On February 21st, 2024, the financial world held its breath as NVIDIA, the tech giant, prepared to announce its earnings. With a staggering 40% surge since the start of the year, NVIDIA’s performance was poised to either trigger a significant market correction or fuel the S&P 500’s relentless climb. As the closing bell rang, an expectant silence enveloped the trading floors, awaiting NVIDIA’s revelation.
And what a revelation it was! NVIDIA emerged with jaw-dropping figures:
- Revenue: A mind-boggling $22.1 billion, a 265% YoY increase.
- Net Income: A whopping $12.28 billion, soaring by 768.81% YoY.
- Earnings Per Share (EPS): A staggering $4.93, surging by 764.91% YoY.
These remarkable results catapulted NVIDIA into the stratosphere of bull markets. Since that fateful day, their stock has surged by 37%, achieving a 92.16% year-to-date growth and boasting a colossal market capitalization of $2.31 trillion.
But let’s delve deeper. Beyond the headlines and financial charts, there lies a lesser-known story—a chink in NVIDIA’s armor. A chink in every semiconductor/GPU producer’s armour. And where does this hidden vulnerability reside? Surprisingly, it’s nestled in the heart of North Carolina.
Semiconductor fabrication is a reasonably complex task in which nanometers (that’s 10^-9m; the diameter of 3 gold atoms combined) are of utmost importance. One of the most critical raw materials used in semiconductor fabrication and all things high-tech related is high-purity quartz. High-quality quartz (SiO2) is required to make the crucibles needed to refine silicon wafers via the Czochralski method. These wafers require 99.999999% purity to create a crystalline structure. Without high-quality quartz, the monocrystalline silicon wafers would cease to exist, and in turn, computer chip manufacturers, GPUs, AI, and modern technology would cease to exist.
Located in Spruce Pine, North Carolina, a small town of 2,175 people, lies the backbone of the modern economy. There, two mines produce all of the world’s ultra-high-quality quartz. About 380 million years ago, the area was located south of the equator. Plate tectonics pushed the African continent toward Eastern America, forcing the heavier oceanic crust—the geologic layer beneath the ocean’s water—underneath the lighter North American continent. The friction of that colossal grind generated heat topping 2,000 degrees Fahrenheit, melting the rock that lay between 9 and 15 miles below the surface. The pressure on that molten rock forced massive amounts of it into cracks and fissures of the surrounding host rock, forming deposits of what are known as pegmatites. What makes this deposit even more interesting is the prices that can be obtained… with quartz up to 99.9992% purity, racking in close to $10,000/ton (USD).
The mines are owned by Sibelco (& one near Spruce Pine owned by Quartz Corp), a multinational private organization that operates in 31 countries, producing silica, clays, feldspathoids, olivine, and recycled glass. Spruce Pine Operations recently announced a €200M expansion to double production capacity by 2025. There is also a distinct interest in Sibelco’s Spruce Pine Operations. With a recent stock buyback, in which Sibelco bought back approximately 89,000 shares at a price of €6,850 (Market Value of €609M), a covenant was added which states explicitly that a variable price component would be calculated if Spruce Pine Operations were sold or disposed of. This specific covenant shows the explicit interest of shareholders in capitalizing on what could be the most important mine in the “AI revolution.”
Sibelco boasts a very impressive €371.7 EPS (in 2023), and its EBITDA has increased in the past two years, culminating with a 22% increase between ’22 and ’23. This all off a modest €2.1B in Revenue, despite it divesting from its Russian assets and having to adjust to the Ukraine war. Another impressive statistic is Sibelco’s ROCE, which is at a staggering 11.4%. Their ROCE has Grown YOY since 2020, and it stands at 11.4% now.
As per a Wired article (which I highly recommend you check out), Sibelco is immensely secretive about its production of high-quality quartz. Their recent annual report mentioned it only eight times in total. They’d boast more for a product that is the bedrock of their company. But I guess it’s in the best interest of their international shareholders to keep this the best-kept secret of the “AI” revolution. If this company ever went public, I’d be faster than a cheetah on caffeine to snatch up those shares! (*Not Financial Advice) Even junior mining corporations such as HomeRun Resources, which manage properties in BC with drill results of 99.7% purity and in Brazil with an average of 99.88%, do not compare to what is hidden in the mountains of Spruce Pine, North Carolina.
In the grand tapestry of the global economy, it’s often the unseen threads that hold everything together. On February 21st, 2024, as NVIDIA’s astounding earnings sent shockwaves through the financial world, a lesser-known narrative quietly unfolded—a tale of high-purity quartz nestled in the heart of North Carolina. This unassuming mineral, extracted from the mines of Spruce Pine, forms the backbone of our technological age, supporting GPU and chip manufacturers like NVIDIA, Intel, Apple, and Microsoft. Without it, the intricate dance of semiconductor fabrication, the marvels of AI, and the innovations of modern computing would grind to a halt. Yet, its significance often goes unnoticed amidst the glitz and glamour of Silicon Valley. As Sibelco’s secretive operations underscore, the true engines of progress often hum in the shadows. And as whispers of expansion and speculation swirl around these mines, one thing is clear: Spruce Pine, North Carolina’s story is not just about minerals but about the essence of innovation and resilience that drives the modern world forward.
Link to Wired Article: https://www.wired.com/story/book-excerpt-science-of-ultra-pure-silicon/