Category: personal_noteS

Nvidia revenue problem

While investors mostly focus on below whispered q3 guidance, or that revenue beat is smaller than recent quarters, a less discussed problem seems to be declining contribution from the US.

Singapore revenue contribution to Nvidia is rising qoq to 19%, while the US declined to 43% from 52%.

In absolute number, US revenue declined from $13.5bn to $13bn and Singapore rose from $4bn to $5.6bn.

Sure Nvidia says it’s not an indication for the end location. But Malaysia/Indonesia is likely, where end users include ByteDance or US CSP services (whose end user is ByteDance).

See the other post for ByteDance capex – it’s probably $10bn+ per year on data centers, or 1GW of IT load assuming $1mn per MW.

US CEOs need be careful about having a popular book in China

This is interesting: when I think of recent popular books in China written by or about US CEOs, it doesn’t seem to be good!

1/ Bob Iger’s book: The Ride of a Lifetime (一生的旅程 in mainland China)

  • published in 2020 (same year in China)
  • Disney stock now is only half of end of 2020 price

2/ Books about Elon Musk

  • one by Ashlee Vance in 2015 (硅谷钢铁侠 published in China in 2016) & one by Isaacson Walter in 2023 (埃隆·马斯克传 published in China in 2023)
  • in China, interest about Musk leveled up in 2021 (above average), per Baidu Index

  • If you compare current Tesla stock to end of 2020/2021, it’s down ~15%/~40%

3/ Ray Dalio’s book: Principles (原则 in mainland China)

  • published in 2017 (2018 in China)
  • Returns from Bridgewater for the past few years are not amazing (read this note)

Personnel changes among China’s top financial regulators

1/ A new anti-graft sub-committee was created for the financial sector within Communist Party’s Central Commission for Discipline Inspection.

Wang Weidong heads this committee/working group.

2/ CSRC vice chairman (similar to SEC in China)

Li Ming replaced Fang Xinghai.

3/ National Financial Regulatory Administration’s (NFRA) Shanghai branch head

Qi Xiang replaced Wang Junshou.

4/ National Financial Regulatory Administration’s (NFRA) Beijing branch head

Pei Guang replaced Yang Dongning.

On a separate note, in recent days it was announced that

Dong Guoqun, an executive vice president of Shanghai Stock Exchange was charged / investigated.

Chen Xiaopeng, CSRC Shenzhen branch former head was charged / investigated.

How much should ByteDance spend on data centers?

ByteDance has deep wallet: in 2023, it generated $40bn+ EBITDA.

To compare, Meta had over $60bn in EBITDA during the same period.

Meta will grow to $80bn ebitda in 2024, while capex guidance is as much as $40bn – half of its EBITDA.

Assuming half of Meta’s capex goes to data centers -> $20bn. And half of that goes to GPUs > $10bn; building out those data centers etc. will be $5-10bn for Meta.

ByteDance is also growing, say at a similar rate as Meta, so $50bn+ EBITDA in 2024. And assume ByteDance invests at a similar ratio as Meta, then it needs to spend ~$25bn in capex, or ~$12bn (or 60% of $20bn) for data centers – $6bn  for GPUs, and $3-6bn to build out data centers etc.

USDJPY

Just using interest rate parity.

Before the interest hike cycle, in early 2022, 1 dollar = 115 yen.

To make it simple, assuming USD interest rate is 5% and JPY is 0%.

If you exchanged 115 Yen [$1 worth of JPY] for USD and held USD for for 3 years, you should get $1.05^3.

If you hold Yen for 3 years, you shall have 115 Yen. So 115 Yen = 1.05^3 USD

1 USD = 99 Yen…

Real life is not like that.

In the real world, people exchange JPY for USD to earn higher yield, which created demand in the short-term.

That portion of USD can be deployed in the equity market, buying S&P 500 for example.

In this case, if you borrow Yen, you pay very little cost of capital (near zero), and you earned S&P 500 return.

Meanwhile, as everyone wants to do this kind of trade, and due to this imbalanced demand in the short term, USD will appreciate against JPY << this means you earn extra return when exchanging USD back to JPY (1USD = ~160JPY a few weeks ago, vs the 115 exchange rate 3 years ago).

In sum, you get S&P 500 return, you get USD appreciation return (~40% in 3 years), and you pay only JPY interest rate.

This is crazy.

Why would this happen? against the interest rate parity?

The other side of the trade seems to be those who are bearing the low rate of return on JPY… The savers in Japan I shall say.

this is also happening again in China?

The victims are obvious.. savers who are only paid 2-3% in China.

An underrated growth driver for Spotify

Not sure if it’s been widely seen as a growth driver, but Spotify is actually not blocked in China!

Yes, you can use Spotify w/o VPN in China, including podcasts.

If you are on a short trip to China, you can use Spotify for 14 days (no payment needed, just regular account). This corresponds to the visa-free 15 day stay in China for several countries – that list is expanding.

If you are staying in mainland China longer, you need a premium account. With Spotify Premium in mainland China, you don’t need VPN.

This is rare – for any “foreign” internet service provider to provide service in its original format.

Democratic calculation

With Kamala Harris the potential nominee, here are the calculations.

Harris vs. Trump: Harris will be linked with Biden policies, which won’t have enough “fresh start” effect.

If Harris wins in 2024, she will be nominated in 2028, which means other Democratic candidates will wait until 2032.

Meanwhile, if Trump momentum is unstoppable, should Democratic supporters “save” some energy and wait for 2028?

Even Trump wins, he will only do one term, so in 2028 Republican also needs a new face.

Trump is still very ahead according to betting.

China delaying retirement age

China is about to delay retirement age from 5-10 years to age 65.

Currently, men retired at 60 and women at 55.

It’s a big change, although details are not set yet, and gov vows a “gradual” rollout, it would still be a big change for many in the coming decades.

 

Looking at France, pushing 2 years up drew protest last year. And the previous change was in 2010 and was also 2 years.

So about 2 years change in 12 years for French people.

 

How women in China can adjust to 10 years of delay? How long it’s gonna take? If like France, it should be 60 years..

Sadly, don’t think China will wait until 2084..

And executing drastic measures is where China outperforms.

 

Another thing is the need for longer life expectancy.

China still has lots of room to improve in terms of healthcare and drugs, which should raise life expectancy. However, some may also argue that the work life balance, food safety, and in general environment all need to improve. To some extent, these things may have worsened vs decades ago.