Tuesday, June 20, 2023
When I wrote you on June 9, I noted we've recently witnessed a huge slowdown in funding for startups.
Global venture funding in Q1 2023, the last period for full data, fell 54% to $76 billion.
But one area of startup funding is still humming, and it's set to have a huge impact on the New Energy Economy.
The fact is, to support the continued adoption of EVs, we're going to need a lot more charging stations. That's why the Biden Administration has earmarked $51 billion to build out a national network.
But there's also a more immediate catalyst, and it's attracting more than $1 billion in startup funding.
Today I'll tell you what it is – and reveal how to get positioned to profit from it.
As a global leader in adopting green-energy technologies, California has long been the trendsetter in the space. Now the state's impending deadline for electrifying heavy trucks is setting off a technological race worth billions of dollars.
See, California's Port of Los Angeles is the busiest container port in the country. It handles 20% of all cargo entering the United States. The Ports of Long Beach and of Oakland are no slouches either. Both are among the top-10 busiest ports.
Much of that cargo gets moved around by tens of thousands of trucks driving through some of the largest and densest metro areas in the country. That creates enormous air pollution right where millions of people live.
And that's why, starting January 1, 2024, California will require trucking companies and owner-operators to begin switching over their heavy trucks to fully electric power.
The goal is to switch over about 30,000 heavy trucks to fully electric by 2035. That will require thousands of new charging stations around ports and warehouses, as well as along major highways.
As you can imagine, this impending deadline is attracting attention from far and wide. For example, according to the Wall Street Journal, startup TeraWatt Infrastructure has raised a whopping $1 billion to build out charging stations for this coming boom of commercial fully-electric trucks.
But that's not even close to being enough. The Journal quotes TeraWatt's co-founder and CEO, Neha Palmer, as saying that the $1 billion "will go in a heartbeat" as the company starts looking past California.
While California may be setting the pace here, this is just one piece of a much larger pie. According to data collected by Atlas EV Hub, $210 billion has been pledged by industry and government to build out EV charging and other EV infrastructure in the U.S. That's almost a quarter of the global total of $860 billion.
While these numbers don't separate out investments in charging from other kinds of EV infrastructure, the numbers still speak for themselves: this is one of the largest investment trends in the world.
As such, we investors need to keep a close eye on it. One name that often comes up in discussions of this trend is ChargePoint Holdings Inc. (CHPT), a small company that runs one of the world's largest networks of EV charging stations with more than 4,000 fleet and business customers.
Unfortunately, the stock is much too volatile for most investors. Daily share price swings of 10% or more happen regularly.
But ChargePoint, like many other companies in the EV-charging industry, is working closely with a huge chip firm that provides the tech needed for all this new EV infrastructure.
After all, recharging an EV battery is a much more complicated process than refilling a fuel tank. How fast a battery can recharge, and what voltage it needs, changes dramatically with the battery's level of charge, temperature, and other factors. It all means that advanced chips are needed to keep the electricity flowing just right.
The tech leader I'm referring to provides ChargePoint and other EV charging providers with extremely reliable chips and hardware that make all this happen seamlessly.
Just as importantly, this firm's chips and software are very adaptable. They can be reused across regions, in commercial and private charging stations, and they allow for easy-to-use and reliable billing and connecting to the cloud, making it and its status visible to drivers for easy navigation.
Even better, this firm also supplies software, hardware, and testing solutions to EV manufacturers, fleet managers, and even the personal charging stations that EV owners install in their homes.
It's a one-stop play on EV charging and the whole EV revolution. In fact, it gives us even more shots on goal, as it's also a leader in chips and other hardware for the contactless communication tech used in passports and cellphone payment apps, for sensors used in industrial robots, and much more.
This one firm gives us a good hook on the EV revolution with a broad portfolio of products. That means multiple sales streams. It also recently beat on earnings, with sales 9% higher, and earnings 17% higher, than a year before.
Automotive chip-sales numbers were especially rosy, jumping 17% from the quarter before.
The firm also announced a 20% increase in its dividend, which brings it up to 2.3%. Over the past three years, the firm has grown earnings by an average of 321%.
To be conservative, let's assume it can achieve just 10% of that rate going forward. Even at that rate, we could still see an earnings double in as little as three years.
In short, this is a great company and an amazing play on the EV revolution that's rapidly picking up steam.
Of course, you'll need to become a "Pro" subscriber to get this firm's ticker symbol.
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Cheers and Good Investing,
Chief Investment Officer
Trend Trader Daily