Our Devices Are Breaking Free From the Smartphone

In 1983, Clark Griswold packed the "Wagon Queen Family Truckster" for an epic road trip to Walley World...

For their drive from the Chicago suburbs to Southern California, the Griswolds brought everything: paper maps, traveler's checks, a camera, a wallet, clothing... and a dog strapped to the top of the Truckster.

If you've seen National Lampoon's Vacation, you know how it ends... Lost, broke, and nearly arrested at a closed theme park.

But in today's world, Clark would have only needed a smartphone. Every disaster faced would have been solved by a single device in his pocket.

But in the near future, Clark wouldn't even need the phone...

Not because the phone is dying. It's just blending into the air around us...

Last week, Apple (AAPL) released the iPhone 17. But signs point to a very near future where the phone loses its essential role.

Meta Platforms' (META) Ray-Ban Meta smart glasses, Apple's AirPods Pro 3, and the staggering $11 billion valuation of smart-ring maker Oura Health all point to the same thing: a world beyond your phone, with technology woven into everything.

Clark Griswold's travel essentials became one smartphone. Now, that smartphone is fading away. Not because we need it less, but because technology is everywhere...

The Great Unbundling

Legendary venture capitalist Jim Barksdale said, "There are only two ways to make money in business: one is to bundle, the other is to unbundle."

It was simple, yet sharp. And it rings true today...

Everything your phone once bundled is breaking up into earbuds, rings, and glasses.

Years ago, we carried a Walkman, then an iPod, then a smartphone. Each one added more features. But the weight became unsustainable.

Now, smartphones are experiencing a similar problem. They've become too packed. Apple even hinted at this by removing complexity in its iPhone Air release.

That's why the bundle is breaking. The pieces are fleeing to better homes...

Calls and music are shifting to earbuds. Navigation and messages are moving to your glasses. And health tracking is spreading out through rings, sensors, and smart devices in our homes.

And these new devices will drive even better technology for identity verification, payments, and personalized AI.

The phone isn't dead yet. But don't expect it to stay the go-to hub either. Soon, it may become just an extra accessory... or a relic.

Health Monitoring Is Going Mobile

We've become reliant on medical devices, wrist watches, and bulky smart-home accessories for health monitoring. But those tools are starting to disappear around us...

Apple sees it, too. At the iPhone 17 launch, Apple also announced upgrades for the AirPods Pro 3. The earbuds will now include in-ear translations in real time and heart-rate tracking capabilities.

That's right. Apple is moving key functionality from the iPhone and Apple Watch into its headphones – turning them into health sensors and tiny computers.

Others are racing into the future as well...

Smart-ring maker Oura Health has already sold more than 5.5 million rings. But it's now expanding beyond just sleep tracking...

Oura's new rings cover metabolic health and acquisitive activity. They also provide AI-powered insights. These upgrades led its user base and revenue to more than double in the past year.

And Oura reportedly raised $875 million just this week, bringing its valuation to about $11 billion. That's more than double its valuation from last year. And it has attracted big-name investors like Fidelity and Dexcom (DXCM).

The Usual Suspects

This unbundling will create enormous opportunities. International Data ("IDC") forecasts that roughly 1.25 billion smartphones will be shipped this year.

But if I'm right, echoing Jim Barksdale's insights, this unbundling could create a device market five to 10 times larger. Instead of needing a "single" device, multiple devices will be the standard.

Meta Platforms continues to be a leader in the space. Its ecosystem of wearables and sensors should also benefit its partners, like EssilorLuxottica.

We've mentioned the need for more on-device compute and memory from companies like Micron Technology (MU) and Qualcomm (QCOM).

And while some see this piece as the fall for Apple, I'm actually encouraged by its own moves to recognize this transition.

Bottom Line

Clark Griswold needed quite a bit for his road trip.

With the iPhone, Steve Jobs bundled it all into one device.

Now, that hub is unraveling into many devices... each creating a multibillion-dollar market of its own.

You don't have to guess which wearables will win. You just need to own the innovators powering them.

Clark's road trip ended in disappointment. Don't let the same happen to your portfolio.

Good investing,

Josh Baylin