- Shaun Maguire, a prominent VC, said most people don't understand the chemicals industry.
- He said that specialty chemicals are especially important, since certain companies rely on them.
- The chemicals industry is in a downturn, but specialty chemicals might offer a bright spot.
Shaun Maguire, a partner at Sequoia Capital and early investor in several of Elon Musk's companies, says people aren't focusing on niche chemicals enough.
On an episode of the "Relentless" podcast that aired on November 17, Maguire said that he might invest in the chemicals industry if he had $10 billion to start a business.
"The chemicals industry is one of the most underrated industries in the world for many reasons," Maguire said. He added that most people don't think about the industry, which supports production for nearly all commercial and household goods, according to a 2022 report from the Cybersecurity and Infrastructure Security Agency.
And those who do know about the industry don't fully understand it, thinking of it as strictly a commodity industry, Maguire said.
"But a large fraction of the industry, I'd say at least 25%, is hardcore specialty chemicals that are actually very rare. A lot of times, there's only one company in the world that will make some specialty chemical," he said. (Specialty chemicals accounted for about 23% of the industry, according to CISA's report).
Maguire said that those chemicals can be crucial for another company's production, as he said is true of one of Musk's businesses, and that losing access to a key chemical can severely delay or upend projects. Specialty chemicals include "adhesives, sealants, flavors and fragrances, food additives, and explosives," according to CISA.
The chemical industry is in a downcycle, and production volumes are expected to contract by 0.2% next year, according to Deloitte's 2026 Chemical Industry Outlook. Though the report predicts continued overcapacity in basic chemicals, it found that specialty chemicals are earning higher margins.
"Specialty chemicals tend to be less commoditized and avoid the hyper-competitiveness of the commodity chemicals markets," the report reads.
Although chemical demand in the construction, automotive, and consumer goods industries is likely to continue suffering, the semiconductor market may offer a bright spot, according to Deloitte's report. The boom in AI data centers is helping to fuel growth, per Deloitte.
So far in 2025, the chemical industry has badly lagged the overall market. The S&P 500 Chemical Industry index was down 5% for the year through Thursday, while the S&P 500 was up more than 11%.
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