Category: personal_noteS

Is LLM still on track of its dream value? Note from podcast

Note from this interesting BG2 podcast: AI Demand / Supply – Models, Agents, the $2T Compute Build Out, Need for More Nuclear & More

Very good discussion. And some notes.

Some would argue that while LLMs are indeed good in coding, chatting etc., that “amazingness” was extrapolated too much. In other words, the gap between pre-ChatGPT and ChatGPT-3 is not gonna continue/replicate. The expectation is too high that the room to beat is diminishing.

Some would question the “moat” of most LLMs. The most advanced ones, the “leading edge” is good, but the rest could be commoditized. Then all those R&D dollars is more of less duplicated and return is low.

GTP-5 is undoubtfully powerful and could be more powerful than people think, but what’s next? What cards haven’t been played or thought about after GPT-5?

Besides technology advancement, there seems to be a problem in regulatory environment in nuclear power in the US, which put a lot of restrictions.

France and China have lowered the nuclear power costs over the years.

 

Zillow’s problem?

1/ the $1.8bn lawsuit became the catalyst to lower commission revenues for each home transaction.

Some real estate agents may exit the industry as the pie is smaller; and spending on Zillow per transaction will likely decrease.

Therefore, Zillow’s revenue from home sales shall decrease under the current model.

2/ competition from CoStar is very real while Zillow is not growing

CoStar combined traffic from 23q4 earnings presentation

Home.com (owned by CoStar) had 149 million unique visitors in Feb 2024, with 567% yoy growth.

Zillow’s 2023q4 reported average monthly unique users was 194 million, down 2% year over year. Visits during Q4 were 2.2 billion, up 1% year over year.

Zillow’s DAU trend from Investor Deck February 2024 – not looking amazing.

Their business models are different. CoStar is more SaaS like. And Zillow is more e-commerce.

(above from ChatGPT 4)

3/ of course the current interest environment is not helping.

While it’s not new and Fed may cut this year, marginal benefits of lowering from 6.5% to 6% won’t move the needle.

 

March CPI 3.5%

March CPI is 3.5% for the past year and increased 0.4% MoM in March.

Higher than expected, but again, like the post last month, Truflation indicates <2% inflation.

Here is another discussion of “lagging” in shelter CPI, which was 0.4% in March

This lag occurs for a few reasons. First, the market indices capture rents of units currently on the market, not rents for units occupied by continuing renters, like the CPI does. Rents change when leases expire, which typically happens annually. In addition, landlords may be less likely to raise rents to market prices for continuing tenants, and so it might take even longer for rents on all units to catch up with rents charged to new tenants.

A new index was introduced to more closely track market prices of renting.

 

Controversial fast fashion

Fast fashion companies are sometimes criticized as environmentally unfriendly.

Intuitively, this seems right.

But exactly how?

It seems that the production process (incl. dyeing and finishing) is not very environmental friendly, with energy & water consumption in question.

E.g. – “Most of these impacts are a direct result of apparel’s reliance on hard coal and natural gas to generate electricity and heat in key processing locations. Asian countries such as China, India and Bangladesh not only comprise the largest manufacturers, but also have heavily coal-based energy mixes.”

And there is microplastic issue.

When people throw away more clothes at a faster rate.. not looking nice.

Sustainable and circular textiles sounds good.

Maybe this would become an issue for companies like Shein, Revolve etc.

Shein is about to IPO, with sales of about $45bn in 2023.

What about using some of the proceeds to be more sustainable? Don’t just go for GMV growth.

The year after Abbott exited China’s infant formula market

At the end of 2022, Abbott Laboratories announced the gradual exit of mainland China’s infant formula market throughout 2023.

Abbott had ~3% market share.

How other international brands were doing in 2023?

Nestle’s Greater China business overall saw 4.2% organic growth in 2023, citing positive growth in Infant Nutrition.

Danone (Aptamil brand) saw market share gain in 2023, with 8.3% yoy like-for-like growth in specialized nutrition in China, North Asia & Oceania.

A2 grew 10.4% yoy in 23H2 (FY24H1) for its China label products, and 16% yoy in 23H1 (FY23H2).

 

 

 

Money Machine by Weijian Shan (2)

Such an interesting book.

Some takeaways:

  • You don’t get a deal until the very last
  • Sometimes you just need to wait, which can be the best strategy
  • Back channels are very much needed
  • Working with the top is very much needed
  • Don’t assume the other side will adhere to “law” all the time

 

Nike China grew, DTC grew less

For the quarter ended Feb 2024, Nike brand sales in China grew 4.5% yoy (overall company sales grew 6% yoy) and Nike brand EBIT in China grew 2.8% yoy.

Not that impressive – as last year’s result should still be impacted by surging covid cases after reopen.

Meanwhile, Nike said it’s growing share, which I believe is true (holding some ground), but also indicates that the overall market is not strong (<6% growth).

Looking at channels, it’s wholesale that’s driving the growth. “Wholesale grew 12%” & “retail sales with our partners grew double digits in Q3 versus the prior year” & “seeing incredibly strong weekly sell-through on these franchises (wholesale partners)” from earnings call.

Another important observation – “physical retail channel in China is stronger than digital.”

Nike will be on Douyin. Not yet on Douyin. However, how should Nike balance gross margin? Live-streaming e-commerce is famous for heavy discounts.

Weijian Shan’s book & the SDB story – very interesting

I didn’t live that era so really appreciate the story.

Some key takeaway so far:

  • in early 2000s: “The market consensus was that China’s banking system was technically insolvent and badly in need of wholesale reforms. The main issue was nonperforming loans (NPLs).”
  • It’s easy to hide NPLs by offering bigger loans; the best practice of “forward looking” was not used in early 2000s
  • Gov will insist on a “good-looking” multiple
  • There was an jokingly bet for a tennis match between Zhou and Summers – “the winner would get to set the exchange rate between the dollar and the Chinese yuan”
  • Much more ups and downs than I imagined
  • “Fortress Besieged” is a really good metaphor..

Notes on CATL 2023

`1/ shareholder return is real

annual dividend of 22bn rmb, out of net income of ~44bn net income -> ~50% payout ratio.

this is also due to scaling back of capex (down 30% yoy in FY23)

 

2/ growth has slowed to almost zero

q4 gross profit is up only +2% yoy

q4 net income is -1% yoy

however, with utilization up, 2024H2 and beyond should return to growth

 

3/ barrier in internationalization

both EU and US want to localize the whole value chain, which seems to be a big investment, and involves upstream & downstream companies.

CATL doesn’t see good return and hasn’t done massive capital-heavy investments.

Licensing model is what clients are happy about, which is capital-light for CATL, but growth in net income would be less.