In today’s fast-evolving tech landscape, investors are always on the lookout for stocks with massive profit potential. However, investing in technology can be a risky venture, as constant disruption and innovation are always on the horizon. Just ask software company investors how they feel about the rise of AI-generated programming and its potential impact on their competition. For investors looking to navigate these risks, it’s crucial to focus on companies that have a clear competitive advantage—companies that possess what we call “economic moats.” These are advantages like economies of scale that allow a company to maintain durable leadership in its sector.
Take, for example, Coupang, the e-commerce giant in South Korea. While it’s easy to draw comparisons to Amazon, Coupang has improved upon Amazon’s delivery model in ways that make it a standout player. Coupang’s Rocket Wow membership program offers customers free delivery that can arrive by 7 a.m. the next day if orders are placed before midnight. On top of that, Coupang provides fast grocery deliveries, as well as installation services for appliances and car parts purchased on the platform—services that many competitors can't match.
These services are made possible by Coupang’s massive investments in infrastructure across South Korea. In fact, the company saw a 21% year-over-year growth in revenue, with gross profit growing even faster at 31%. Despite these heavy investments, Coupang managed to generate operating income of $154 million last quarter, demonstrating impressive profitability.
Coupang’s potential doesn’t stop at South Korea, either. The company is rapidly expanding its operations in Taiwan and beyond, bringing its e-commerce and subscription-based model to new markets. With a projected revenue of over $100 billion in the near future, up from $31 billion in the last twelve months, Coupang is quickly becoming a major player in East Asia. For long-term investors, Coupang could very well be a “millionaire-maker” stock, one to hold onto for years to come.
However, before jumping into the world of tech stocks, it’s important to look at another company that has even more massive economies of scale—Taiwan Semiconductor Manufacturing Company, or TSMC. A leader in semiconductor manufacturing, TSMC dominates the market for AI chips, with major customers like Nvidia, Apple, and Qualcomm. Every year, TSMC invests roughly $35 billion in building its factories, with over $100 billion in committed investments in the U.S. alone. This massive capital spending has given TSMC a nearly insurmountable edge in the semiconductor industry.
The growing demand for AI chips has caused TSMC’s revenue to skyrocket. Last quarter, the company’s net revenue grew by 35% year-over-year, reaching $25.5 billion, with operating margins nearing 50%. These kinds of profit margins are unheard of in heavy manufacturing and highlight TSMC’s dominant pricing power in the industry.
As AI continues to grow, the demand for semiconductors will only increase, and TSMC is poised to benefit from this trend. At a price-to-earnings ratio of 30, TSMC is relatively reasonably priced for a company in a near-monopolistic position in an industry experiencing a massive surge in demand. TSMC has been a “millionaire-maker” for investors in the past and is well-positioned to continue delivering impressive returns for years to come.
Of course, no investment is without risks. Even industry giants like Amazon and TSMC are not immune to the challenges brought about by new technologies. For instance, the rise of AI poses a serious threat to some software companies. Therefore, investors need to look for companies that not only have strong current performance but also possess the ability to innovate and adapt in the face of disruption.
When it comes to technology investing, it’s clear that companies with substantial competitive advantages, like Coupang and TSMC, are the ones to watch. Both companies have massive potential to grow and dominate their respective sectors, making them appealing options for investors looking for long-term gains. In an ever-changing tech landscape, those who can spot the winners early—those with the right infrastructure, competitive advantages, and innovative capabilities—will have the best chance to ride the wave of growth.
In conclusion, while investing in technology stocks can be risky, for those willing to dive deep and seek out companies with sustainable competitive advantages, stocks like Coupang and TSMC offer a chance at becoming part of the next generation of tech giants. With their massive scale and potential for long-term growth, these companies could very well make investors rich in the years to come.