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Feb 11
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LONG
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Citrini
Substack author, Citrini Research
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The "atoms" trade is evolving beyond crowded plays into specialized Advanced Materials & Processes. These companies operate in concentrated markets (duopolies, oligopolies, monopolies) with high barriers to entry (decades of process knowledge, stringent quality, long customer qualifications). They sell into sectors with multiple tailwinds: defense (Trump's $1.5T budget, NATO, Japan), electrification, aerospace (historic backlog), and AI (data center buildout). These materials are protected by physics, technical barriers, defense restrictions, chronic underinvestment, and quality requirements, making them resilient to competition and supply chain disruptions. The convergence of cyclical demand recovery and structural spending increases means the market is currently underpricing these names, often valuing them based on only one tailwind. This sector represents the "next evolution" of the "atoms" trade, offering companies with strong moats, pricing power, and multiple, converging demand drivers. These businesses are fundamentally resilient to AI disruption and are poised for significant outperformance as capital continues to rotate from "bits" to "atoms." Global economic slowdown impacting industrial demand, geopolitical shifts reducing defense spending, unexpected technological breakthroughs that reduce demand for specific materials, or a failure of the market to recognize the confluence of tailwinds. |
Citrini Research
Atoms vs Bits
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