cycle is still running, do not watch GPU shipments. By the time GPUs print, the materials trade is already two quarters in. Watch packaging.
THREE SIGNALS THAT MOVE FIRST 1. CoWoS expansion commentary. TSMC capacity adds and qualification timelines. This is the upstream tell for ESI and MKSI. 2. Advanced substrate lead times and orders. Substrate tightness is the canary for the entire packaging stack — and a direct read on ROG and the laminate complex. 3. Packaging chemistry pull-through. ESI electronics segment organic growth and MKSI Atotech commentary on each earnings call. This is the cleanest real-time read on whether the chemistry layer is keeping up with the buildout. |
FIVE TAKEAWAYS
1. The bottleneck migrates — and chemicals is the next stop. Compute, then memory, then power, then interconnects — each became the trade as the prior one priced in. Materials are the next leg.
2. A $30,000 package can brick on a single particle — which is why qualified suppliers are not commodities. The pricing power is structural, not cyclical.
3. Treat it as a basket — not a single name. ENTG and ESI are the core; MKSI and ROG are the satellites. Each one sits at a different layer of the stack.
4. The multiple gap is the trade — These names trade like nice industrials. They behave like secular monopolies. Own the closing of that gap.
5. Watch packaging capacity, not GPU shipments — as the leading indicator. CoWoS bookings, advanced substrate orders, and electroplating chemistry pull-through tell you whether the cycle is still running before any GPU print confirms it.
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News vs. Noise: What’s Moving Markets Today
$AMD ( ▲ 4.91% ) announced earnings after the bell and is currently up 18% ish after a monster move already over the past month…..
Getting this type of move from a megacap is certainly interesting. I’m certainly cognizant of this….
This of course doesn’t mean we have another bubble burst right around the corner, but if you aren’t in semi’s already I probably wouldn’t chase.
Oil is down big this morning, as usual I’d probably buy the dip in oil stocks…..
Remember, we have heard this before….
Gold is starting to look interesting again….
$GLD ( ▲ 0.32% ) is up big this morning and should have a few undercut and rally moves at the April lows and the 10 and 20 day moving averages. On the wealth side we always have a static position in gold, but I do like to move in and out of the miners. The time to buy the miners is when nobody wants them. I usually think Mark Hulbert’s articles are dumb, but he could be right here….
What Iran Tells Us About UFO Disclosure
When governments confront unknown threats in their airspace, defense budgets surge
and the same aerospace and surveillance companies move hardest. On March 2nd,
Northrop jumped 6% and Lockheed 3.3% on the Iran news — and President Trump has
since ordered the formal release of government UAP files, with the Pentagon confirming
compliance. So if a conventional conflict can move these stocks this fast, what happens
when the bigger story breaks?
See the UFOD holdings: [thetruthisoutthereufod.com
ETF News
$MEMY Holdings Update: |
We replaced $MITK ( ▲ 0.92% ) and added $PENG ( ▼ 0.59% ) All 5% positions. |
A Stock I’m Watching
Talked about this on the Cow Guy Podcast…..
In Case You Missed It
Great talk on with the Acquirers Podcast on markets, value investing, inverse Cramer, and Michael Gayed joins me to talk about taking income from your portfolio and how to get more than 4%……
The H.E.A.T. (Hedge, Edge, Asymmetry and Theme) Formula is designed to empower investors to spot opportunities, think independently, make smarter (often contrarian) moves, and build real wealth.
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