Introduction

Major technology trends like artificial intelligence often dominate headlines, but there are lesser-known plays with significant potential. According to tech investor Richard Clode, the Internet of Things (IoT) falls into this category. Clode, a fund manager at Janus Henderson Investors, believes that IoT stocks like NXP Semiconductors and Impinj have the potential to be long-term winners. In fact, the $3.2 billion Horizon Global Technology Leaders Fund, managed by Clode, is invested in both of these stocks.

The Rise of IoT

One specific IoT technology that Clode sees gaining momentum is radio frequency identification (RFID) for supply chain tracking. RFID utilizes small wireless chips to track inventory and assets. While it was initially hailed as a breakthrough in supply chain visibility, it was deemed too expensive and unreliable back then. However, Clode believes that now is the perfect time to invest in IoT technologies, as they have undergone a “revulsion phase” where interest waned. With costs reduced, performance improved, and years of piloting, major companies like Walmart and UPS are now rolling out RFID on a massive scale to tag shipments. In fact, Walmart has mandated RFID for all of its suppliers across various categories.

The Real Side of IoT

Clode points out that the true potential of IoT lies in specific applications like supply chain efficiency, rather than being just a general and vague concept. He highlights the real-world impact of IoT in industries like retail, where it enables more efficient supply chains. NXP Semiconductors and Impinj are the dominant players in RFID chips, making them well-positioned to benefit from this trend. Their specialty chips, capable of wireless transmission without batteries or line of sight, are ideal for supply chain applications.

Investment Opportunities

NXP Semiconductors, a U.S.-listed Dutch multinational, is the more prominent player among the two, known for its automobile microchips, and boasts a market cap of $58 billion. On the other hand, Impinj focuses solely on RFID chips and has a smaller valuation of $2.4 billion. Analysts’ consensus price target suggests a 45% upside potential for the stock over the next 12 months.