Limits of Chips embargo; Buffett sells Apple shares

tech
Author

Ben

Published

August 4, 2024

The limits of US Chips embargo to China

“With Smugglers and Front Companies, China Is Skirting American A.I. Bans”

  • The high-performance chips (e.g., A100) produced by Nvidia are necessary conditions for development of AI. US companies have been prohibited from selling these chips to China, an initiative started in the Trump admin and continued in the Biden admin.

    • The reason is mostly military. The military application of the AI technology is a new front in US-China competition. The goal of the embargo is not to block the supply of the sought-after chips entirely (which is impossible) but “to hold China back during a critical window in which the United States can pull ahead.”

    • But it’s questionable if even this goal is being fulfilled because private entities that trade chips effectively evade the embargo by, for example, enlisting new companies for the old operations.

      • The Bureau of Industry and Security, which is responsible for the AI ban operation acknowlege that the embargo may not perfectly prevent the chip sales. The Commerce Secretary, Gina Raimondo (who overseas BIS), also admits this.

    • US companies are already taking on, allegedly, billions of dollars of financial costs due to the ‘AI ban.’ This pent-up pressure explains why as soon as any loophole in the embargo is identified, the trades surge. These chips eventually show up in China through private entities who, in both countries, vehemently deny that they ever breach the regulation.

  • Some of the events that spooked Washington includes a hypersonic missile test, which implies theoretically that China can send in nuclear warheads to US soil without being detected: “Six months into the Biden administration, China tested a weapon that shook U.S. officials: a hypersonic missile that circled the earth.”

Buffett sells Apple shares

“Warren Buffett’s Berkshire Hathaway halves stake in Apple”

  • Buffett “dumped $76bn of stocks” of Apple selling half of its shares. This led “Berkshire’s cash holdings to a record high of $277bn, up $88bn from the previous quarter.” This is the largest cash holding for his compnay, ever.

  • But Buffett also stated in the recent (May) meeting that they will keep investing in Apple “unless something dramatic” happens.

    • This could simply indicates the ‘valuation discipline,’ which makes sense given how the Magficent-7’s prices soared so rapidly.

    • The move also makes sense given how the company benefited from Fed’s rate policies in the past two years.

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