Industry Overviews

Semiconductor Industry

Semiconductors sit at the core of nearly every modern technology, from smartphones and data centers to electric vehicles and AI systems. While the industry can seem overwhelming due to its technical depth and global scale, the fundamentals are surprisingly intuitive once broken down. This primer walks through how chips are made, how the semiconductor ecosystem is structured, and why different parts of the value chain matter.

At the most basic level, a chip is created by stitching together billions of transistors on a silicon base called a wafer. A transistor is a tiny electrical switch that allows current to flow depending on a given voltage or power level. When transistors are wired together, they form logic gates, such as AND, OR, and NOT, which enable computation. Silicon is used because it is a semiconductor, meaning it can behave as either a conductor or an insulator depending on how it is treated.

Chip manufacturing begins with sand, which is heated until it melts and then crystallized into an ultra-pure silicon ingot. This ingot is sliced into thin, flat wafers, which are typically 200mm or 300mm in diameter. On each wafer, the same chip design is repeated many times across the surface, with each copy referred to as a die. Smaller designs can yield hundreds or even thousands of dies per wafer, while larger CPUs or GPUs may only produce a few dozen. Once manufacturing is complete, the wafer is diced, and each die becomes an individual chip.

One of the most critical steps in chipmaking is photolithography. The wafer is first coated with a light-sensitive chemical called photoresist. Light is then shined through a photomask, which acts like a stencil containing the circuit pattern. Where the light hits, the photoresist changes chemically, allowing certain areas to be etched away or filled with new materials. This process is repeated dozens of times, layer by layer, with thin films added in between to protect the design as chips are built vertically. Impurities, known as dopants or ions, are introduced to control conductivity, and metal wiring layers are added to allow electricity to flow throughout the chip.

After fabrication, chips undergo extensive testing. Electrical die sorting identifies defective dies before packaging. The remaining dies are bonded to contact points, often stacked to improve performance and efficiency, and tested again before shipping. Many of these final steps are handled by OSAT companies, or outsourced semiconductor assembly and test providers, which play a critical role even though they do not design or fabricate chips themselves.

The semiconductor industry is highly specialized and segmented. Fabless companies focus only on chip design, relying on foundries to manufacture their products. Integrated device manufacturers handle design, manufacturing, and testing in-house. Foundries like TSMC focus exclusively on production, benefiting from massive scale and consistent demand. Supporting this ecosystem are EDA companies such as Cadence and Synopsys, which provide the software tools needed to design chips, and IP companies like ARM, which license reusable building blocks used inside larger designs. On the equipment side, special production equipment vendors supply the highly advanced machinery required to manufacture chips.

Different chip categories also behave differently from an economic perspective. Memory chips like DRAM and NAND are heavily driven by supply and demand dynamics, making memory stocks highly cyclical. Logic-focused fabless designers, such as Nvidia or Qualcomm, are more dependent on product adoption cycles, where being early in a rapidly growing market can lead to outsized returns. Diversified players like TSMC benefit from exposure across many customers and end markets, providing a more stable demand profile. Regionally, the U.S. dominates design, Taiwan leads foundry manufacturing, Korea specializes in memory, Europe and Japan excel in equipment, and China plays a major role as an intermediate buyer.

At the chip level, CPUs handle general-purpose arithmetic and logic operations, while GPUs excel at parallel processing and graphics-intensive workloads. Analog chips play a different but equally important role, converting real-world signals such as sound, light, temperature, and power into digital information that computers can process.

Understanding these building blocks provides a strong foundation for analyzing semiconductor companies. While the technology continues to evolve, the underlying structure of the industry remains one of the most strategically important and globally interconnected ecosystems in the world.

Jet Engine Industry

Jet engine manufacturing combines elements of advanced engineering, long product cycles, and very durable business models. At a high level, the industry is characterized by two end markets, a handful of dominant players, and a model where most profits are earned long after the engine is first sold.

The jet engine market is split into two major segments: commercial and military. Commercial engines are used on airline passenger jets and cargo aircraft, where priorities center on fuel efficiency, reliability, and lifetime operating costs. These programs are dominated by GE Aerospace, CFM International, Pratt & Whitney, and Rolls-Royce. Engines are often sold at very low margins, or even at a loss, in order to secure decades-long service contracts that generate the majority of profits.

Military jet engines operate under a very different set of constraints. These engines power fighter jets, bombers, drones, and helicopters, and must withstand extreme heat, higher thrust requirements, and stealth considerations. GE Aerospace and Pratt & Whitney dominate this segment, with examples like GE's F414 and F110, and Pratt & Whitney's F135 used on the F-35. While margins per engine can be higher, production volumes are lower and aftermarket revenue is more limited, as the U.S. Department of Defense controls much of the maintenance ecosystem. However, military programs tend to last 30 to 50 years, providing long-term revenue visibility.

On the commercial side, aircraft are commonly grouped by size and mission. Narrow-body, or single-aisle aircraft, such as the Boeing 737 MAX and Airbus A320neo, represent the largest volume market globally. Wide-body, or twin-aisle aircraft, including the 787, 777, A330, and A350, sell in lower volumes but use extremely large and expensive engines like the GE90, GEnx, GE9X, and Rolls-Royce Trent XWB. These engines generate substantial lifetime service revenue due to their size, complexity, and utilization on long-haul routes. Regional jets, such as Embraer’s E-Jets and the CRJ family, sit below narrow-bodies in performance needs.

Across all aircraft categories, the jet engine industry follows a razor-and-blades economic model. The engine itself is the razor, often sold at breakeven margins to win placement on a new aircraft platform. The blades are aftermarket services, which account for roughly 70% of revenue for major OEMs. These services include spare parts, full engine overhauls, and long-term maintenance agreements that can last 20 to 30 years. Over an engine's lifetime, service revenue can reach three to five times the original sale price, with service margins often ranging from 25% to 40%, compared to near-zero margins on the original engine sale.

Barriers to entry are immense, with new engine programs requiring $2–4 billion in development costs, 5–10 years of testing and certification, and multi-decade service commitments.

A useful mental model for the jet engine market is to think in layers. There are two end markets: commercial and military. There are two main aircraft categories: high-volume narrow-bodies and lower-volume but higher-value wide-bodies. And there is one dominant economic truth: engines are sold cheaply, but services drive the profits. Within this structure, GE Aerospace stands out as the largest player, with roughly 70% of revenue coming from services and blended operating margins approaching 20%. The result is an industry defined not by rapid disruption, but by durability and scale.

Private Credit Industry

Private credit has grown rapidly over the past decade as capital has moved away from traditional banks and into private, non-bank lending channels. Understanding how private credit is structured, who uses it, and where the risks sit is essential for evaluating its role in a portfolio.

At its core, private credit refers to non-bank lending that does not trade on public exchanges. These loans are typically floating-rate, illiquid, and held to maturity. Borrowers are often private equity-owned companies that need flexible, reliable financing. Because these loans are customized and difficult to exit, investors are compensated with higher yields relative to public credit markets.

The largest segment of private credit is direct lending. These are senior secured loans made to middle-market companies, frequently used to finance leveraged buyouts. Most direct loans are sponsor-backed, meaning a private equity firm sits behind the borrower. Structures can range from first-lien and second-lien loans to unitranche facilities that combine multiple tranches into a single instrument. Direct lending has become the backbone of private credit due to its scale, predictable cash flows, and senior position in the capital structure.

Beyond direct lending, private credit spans several specialized strategies. Mezzanine debt sits below senior debt and offers higher yields, often paired with equity warrants to enhance returns. Special situations and opportunistic credit focus on transitional or stressed financing needs, such as rescue capital or bridge loans, where risk is higher but potential returns are meaningfully larger. Distressed credit targets companies in or near bankruptcy, with investors often seeking to influence restructurings or gain control through debt ownership. Venture debt provides loans to venture-backed growth companies, typically structured alongside equity warrants. Asset-based lending relies primarily on collateral, such as inventory, receivables, or equipment, rather than cash flow. Structured credit, including CLO mezzanine and equity tranches or private ABS, leans more toward market-linked instruments but still falls under the private credit umbrella.

Liquidity is one of the defining features of the asset class. Most private credit is not publicly traded, and investors must accept limited exit options. Liquidity solutions include closed-end fund structures with seven- to ten-year lockups, interval funds that allow quarterly redemptions subject to caps, and evergreen private credit funds that offer periodic liquidity with soft lockups. There are also secondary markets for private loans, though these are typically over-the-counter and less efficient. At the fund level, credit facilities are often used to manage short-term liquidity needs.

Access to private credit varies widely by investor type. Publicly traded business development companies offer the easiest access, providing daily liquidity while investing primarily in private loans. Interval funds serve retail investors with lower minimums and limited quarterly liquidity. Accredited investors can access evergreen funds from large managers such as Ares, Blackstone, and Apollo, as well as private BDCs and online platforms. Institutional investors typically commit to closed-end private credit funds with long lockup periods in exchange for higher target returns.

Private credit exists largely because banks cannot fill this role anymore. Regulatory constraints make it difficult for banks to hold leveraged loans on their balance sheets. Private lenders, by contrast, can move quickly, offer certainty of execution, customize deal terms, and provide higher leverage.

To understand risk in private credit, it helps to view loans within the broader corporate capital structure. Senior secured debt sits at the top, backed by collateral and first in line during bankruptcy. First-lien lenders are paid before second-lien lenders, even when both are secured by the same assets. Below secured debt lies senior unsecured debt, followed by subordinated and mezzanine debt, which carries higher yields due to lower recovery prospects. Preferred equity ranks below all debt but above common equity, while common equity sits last in line, absorbing losses but retaining the highest upside.

Stock Brokerage Industry

The U.S. retail brokerage market has evolved from commission-driven trading platforms into diversified financial ecosystems. Today, the landscape is split between large incumbents, such as Charles Schwab, Fidelity, and Interactive Brokers, and a set of digital-first challengers like Robinhood, Webull, and SoFi, alongside crypto-native exchanges such as Coinbase and Kraken.

At a high level, most brokerages generate revenue through a similar set of levers. Net interest income has become increasingly important, driven by interest earned on customer cash balances, margin loans, and securities lending. Transaction-based revenue still exists, though it has shifted away from explicit commissions toward market-structure mechanics like payment for order flow, exchange rebates, and crypto trading fees. Subscription and recurring revenue, such as premium account tiers and advisory fees, help stabilize earnings, while adjacent products like credit cards, banking services, and wealth management deepen customer relationships and improve lifetime value.

Within this market, Robinhood's business model has matured meaningfully. Historically known for transaction-based revenue, the company has seen rapid growth in net interest income as platform assets and customer deposits expanded. Cash-sweep balances and margin lending have become a large and relatively stable revenue source. Payment for order flow remains a material contributor for retail equity and options trades, but subscriptions, particularly Robinhood Gold, have grown into an important recurring revenue stream. 

Scale metrics reinforce this shift. By 2025, Robinhood's funded customer base had grown into the mid-20 million range, while total platform assets surged into the hundreds of billions as net deposits increased and asset prices rebounded. These dynamics matter because platform assets, rather than raw trading volume, increasingly drive profitability through interest spreads and cross-sold financial products.

One of Robinhood’s most strategically interesting initiatives is tokenization. By launching tokenized stocks and ETFs and planning a proprietary Layer-2 blockchain, the company is attempting to extend its brokerage model beyond traditional market hours and geographic boundaries. Tokenization enables 24/7 trading, native fractional ownership, and global distribution without requiring full local broker-dealer infrastructure. It also introduces new potential revenue streams, including on-chain trading fees, custody fees, and market-making spreads. At the same time, this strategy carries real constraints, particularly regulatory uncertainty, operational complexity, and reputational risk if token design or marketing is misunderstood.

Parallel to tokenization is Robinhood's push into banking. By offering checking and savings-style features through partner banks and gradually expanding its own capabilities, Robinhood aims to capture customer deposits and convert historically volatile transaction revenue into stickier, interest-driven income. 

For investors analyzing the business, a small set of key performance indicators tells most of the story. Funded customer growth signals adoption, while total platform assets and net deposits indicate future earning power through interest income. ARPU and subscription penetration reflect improving unit economics, and margin balances and securities lending provide incremental yield. Engagement metrics, such as active users and trades per customer, serve as leading indicators for transaction revenue.

Viewed through a simple mental model, incumbents dominate asset-based stability, while challengers like Robinhood compete on product innovation and distribution. Robinhood's long-term opportunity lies in turning its large, engaged user base into a full-service financial platform.

Credit Card Industry

The credit card ecosystem looks simple on the surface, but underneath it sits a layered, highly specialized supply chain. Each layer plays a distinct role, takes on different risks, and captures a different profit pool. Understanding how these pieces fit together helps explain why premium cards exist, why fintechs are so eager to launch them, and why small players like card manufacturers can be strategically critical despite representing a tiny fraction of overall costs.

At the core of the system are issuers, which are primarily banks. Institutions such as JP Morgan Chase, Bank of America, Citi, Capital One, and American Express underwrite customers, approve credit lines, fund receivables, and take the balance sheet risk. This is where most of the economics live. Issuers earn money from interest income on revolving balances, interchange fees paid by merchants, annual card fees, late fees, and breakage on unused rewards. Revenue is highly skewed: the top tier of high-spending, affluent customers drives a disproportionate share of profits through higher spend, premium card fees, longer customer lifetimes, and travel-heavy categories that generate higher interchange. This dynamic explains why issuers aggressively compete for affluent users and invest heavily in premium card experiences.

Sitting above issuers are the card networks, such as Visa, Mastercard, American Express, and Discover. With the exception of Amex and Discover, which also issue cards, networks do not take credit risk. Instead, they operate the global payments infrastructure, route transactions between banks and merchants, and enforce standards around security, fraud prevention, and tokenization. Their business model resembles a toll road: they earn fees on every transaction that flows across their rails, regardless of whether the cardholder pays in full or defaults.

Below the networks sits a less visible but strategically important layer: card manufacturing. This is where companies like CompoSecure operate. These firms produce the physical cards used by issuers, particularly high-end metal cards for premium programs such as the Amex Platinum or Chase Sapphire. While the cost of manufacturing a card, often only a few dollars, is negligible compared to the lifetime value of a premium cardholder, the physical card itself plays an outsized role in brand perception, activation rates, spending behavior, and churn. For issuers, paying up for a premium metal card is an easy decision when it helps attract and retain customers worth thousands of dollars in long-term revenue.

Closely tied to manufacturing is the technology layer. Modern cards rely on EMV chips to enable secure authentication, generate dynamic transaction codes, and support contactless NFC payments. Card manufacturers integrate dual-interface chips that allow both tap-to-pay and insert functionality, along with advanced security features that prevent skimming and fraud. In the case of metal cards, this engineering challenge becomes significantly harder because metal interferes with radio frequency signals, requiring specialized designs to ensure reliable contactless performance. While this hardware represents a tiny fraction of a card program’s total cost, it enables global acceptance, regulatory compliance, and materially lower fraud rates.

What makes the credit card ecosystem work is the alignment of incentives across layers. Issuers earn outsized returns from high-income users, networks monetize every transaction without taking credit risk, manufacturers deliver the physical and technological experience that supports premium positioning, fintechs use cards to deepen customer relationships, and consumers receive convenience, rewards, and identity. Each participant plays a different role, bears a different type of risk, and captures value in a different way, creating a durable and highly scalable transaction ecosystem.

Real Estate Marketplace Industry

The real estate marketplace sits at the intersection of technology, brokerage services, and finance. While the transactions themselves are highly localized and fragmented, the underlying business model has clear patterns once broken down. At a high level, the industry is defined by two main markets, residential and rental, alongside a handful of dominant online platforms and traditional brokerages, with most profits earned through lead generation, advertising, and transaction facilitation rather than the property itself.

The residential sales market covers single-family homes, condos, and townhouses. Buyers typically work with agents, who help navigate listings, negotiate offers, and close transactions. Online marketplaces like Zillow, Redfin, and Realtor.com have become essential in this ecosystem by providing searchable listings, home-value estimates, and buyer leads. While these platforms rarely take on the underlying property risk, they monetize by charging agents for leads, promoting premium listings, and selling subscription services. Traditional brokerages earn the bulk of their revenue via commissions, often 2-3% per transaction, creating strong incentives to work with marketplaces that generate high-quality leads.

The rental market operates under a similar structure but on shorter cycles. Tenants search for apartments and houses via platforms such as Apartments.com, Zillow Rentals, and CoStar's network. Property managers and landlords pay to advertise, and platforms monetize via cost-per-click, cost-per-lead, and subscription packages. Additional revenue comes from application fees, background checks, and renter-screening services. While the total transaction values per lease are smaller than home sales, the frequency of rentals provides recurring revenue streams for marketplaces.

A key revenue dynamic across both markets is the razor-and-blades model of digital real estate services. The platform itself is often offered for free to consumers. The recurring profits come from the services layered on top: agent leads, lender referrals, advertising, and ancillary transaction tools like mortgages or closing services. Zillow, for example, generates the majority of revenue from its Premier Agent program, where agents pay for visibility and buyer leads, while ancillary offerings like Zillow Home Loans and closing services complement the ecosystem.

Lead generation and advertising are central to the business model. Platforms control distribution by deciding which listings appear first, how prominently properties are displayed, and which agents are matched with buyers. This control over attention translates directly into monetization power. Larger platforms benefit from network effects: more users attract more agents, more agents attract more listings, and more listings attract more users, creating a self-reinforcing cycle that makes it difficult for smaller competitors to scale.

The industry is highly fragmented at the agent and local brokerage level, but the online platforms represent an oligopolistic layer. Companies like Zillow, Redfin, and Realtor.com dominate national traffic, while regional players capture niche markets. High barriers to entry include brand recognition, data aggregation capabilities, regulatory compliance, and technology infrastructure. While iBuyers like Opendoor and Offerpad briefly disrupted the transactional side, traditional agents and integrated marketplaces continue to capture the majority of revenue.

A useful mental model for the real estate marketplace is to think in layers. There are two end markets: residential sales and rentals. Within this structure, Zillow stands out as the largest player, with the Premier Agent program, mortgage leads, and data products generating the most revenue. The result is an industry defined not by rapid disruption in physical assets, but by control over distribution and transactional services, producing durable revenue streams and significant scale advantages.

E-Commerce Industry

E-commerce marketplaces sit at the intersection of online retail, logistics, fintech, and advertising. The heart of e‑commerce revenue comes from the third-party marketplace, where independent sellers list products and buyers purchase them. Platforms collect transaction fees, often referred to as take-rates, which can include final value fees, shipping or fulfillment charges, and advertising services. These take-rates vary by platform and category, but they typically hover around 10-20% for general merchandise. Some platforms also offer fulfillment services, charging additional fees when sellers use their logistics infrastructure. This dual monetization allows marketplaces to capture more value per transaction. Success in this segment is closely tied to Gross Merchandise Value (GMV), as both revenue and profitability scale with total transaction volume and the proportion of sales using the platform's services.

Many marketplaces also engage in first-party sales (1P), buying inventory and selling directly to consumers. Unlike a pure marketplace, this approach gives the platform more control over assortment, pricing, and delivery speed, but it introduces higher capital requirements, inventory risk, and potential tension with third-party sellers. In mature markets, companies like Amazon have heavily leveraged 1P sales alongside their marketplace, whereas platforms in emerging markets often keep 1P as a small portion of total GMV to avoid undermining their merchant base. The balance between 3P and 1P affects both margins and competitive dynamics.

Advertising is a growing revenue stream for marketplaces. Sellers and brands pay to promote products, gain placement in search results, or reach targeted audiences. While advertising often represents a smaller percentage of overall revenue, it is highly profitable once traffic and engagement are established. Digital ad growth is driven by increased online shopping, better targeting capabilities, and higher brand investment in e-commerce platforms. Over time, advertising can become a significant contributor to overall profitability.

Financial services, including payments, credit, and receivables, are a key differentiator in many marketplaces. By offering integrated payment processing, digital wallets, and loans to both buyers and sellers, platforms can solve friction points in commerce, particularly in regions with limited banking penetration. Payment infrastructure allows marketplaces to capture transaction fees while also extending credit to merchants to expand inventory or manage cash flow. Credit products for consumers, such as buy-now-pay-later, loans, or credit cards, can also increase purchase frequency and basket size. This fintech integration also creates a barrier to competition, as it links merchants and buyers more tightly to the platform ecosystem.

Logistics and fulfillment are another core component of e-commerce profitability. Platforms that own or operate warehouses, shipping networks, and last-mile delivery infrastructure can guarantee faster and more reliable delivery, a key differentiator in both mature and emerging markets. High fulfillment penetration improves customer experience, encourages repeat purchases, and allows platforms to capture additional fees for shipping and fulfillment services. Investments in logistics are capital-intensive, but they create significant moats in markets where reliability and speed are scarce.

The e-commerce industry is also shaped by structural headwinds and market limitations. Despite rapid growth, online penetration remains lower than total retail spend in many markets, particularly in emerging regions. Adoption is constrained by internet access, consumer trust, payment infrastructure, and income levels. Smaller merchants in underdeveloped markets may struggle to compete with first-party offerings or high-scale third-party sellers, creating potential tension and concentration risks. Additionally, fintech services introduce credit risk, particularly in regions with volatile economic conditions or fluctuating currencies. Large logistics networks also require sustained volume growth to maintain margin efficiency, as fixed costs are high.

Key metrics for understanding an e-commerce marketplace include Gross Merchandise Value (GMV), take-rate on GMV, share of 1P versus 3P sales, fulfillment penetration, delivery speed, total payment volume, monthly active fintech users, credit portfolio size, and adoption rates of financial products. These metrics provide insight into scale, monetization efficiency, and underlying financial risk.

Overall, successful e-commerce platforms are more than just marketplaces. They integrate multiple functions, including commerce, logistics, fintech, and advertising, to create a durable ecosystem that captures value across the entire transaction lifecycle. The combination of a robust marketplace, reliable logistics, embedded financial services, and high-margin advertising creates network effects and competitive moats, enabling platforms to scale profitably while serving both buyers and sellers. While complexity brings risks such as credit exposure, inventory management, and infrastructure leverage, the large addressable market and ongoing shift to online commerce provide substantial growth potential. The most successful marketplaces are those that optimize this flywheel, turning every additional buyer, seller, and transaction into a reinforcing cycle of value creation.