Category: lenS & thoughtS

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.

It’s hard to be top notch in every industry.

The best talents in a country will bring strength to one industry which is tech for the US. If tech gets the smartest minds, of course other industries may not be able to compete at their max potential.

Boeing pleads guilty for 737 Max crashes.

Boeing benefited from its market position and gov contracts, while GM needs to compete in the more fierce commercial world. However the drivers and outcome feel a bit similar to me.

It could be about global competition but that’s limited (Airbus and SpaceX), and Covid is just one-off. Blame China? Sure China is not buying many planes like before, but it’s very early in actually competing in airplane manufacturing. I assume Airbus is not breaking many rules to compete. SpaceX might have some technology breakthrough, but Boeing also has r&d and should have unparalleled industry expertise.

The harder question is what’s Boeing’s (and broadly US manufacturing) competitive advantage over the longer term? Why TSMC didn’t do well in the US?

From a previous post, I touched on this – how to recreate the manufacturing industry in US is a question about how to make this sector attractive compared with other industries for young people and for capital.

Fiscal spending and subsidy is not a permanent solution. Tech didn’t rely much on subsidy to grow.

Maybe there is a negative side effect of being very strong in the technology sector?

Maybe US has evolved over the years so that the nature of this industry didn’t deserve a lot of attention? Maybe Tesla robot is an answer to unleash the manufacturing potential.

It’s tough for small countries to negotiate with big countries, like any single individual is hard to fight a big company.

To protect individual employees, union is needed.

It’s the same for small countries.

It’s different from UN, which INCLUDE big counties. It’s not like BRICS etc., as China is already a super power.

It should be small countries only. And they shall work together and organize a team to fight for their rights in negotiations.

Sure this may cost some money, but the benefit shall outweigh.

They shall need to resist the attempt to make separate deals with big countries – this will undermine the coalition and bargain power collectively.

 

Prolonged worsening US-China relationship has more indirect casualties it appears.

Recently, a women who defended Japanese nationals from being attacked in Suzhou passed away.

A 30-year girl in Shanghai suicided when facing a declining housing price (~3-4mn rmb of down payment loss) and cut in pay.

We might not feel US-China relationship in our daily life, but it’s around us.

It’s affecting every corner of the world.