In short: The week's featured growth special situation, and the only name he says outright he is looking to add. "HIMX is another very cheap name to play the AI tailwind that we're seeing in the market. And frankly, you can hedge with any of the AI ETFs to take out the beta from that name." Asked in Q&A whether digital infrastructure is too pricey: "we're just waiting, and looking at less followed names like Himax to add to for now." What it is: "a Taiwan-based fabless semiconductor company… instead of manufacturing its own silicon chips in factories, Himax designs the integrated circuits and outsources production to foundries like TSM," selling as a tier-two supplier into panel makers (AUO, BOE) and tier-one auto electronics, and from there into Apple, Dell, Samsung and the global automakers. The moat is automotive: "Himax is the global market share leader in automotive display driver integrated circuits… Himax owns 40% of the global market share for automotive displays." The optionality is edge AI and glasses — WiseEye ultra-low-power always-on computer vision, LCoS micro-displays and wafer-level optics — and "all of the Meta Ray-Bans use Himax. So as you see those sales increase, it's positive for the company." The setup: Q2 revenue $227M, +14% sequentially and +5.9% y/y, snapping a four-quarter stretch of declining revenue growth, EPS $0.11 (a penny light) on 33.1% gross margin, exceeding guidance, with small/medium display drivers +19.6% to $162M and now 71% of sales. Guidance: +7-11% q/q to $243-250M, +23.8% y/y at the midpoint, gross margin +90bp to 34%, inventories flat at $150M — "so no red flags… but the market doesn't seem to be rewarding this strong beat." His read on why: "its last quarter beat and its stock is down simply because of the AI sell off." On valuation: "while Himax does look expensive when viewed through trailing multiples, on a forward basis it looks a lot more reasonable — Himax's PE on a forward basis is around 30, but the business has so much potential. The TAM in the smart glasses is so high… and the fact that the business is growing and auto has bottomed, means that there could be upside from here."
Himax is a Taiwanese chip designer. It does not own factories — it designs the silicon and pays TSMC to manufacture it, a model called "fabless." Its chips are display drivers: the small processors that sit behind a screen and translate a computer's instructions into individual pixels lighting up in the right colour. They are in televisions, laptops, Kindles, phones — and, above all, in cars.
Cars are where the position is genuinely strong. As dashboards have replaced dials and needles with curved screens and head-up displays, Himax has ended up supplying roughly 40% of the world's automotive display driver chips — the largest share of anyone. That business went through four straight quarters of shrinking revenue as the car industry slumped, and has now turned: last quarter revenue rose 14% from the prior quarter to $227 million, profit margins beat guidance at 33.1%, and management guided the current quarter to $243-250 million, which would be growth of nearly 24% against a year ago, with margins improving again.
The share price fell anyway, because the whole artificial-intelligence complex sold off and Himax got sold with it. That, in Singh's telling, is the entire opportunity: "its last quarter beat and its stock is down simply because of the AI sell-off." He also names the way to hold it without holding the market's mood — buy Himax and short an AI-themed exchange-traded fund against it. If AI stocks fall as a group you make money on the short and lose it on Himax, leaving you exposed only to whether Himax itself does better than its peers. That is what "hedging out the beta" means.
The part that could turn a cheap car-parts business into something more is smart glasses. Himax makes an ultra-low-power vision sensor called WiseEye that lets a device watch its surroundings continuously without flattening the battery, plus the tiny projectors and optics that put an image in front of your eye. Every pair of Meta Ray-Ban glasses uses Himax. If those glasses become a mass-market product, a chip supplier with a design win in all of them is worth a great deal more than thirty times next year's earnings.
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