Bottlenecks!
Let's talk bottlenecks.
Hyperscalers are spending $1tn on data centres. Billions on Nvidia chips alone. Data centres the size of small English towns (some not so small). A wall of money is hitting the entire supply chain, and every link is being asked to step up and supply more.
But what if one link can't?
Take sewers. Pipes That Carry Poo (PTCP). Every data centre needs PTCP. If there aren't enough to go around, the price rises until someone on the demand side gets squeezed out. This happens all along the chain — which is why companies that previously made very boring (don't say commoditised) stuff suddenly have massive pricing power, massive earnings, and stocks going to the moon.
But those prices attract competitors. PTCP aren't that hard to make. Soon the PTCP guys find themselves with lots of competition, maybe even a glut, forcing them to sell at rock-bottom prices — earnings collapse, stock heads to the centre of the earth.
The job is to find the durable bottlenecks. Or ones priced so cheaply that a single quarter's earnings justifies the entry, even if all they sell is PTCP.
Four questions:
What are the barriers to entry?
How long does new supply take to come online?
How persistent is the demand?
What are the substitutes?
$PTCP $NWPX
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