Dylan Patel: recommendation

Transcript context

…To the extent that you could just take out a five gigawatt aluminum refining center and build a giant data center there, then I guess the way to control Chinese AI has to be the chips? Just walk me through how many chips they have now. How many will they have in the future? What will that be in comparison to the US and the rest of the world? In the world we live in, they are not restricted at all in the physical infrastructure side of things in terms of power, data centers, etc. Their supply chain is built for that. It's pretty easy to pivot that. Whereas the US adds so little power each year and Europe loses power every year. The Western industry for power is non-existent in comparison. On the flip side, "Western" manufacturing when you include Taiwan is way, way, way larger than China's, especially on leading-edge where China theoretically has—depending on the way you look at it—either zero or a very small percentage share. There you have equipment, wafer manufacturing, and then you have advanced packaging capacity. Where can the US control China? Advanced packaging capacity is kind of shot because the vast majority… The largest advanced packaging company in the world was Hong Kong-headquartered. They just moved to Singapore, but that's effectively in a realm where the U.S. can't sanction it. A majority of these other companies are in similar places. Advanced packaging capacity is very hard. Advanced packaging is useful for stacking memory, stacking chips on co-ops, things like that. Then the step down is wafer fabrication. There is immense capability to restrict China there. Despite the US making some sanctions, China in the most recent quarters was like 48% of ASML's revenue and like 45% of Applied Materials’. You just go down the list. Obviously it's not being controlled that effectively. But it could be on the equipment side of things. The chip side of things is actually being controlled quite effectively, I think. Yes, there is shipping of GPUs through Singapore and Malaysia and other countries in Asia to China. But the amount you can smuggle is quite small. Then the sanctions have limited the chip performance to a point where it's like, “You know, this is actually kind of fair.” But there is a problem with how everything is restricted. You want to be able to restrict China from building their own domestic chip manufacturing industry that is better than what we ship them. You want to prevent them from having chips that are better than what we have. And then you want to prevent them from having AIs that are better. That’s the ultimate goal. If you read the restrictions, it’s very clear that it's about AI. Even in 2022, which is amazing, at least the Commerce Department was kind of AI-pilled. It was like, “You want to restrict them from having AIs better than us.” So starting on the right end, it's like, “Okay, well, if you want to restrict them from having better AIs than us. you have to restrict chips. Okay. If you want to restrict them from having chips, you have to let them have at least some level of chip that is better than what they can build internally. ” But currently the restrictions are flipped the other way. They can build better chips in China than what we restrict them from in terms of chips that NVIDIA or AMD or Intel can sell to China. rnally.” But currently the restrictions are flipped the other way. They can build better chips in China than what we restrict them from in terms of chips that NVIDIA or AMD or Intel can sell to China. So there's sort of a problem there in that the equipment that is shipped can be used to build chips that are better than what the Western companies can actually ship them.…

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