Chips foreign, Chips domestic
And: If not AI, then robots
Welcome to Cautious Optimism, a newsletter on tech, business, and power.
Monday. May your children have slept in longer than mine.
Over the weekend, there was much ado about trade. Below we’ll get into the European deal and more. If you want something light and lovely to start your week, this Washington Post article on my adopted San Francisco returning to boom times after bust times is a good reminder that cyclical towns tend to economically gyrate. Still, it’s nice to see that the town is once again on the ascent, if not ascendent.
It’s going to be a huge week for earnings, which means learnings. Tomorrow we’ll get numbers from PayPal (fintech, crypto) and Spotify (consumer, SaaS), Wednesday brings us Meta (social, AI), Microsoft (enterprise, AI), Robinhood (fintech, crypto), and both ARM and Qualcomm (chips). Then on Thursday, Apple reports (consumer, hardware), Amazon (ecommerce, AI), Coinbase (crypto, fintech), Reddit (social, AI), Cloudflare (infra, AI), and Roblox (consumer, gaming).
Samsung also drops Thursday, which brings us to our first topic of the day! To work — Alex
📈 Trending Up: International anger over humanitarian conditions in Gaza … ever-cheaper AI models … tariff rates, on August 1st … Cognigy … the SatComms Wars … AI insurance … age checks in the U.K. … Apple in China? … domestic taxes …
📉 Trending Down: Low-cost ecommerce in Europe … violence between Thailand and Cambodia … Fed independence … global GDP growth … AI costs … humanoid robot costs … NSFW games … human intelligence … media economics …
Chips foreign, Chips domestic
Per Jefferies, Nvidia’s refound ability to sell its tuned-down H20 chips in China is facing a massive numerical shortfall. With expected demand reaching 1.8 million chips, and Nvidia having a third to half that total, the American chip giant could be heading for a truly epic return to form in the nation and domestic trade rival.
Despite tough talk on chips, U.S. policy towards China has been more accommodative under the skin than it may have appeared on the epidermis. The FT writes that because POTUS “wants to avoid actions that could hurt efforts to meet Xi, some officials have argued that the US is hamstrung on export controls[.]”
While it’s a massive win for American company — and huge component of domestic investment accounts — demand for Nvidia chips from China is indication of the nation’s limited supply of domestic chips of similar worth. Ergo, it’s great for Nvidia that it gets to sell into China; for American AI companies, the news is less salubrious.
In its Q1 earnings, Nvidia took a $4.5 billion charge and noted a loss of $2.5 billion worth of incremental H20 revenue. It forecasted an $8 billion loss of sales for the second quarter. Presumably the third will see its China sales figure return to form.
For American boosters the news is not all bad, however. Telsa has landed a huge deal with Samsung, a South Korean company, to manufacture its upcoming AI6 chips in the United States. The deal is worth around $16.5 billion through 2033, though Musk touted that the eventual dollar amount could be higher.
Pledged future capacity, huge dollar amounts promised for future purchases, and deals that stretch to nearly a decade are always moments to gin up at least some skepticism. But with TSMC building out more American capacity while Samsung does the same makes it slightly less painful that Intel remains somewhere in the woods.
Trade, a recap
A trade deal between the United States and the EU is drawing bitter review by some in Europe. The deal, which lowers tariffs in most European imports to the United States to 15% and comes with pledges by the bloc to spend on American goods, brings a more concrete economic playing field between the two trading partners, per major EU leaders.
But not all are content. French PM François Bayrou wrote on Twitter (machine translation) that it is a “dark day when an alliance of free peoples, united to affirm their values and defend their interests, resolves to submission.”
Yeah. The weird part of all this is that the United States is not winning, either. By taxing imports and allowing free exports we’re pursuing a mercantilist trade strategy. Something that was popular so long ago that Adam Smith was one of its foremost critics. Milton Friedman was also not a fan. In short, the U.S.-EU trade ‘win’ is more an agreement that makes the EU unhappy today, and the American economy unhappy later.
It’s a weird time to be a free speech guy and a free trade guy. Neither position is too popular, which is a shame.
If not AI, then robots
Microsoft Research dropped a fascinating paper last week that we need to digest. Using data from Bing Copilot (an AI search assistant) and labor data, Microsoft came up with a list of occupations that it considers most at risk of being consumed by AI automation.
The list will not shock you: