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A very random thought on two seemingly unrelated events.

Hamas political leader was killed in Iran.

Iran uses Huawei equipments I assume.

Huawei also needs foundry which uses ASML.

ASML and Japan’s equipment makers are exported to be exempted from a new drafted rule.

Is this weird that these two things are happening & making to the headlines this week?

Is there any possibility that someone from China “helped” US/Israel on Hamas and someone from the US “helped” China on semi control?

This is like a prisoner swap on another level.

The “Wanting it all” mentality is dangerous.

In Chinese, a trendy phrase is “既要又要还要”. It’s often used to describe/complain what regulators want in China in recent years.

Some examples:

China wants economic growth and security, and it wants high tech.

When local gov wants growth, it wants a market participant that can do the construction (industrial park, infra, city updates etc.), plus bringing in good businesses, and it doesn’t want to give monetary support.

In economics, there is this impossible trinity – fixed exchange rate, free flow of capital, and independent monetary policy. China wants it all – policy needs to be “independent” and not influenced by others; it doesn’t want RMB to depreciate fast which could be a “loss of face”; and it wants foreign flows/investments to support its “open” narrative.

It’s not just China. US has this “wanting it all” mentality in drug pricing and supply (insulin for example) – US wants innovation in biotech; it wants low drug price; it wants de-risked supply chains. Companies are put into a hard position and are challenged if decisions like this are made (Novo Nordisk to discontinue Levemir in the US).

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One doesn’t become a leader just by making requests; one leads with directions.

“Crypto capital of the planet”

“Fire Gary Gensler” (SEC Chair)

..

This does seem logical from Trump’s point of view –

if Trump know what words can be “most relevant” for a specific group of people, he will just say it and get their votes, as long as it’s not contradictory with Trump’s other statements.

plus, the more eye-catching the moment is, the more “free marketing” Trump gets.

oh, and the crypto industry must be super rich and can make big donations I suppose.

and this is something PRC opposes – good!

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Btw, some people floated the idea of Trump picking Jamie Dimon as Treasury Secretary.. I guess Jamie Dimon and the world crypto are very hard to mingle.

Probably the JD Vance pick has already lowered the chance of Trump working with traditional Wall Street people?

but I don’t know if the JD Vance pick (for mass mfg workers I assume) and the rich crypto moguls can fit into one photo…

Maybe Trump is just leveraging crypto + Vance to get as many votes as possible first – that’s all Trump needs indeed. If that’s the case, policies from Trump at this stage are less about what should be done / what’s good for the long run, but just what’s popular. Maybe this has always been the case, for most campaigns…

AI’s $600B Question

Obviously it’s a question that needs to be addressed: where are the returns on Nvidia GPUs?

Here are some of my thoughts on what’s missing from the article – not to say I have an answer, but to look at the article/question from other perspectives

1/ what are the risks of LOSING revenues if falling behind in AI? 

Case in point – likely that Google can’t keep its grip on the AI equivalent of iOS search engine bar (or whatever the gateway to AI functions and monetization) in the next decade.

2/ what are the risks of losing top talents’ interest if not doing AI? And the culture of being at the frontier?

People wants to be part of the next gen thing. To be precise, top talents want to be the center of the next gen thing. If they see peers doing AI, they will not forgive themselves not doing AI.

If the company is seen as not the frontier, that’s a big risk in the next decade of not getting the top talents naturally. I bet now Google needs to do EXTRA to get talents it wants vs in the early days they were drawn to Google.

3/ what are the “infrastructure”?

In the article, author mentioned railroads. So what exactly is the “railroad” now?

The GPUs?

Or the data centers?

Or the foundation models?

Where does the overinvestment risk lie? (I bet it’s the third; also DC to some extend)

4/ If there any “moral hazard” here?

By having investments in AI, VCs should be inclined to discourage similar investments from other people.

Few entrants would enhance their return – whether it’s foundation models or GPU resources (easier to get GPUs / falling prices).

It’s tricky.

Like inflation – you need to tell the public to spend less to lower inflation; if you tell the public that you expect inflation to be down too early, it would be harder to come down.

If you are telling people AI is a good investment, then it may make returns lower.

Few years ago, many car companies were committing to go full EV. Now it’s clear that won’t be the case.

Take Benz for example, in 2021 it stated it would go full EV for new models from 2025 onward and all EV by 2030 where market conditions allow. Now in 2024 it back pedaled, saying by 2030 will only do 50% EV.

Why?

– The most common reason is weak consumer demand due to weak charging infrastructure plus ICE outperforms in many use cases.

– EVs are not cheap enough.

What’s more?

Many countries don’t want to rely on China’s supply chain.

And?

There are deeper implications/concerns.

Auto industry in EU is built on ICE cars. The traditional car industry provides jobs, income, taxes, etc.

The stability of EU relies on traditional vehicles!

Btw, this also affects Japan with the same logic.

Auto industry is a smaller part of US economy directly, and US has Tesla, but US will likely be negatively affected if EU and Japan is unstable or poorer.

Therefore, either EU/JP needs to maintain competitiveness in the EV era, or they need to pivot to other industries (very hard; nothing in sight), or US will need to strengthen its own economy and rely less on EU/JP.