Speaker unverified: belief

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…ere a point at which the lead time becomes so extreme that…. Because at the end of the day people don't want the turbines, they want the energy that other forms of energy become more exciting somehow? Yeah, I think it's two things. I think one, eventually let's assume that Silicon Valley is correct and all this investment is going to be high ROI and therefore they're going to keep doing it. Eventually, I think Siemens and Mitsubishi and GE will say, “You know what? We have to build some more capacity.” That will happen. I think over a very long period of time, nuclear will probably be a more viable option for energy. That's probably the best in terms of taking everything into account: steadiness of the electricity, environmental factors, nuclear is much better than gas. But nuclear plants take a really long time to bring on and have all kinds of other complexities. I think that two things will happen. I think over the very long term there will be more nuclear, but I think that people miss that—the United States has been pretty early in building out these huge clusters. Most countries in the world that have developed economies are going to need to build out. Maybe they don't need to have the same kind of clusters that OpenAI is building in Abilene but they're going to need to have, probably for national security reasons, their own training clusters. And at a minimum, they're going to have their own inference clusters. The products they sell are pretty equivalent. The products they sell are pretty equivalent. Nobody would say this one's dramatically different. They sell turbines, electrical grids, and then wind energy. GE Vernonva trades at 2x the value of Siemens Energy. Ultimately, there's no reason why the margin should be higher at GE Vernova. The revenue base is the same. So I think that Europeans are implicitly just a lot more skeptical of the sustainability and longevity of this AI cycle and that has to narrow one way or another. I don't think you can have two companies—one traded at half the price of the other one—and there's nothing about it that's actually worse. There's also the other open mystery, which is I think, the onshore TSMC trades at a 20% discount to the US ADR. How is that possible? That is also extreme and it just shows you the US equity markets either have more liquidity or just a different perception of the risk inherent in buying TSMC. And 20% is quite meaningful for the same company, but Siemens Energy is a 50% discount. Now I understand TSMC is the same company—literally—but these are pretty close. Well, okay, you raised different regions trading at different multiples and you raised Asia, which is a great segue. Asian multiples. Yeah, everything in China is really cheap right now. ByteDance trades at a really low multiple, Alibaba trades at a really low multiple. Do you guys do much in China? Is that just a value trap? What's going on there? in China is really cheap right now. ByteDance trades at a really low multiple, Alibaba trades at a really low multiple. Do you guys do much in China? Is that just a value trap? What's going on there? Yeah, we stopped investing in China about three years ago. So look, everything has a price. I think that the reason we stopped investing there is, fundamentally, I have an issue with the way their economy works. I think the government has way too much influence on how resources are allocated. Sorry, you have an issue as a moral matter or you just have an issue as a practical, capitalistic— Practical, capitalistic matter. I'm not making moral judgements on China. I personally don't think it's the best. You're just saying you don't know how to predict how the market will perform. Look, I think that what markets don't like is uncertainty. And the problem with China is twofold. One is that the government has way too much influence on how resources are allocated. I don't think they're particularly good at making those decisions. As you saw during COVID, when they shut everything down for no reason… And they will arbitrarily decide which industries are important and which ones are not important, and if you make too much money, that's bad. And so all of those factors, for a while we were seeing the Chinese internet companies, they didn't want to beat earnings because if you beat earnings, the stock goes up too much. You might be flagging that you're overearning. So then if you look at a company, if you know they're not going to beat earnings, what are you left with? You left with a distribution which is not particularly attractive. So you think the tech is very cool, but just fundamentally being an equity holder there is hard? The tech is very cool. I just don't think it's progressing at the same rate it used to because a lot of the great entrepreneurs have left. Because they felt like the environment for starting companies, for driving new innovation that was going to make a lot of money. That wasn't something that was looked favorably upon by the government. So the best people left. A lot of them went to Singapore. And that to me, I think that's a shame because with the right government and with the right economic system, China should be the most important economy in the world and it should be a technological leader. And I think the geopolitical tensions would be entirely different. And I have a ton of respect for what China did from the 1970s to 2020. I think it is pretty much an economic miracle, but what we've seen the last five years is that governments matter. And it matters what your political system is and it matters how the government intervenes and due process matters. There's the famous case where many of the digital education apps were banned overnight. Did that really update your view of China? and it matters how the government intervenes and due process matters. There's the famous case where many of the digital education apps were banned overnight. Did that really update your view of China? Yeah. Investors hate uncertainty. In the US, can something bad happen to social media companies? They get called in front of Congress, but there's due process. Donald Trump can't wave his hand and get rid of Meta because he doesn't like the fact that they're allowing people to say bad things about him. And so when you have a government that can act capriciously, that has a humongous gravitational pull on valuations. Some big picture questions related to China. So there's all these charts one could look at of the concentration of Mag 7 into the S&P 500 and you could look at the 1970s equivalent of the Nifty Fifty. There's the inflation, which seems to be tracking the “double hump” story. First of all, do you care at all about these analogies? Do these analogies mean anything to you? These charts with all the JPEG artifacts on them? Yeah, they're always very convincing. Look, history rhymes and it’s the same thing in the market. So it's interesting to look at what's happened historically to these companies. It's dangerous to look at it and just extrapolate to the point where you— So you can overcorrect on the chart. But then my question would be, what would be the sign for you actually that the bubble is close to peaking? Is there something, an anecdote or an actual piece of evidence you look at, you'd say like, “Okay, maybe we all believe in AI, but…” So you're saying AI is a bubble? No, I'm saying I believe in cyclicality. The internet worked, but it was also a bubble. Derek Thompson said this recently in a way that I liked, which is people associate using AI—that AI may currently be or in future be a bubble as some kind of negative statement. But because every major tech change—the canals, the railroads, the internet, whatever—has been accompanied by a huge speculative bubble, it has to, when you think about it. Americans are optimistic. But it's an AI-optimistic statement to make that there will be a bubble. We’re actually celebrating how important it is. So Daniel's saying he's an AGI believer and AI is clearly going to be a big thing. Therefore, is it this year? Is it next year? When's the bubble?…

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