The use of semiconductors to elevate the features used while driving an automobile has been growing for years, and recent technological advances in electrification, autonomous features, safety and security capabilities, as well as display and lighting, have fueled increased global demand for chips, according to Fidelity Portfolio Manager Adam Benjamin.
“All this innovation is increasingly supporting the concept that autos have become ‘smartphones on wheels’ and require more semiconductor content to support these technological advancements,” explains Benjamin, who manages Fidelity® Select Technology Portfolio (FSPTX).
In helming the sector-focused fund, Benjamin believes the value of technology stocks is in large part determined by companies’ potential to generate earnings and cash flow, while his investment framework focuses on themes that impact the largest end markets, determining potential winners/losers, and how certain firms that are technology disruptors can impact incumbents.
Electric vehicles have played a key role in the rising demand for auto-related semiconductors the past few years, and despite the stock market’s recent concern about slowing sales of EVs, they are still expected to see roughly 20% annual growth for the next several years, according to Benjamin.
While this rate of projected EV growth may be lower than prior years and previous investor expectations of about 30% growth, Benjamin believes it’s important to factor in the growth opportunities for chip content, given the pace of innovation throughout the entire auto industry – in many cases, $500 for a vehicle with an internal combustion engine and $1,000 to $2,000 for an EV.
“I project compelling growth for the semiconductor companies that are leading the way in auto vehicle innovation,” he says.
As of March 31, semiconductors were by far the largest portfolio overweight by subindustry, representing about a third of assets.
The fund counts some leading names here among its top holdings, including NXP Semiconductors (NXPI), a key supplier of chips for advanced driver-assistance and EV battery-management systems. The company is developing new architecture to simplify auto connectivity and advance the concept of a smartphone on wheels, according to Benjamin.
He’s also remained bullish on onsemi (ON) for its leadership in providing silicon-carbide solutions to power EV traction inverters, as well as image sensors for advanced camera-based safety technologies.
“Both companies are well-positioned to provide key products at the core of the powerful innovation trends that are disrupting and advancing the auto industry,” Benjamin says.
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Adam Benjamin is a research analyst and portfolio manager in the Equity division at Fidelity Investments.
Mr. Benjamin manages the Fidelity Advisor Technology Fund, Fidelity VIP Technology Portfolio, Fidelity Select Semiconductors Portfolio, Fidelity Select Technology Fund, Fidelity Advisor Semiconductors Fund and the information technology sleeves of the Fidelity Institutional Asset Management (FIAM) Large Cap Core and Global Core sector strategies. He also covers the large cap semiconductors industry.
Prior to assuming his current roles, Mr. Benjamin was a research analyst responsible for the coverage of the semiconductor, semiconductor capital equipment, and solar end markets. Most recently he served as global technology sector leader within FIAM.
Before joining Fidelity in 2011, Mr. Benjamin served as managing director and head of semiconductor equity research at Jefferies & Company, Inc. Previously, he held various roles at SG Cowen, including senior research associate focused on the semiconductor space and vice president in the Technology M&A group. Mr. Benjamin was also an associate in the Corporate Law department of Sullivan & Worcester. He has been following the technology sector for over 18 years.
Mr. Benjamin earned his bachelor of arts degree from Cornell University and his juris doctor degree, cum laude, from Suffolk University Law School.