Will one of the 3D stocks become the next Microsoft (NASDAQ:MSFT)? I doubt it seriously. 3D printing technology allows printing of objects of plastic or metal in three dimensions. Complex shapes are created in titanium or other hard metal alloys without the use of tooling of any kind. The immense import of this technology tempts many to compare the rapidly appreciating stocks to the Microsoft phenomenon.
IBM (NYSE:IBM) developed the desktop computer in 1980. In 1981 IBM contracted with Bill Gates and Microsoft for an operating system for the new device. Gates had acquired the DOS system for fifty thousand dollars and reworked as MS/DOS, the Microsoft disc operating system. It became standard on the IBM, and since initial programs were written to this system, as other computer companies emerged they used Gates' system, so that programs written for the IBM computer would be compatible with any computer. Thus, MS/DOS became the default operating system for computers worldwide.
Software is intellectual property that costs a good deal of money to write, but once written, copies are sold or licensed on compact discs. The discs cost less than a dollar to produce and package, but are sold or licensed for over a hundred dollars and must be updated or replaced periodically at substantial cost. Microsoft was profitable beyond belief and produced vast abundance and benefit for thousands and thousands of employees and investors. The stock became one of the great wealth generators of all time. Microsoft stock split nine times between 1986 and 2003. One share purchased in 1986 and held, is now 288 shares. But, since 2003 the stock has remained in a trading range between 20-32. The company has matured and the abundance is vastly diminished. There is a dividend, but no more magic. Many in the investing public are obsessed with the Microsoft phenomenon and search constantly for the next stock to repeat the performance. Currently, 3d stocks are the darlings and hopes are high. 3D will be unbelievably successful, but not in the same way as Microsoft. The 3D era has just begun and there is really no end in sight.
3D technology, a process called additive manufacturing, has been around for at least twenty years and has reached full flower. The process creates metal objects by laying down thin layers of metal powder, melted in place by lasers or electron beams, under computer control. Successive layers are added to build the object. Thoughtful observers point out that 3D technology in its present form will absolutely transform the working of metals without the need for tooling of any kind. A whole new era of manufacturing is upon us, and industry as we knew it would never be the same. No one is sure exactly how it will look, but within finite time it will be unrecognizable by current standards.
To be sure, there are companies in the lead, some with significant patent protection, but the technology is capable of expanding in many directions at once, each system producing more or less equivalent products. In no case is there a company whose technology or patents can long exert control over the industry. 3D has at least another twenty years of development and penetration before becoming totally dominant in the manufacturing sector. Many companies and systems will share in the wealth and benefit. There is no limiting factor such as "compatibility" that will allow one system to dominate, or replace all others. There will be no default 3D system or device. 3D will reach critical mass very shortly, and when it does, changes in manufacturing will come so fast genuine industrial dislocations will happen. The machine tool industry, among others, will certainly feel the impact. Every industry will want a 3D machine specific for its needs. The concept of fabricating metal parts without the need for tooling is mind-boggling, but it's here. It is here now, and functioning in America and Europe. But, no one company will be able to do it all, or control it all the way Microsoft dominated the computer industry.
Several companies are publicly traded. Chief among these is 3D systems (NYSE:DDD), Stratasys (NASDAQ:SSYS), ExOne (NASDAQ:XONE) and Arcam (OTCPK:AMAVF). In addition to these few there are several in Europe, two in Germany of note, SLM and EOS. The latter are not publicly traded to the best of my knowledge. It is of little value at this point, and for this discussion, to analyze these stocks individually. Each has certain distinctions and advantages, but the market is too young to settle on one or the other. In addition, there is a large number of smaller companies emerging worldwide. Many of these smaller operations have great ideas and will grow large and potent over time. It is too early to say more, and certainly too early to pick any one winner.
As the technology develops the lead will constantly shift. Shrewd investors will move in and out as things change, being willing to shift investments with the tides of advance and decline of one company or another. Too, leaders may emerge, and virtual dominance for varying periods of time can be expected. But, no one company will develop total control. In the long run, and by that I mean at least twenty years, 3d will deliver benefits to mankind in such volume as to make Microsoft look like a blip in history. You can count on it. But how you invest is another matter. The technology must be studied and understood. Investment decisions will have to be cerebral rather than visceral.
Disclosure: I am long MSFT, OTCPK:AMAVF, DDD, SSYS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.