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Tag: China

  • The Truth Can Hurt ….. Investment

    The Truth Can Hurt ….. Investment

    Forty years ago this week, reactor 4 of the Chernobyl Nuclear Power Plant exploded. The human and monetary costs were in the thousands and hundreds of billions respectively. More difficult to quantify was Chernobyl’s contribution to the collapse of the Soviet Union. However, I did re-watch the excellent HBO series Chernobyl in recent days and was struck by a non-monetary factor which might resonate for those currently enduring daily White House appeals to ignore our eyes and ears. The words of Professor Valery Legasov of Moscow State University in the opening scene of Chernobyl seem almost prescient  –  “What is the cost of lies? It’s not that we’ll mistake them for the truth. The real danger is that if we hear enough lies, then we no longer recognize the truth at all.”  For the USSR, the truth of technological decline, an obsolete economic model, and the inability of centralised power to deal with the complexity of a more connected global economy was easy to see. But fatally, not recognized. Fast forward to today, and we could be in similar TRUTH territory….

    Don’t worry, we won’t go down any conspiracy theory rabbit holes. So, no need to wonder why a would-be assassin might gain access without security challenge to the Washington Hilton and within one floor of almost the entire Trump regime senior leadership at Saturday’s annual White House Correspondents dinner. If the current head of the FBI is nicknamed “J. Edgar Boozer” then the truth is closer to incompetence than conspiracy. Similarly, but with far greater global economic impact, if Germany’s normally cautious Chancellor Merz is saying that the US has “no clear exit strategy” and is being “humiliated” by Iran, then the truth is that the US does not really “hold all the cards” or the keys to “Schrödinger’s Strait” of Hormuz. The consequences are plain to see as oil prices soar past $110 per barrel again and OPEC’s number 3 producer, UAE, just left the cartel after 59 years of membership.

    Clearly, the old world order alliances from NATO to OPEC are fragmenting. And, that’s before anyone dares to mention the eye-catching new Pew (March 2026) poll showing 60% of Americans now view Israel unfavourably — up from 42% in 2022. That’s almost as bad a swing as Trump’s voter approval on dealing with inflation shifting to a net MINUS 40, and national Consumer Sentiment surveys (Michigan/Ipsos) diving to the lowest levels seen since 1978. And yet….

    There’s a danger we have been distracted and miss other truths. Watch what people do, not what they feel. For example US consumer sentiment might be plummeting but US retail sales are running ‘hot’ at 7.7% year-on-year growth, the fastest growth pace seen since 2022. Meanwhile, fossil fuels and Strait of Hormuz blockades (unless you’re a Russian oligarch’s yacht – I know…Russia, Russia, Russia) might be dominating the gloomy headlines but there’s more positive long-term developments accelerating at speed. If you have been unable to copy or track Baron Trump’s oil trading strategies or share the Fox Business congratulations of Maria Bartiromo on Eric Trump’s new $24 million contract with the Pentagon(yup), then there’s good news and bad news. The bad news is you’re not making millions on risk-free trading or commerce, but the good news is you won’t need a fitting for an orange jump suit. However, away from the fossil fuel supply crisis, check out the following quiet developments which could hurt your investment portfolio if you miss them…

     

    • In 2025, for the first time in history, clean power met every single unit of new global electricity demand.
    • Renewable energy sources (33.8%) officially crushed coal (33.0%) for the first time in 100 years.
    • Electric vehicle (EV) sales in emerging markets have surged 80%.
    • In Europe, EV sales soared 51% in March while EV sales smash through 25% of the total global market.
    • Chinese company, CATL, just unveiled a battery with a 1,500km range that charges in 6 minutes
    • China exports of batteries, EVs and solar cells were up 34%, 53%, 80% respectively last month.

     

    A quick glance at the last two developments might suggest another uncomfortable truth; China is winning this global electrification ‘war’ and arguably is the winner of the Persian Gulf one too. However, there’s clearly only one country, USA, winning the global race for AI investment capital right now. The AI chip superstar stock, Nvidia, has just clocked up another $1.25 trillion increase in market value in less than 4 weeks. Nvidia’s current market capitalisation of $5.25 TRILLION is just shy of the entire value of Germany’s GDP and surpassed by only those of China and the USA itself. Google and Nvidia’s combined market value is now over $10 trillion.

    AI is acting like a ‘death star’ for other investment sectors as it sucks up huge amounts of investment dollars. In Q1 of this year software stocks collapsed 29% from their highs while 81% of all venture capital funding ($265 billion out of $330 billion) went to AI start-ups, with 65% of that going to just 4 companies (Source: Pitchbook). You’ll keep hearing and reading that word “concentration” and how investment capital is racing into ever narrower niches within technology. However, it might be worth keeping a mix of old and new names on the investment radar. Here’s two to watch:

    NEW: Anthropic, the parent of my new best work friend this week, Claude, is apparently trading in private markets right now at a $1 trillion valuation. Of course, it does help valuations if your annualised revenue jumps from $9 billion to $30 billion….in just 3 months.

    OLD: Samsung, the unwieldy Korean conglomerate of TV, phone and memory chip manufacture, is going to be the most profitable company in the world by 2027. Bloomberg reckon Samsung will edge out Nvidia for top spot with a whopping operating profit of $330 billion. Yep, good old memory chips (DRAM, NAND etc) are needed by Claude, Gemini and all the other agentic chatbots to remember you (and your prompts).

    So, that’s all good for now. But, let’s get back to the Truth thing. And, we’re not talking about AI chatbot hallucinations, or even Trumpolini’s Jesus delusions. It’s much more basic than that. In the middle of all this AI euphoria sits the company who kicked things off with ChatGPT, Open AI, and its CEO, Sam Altman. This week we heard OpenAI are behind on planned revenues and new subscriber growth targets. These things happen in fast growing tech stories, but OpenAI is attached to $1.2 trillion of AI infrastructure deals where OpenAI’s commitment is $600 billion despite current annual cash burn of…… $17 billion. Furthermore, OpenAI does not have a huge balance sheet like Google, Microsoft or Amazon. So, credibility and confidence matters. And, I’m concerned.

    Altman’s career history per various in-depth media articles (the New Yorker one is best) is littered with massive commercial relationship breakdowns and a common theme. Loss of trust. Phrases like “profound mistrust”, “lack of candour”, “consistent pattern of lying” and “deceptive and chaotic behaviour” are used to describe the CEO of a company seeking to publicly list (IPO) in New York this year with a valuation of more than $800 billion. This week Altman faces Elon Musk in court for a $150 billion lawsuit brought by the latter regarding governance at OpenAI. Let’s just say the potential damage to Altman’s credibility could have ‘nuclear’ consequences for the AI financial ecosystem. Watch carefully and remember the fragility of the Open AI balance sheet in the context of its trillion dollar commitments. Then think of Chernobyl and Valery Legasov’s most powerful words which we have cited before on these pages…

    “Every lie we tell incurs a debt to the truth. Sooner or later that debt is paid”

  • Things Getting Very Real….

    Things Getting Very Real….

    I know, I know we’re not supposed to throw the “F” word about lightly. But things are getting serious, and expletives aren’t even close to what I’m thinking. I’ll save those for counting freezing Freezbrury water minutes. No…my reluctant F word is  FASCISM. Possibly over-used in recent times….until now. Check out the enormous banner poster of Donald Trump which has just been hung on the outside of the headquarters of the US Justice Department (DOJ). Gobsmacking. The capture of the rule of law in the US is now almost complete. While business leaders are removed, senior foreign government officials resign in disgrace and the 8th in line to the throne of the UK is taken into police custody, Trump’s private legal firm (the DOJ) is desperately trying to deflect and pretend there are no US-based Epstein predators. Deflection tactics from the White House have now moved on to releasing files on Aliens (the non-ICE versions) and UFOs. However, the biggest ‘bread and circus’ deflection show is the 15- day countdown to conflict with Iran.

    I am struck by how complacent current geopolitical risk thinking is right now, and what desperate measures Tehran’s murderous regime might take to strike a blow against the US and its allies in the region including Israel.  Any regime which murders 20,000 of its protesting citizens in a matter of days is capable of awful stuff. So, it concerns me that the emotionally stunted “Admiral Bonespurs” in the Orange House and his War Secretary, “Whiskey Pete”, in the Pentagon will be the key decision makers if US forces take larger casualties than expected. We are into very unpredictable territory now. However, Iran is not the only risk reality creeping up on us.

    The financial markets have been focused on the carnage wrought on software company share prices year-to-date. Valuation destruction has been close to $2 trillion as the latest Wall Street thinking is that AI will blow up software business models. It even has its own event taxonomy – “SaaSpocalypse”. The basic premise is that companies will build their own workflow, HR, process applications etc. in-house with increasingly powerful AI coding tools. Thus, software companies could face growth and competition challenges which in turn impacts valuation/sales multiples framing that growth. In fact, this invasion of artificial digital expertise is in danger of commoditizing software. Ironically, there has been a complete reversal of the valuation hierarchy between hardware and software. In tech terms, things are getting very real. Real stuff like memory chips(DRAM) and logic chips (GPUs) are perceived as supply constrained and ditching their historic ‘commodity-type’ characteristics. The best illustration of this shift in investor perceptions is the stunning statistic that 89% of semiconductor companies’ (real stuff) share prices are flying (trading above 200 day moving average) while precisely ZERO software company (digital bits) share prices are exhibiting any technical strength(evidence of buying). However, we are in danger of focusing on the trading trends of financial markets while missing the bigger AI picture. Technology insiders are becoming more nervous about the power of AI without adequate guardrails…

    It’s difficult to get away from Anthropic’s founder, Dario Amodei, confidently predicting a world where AI systems would be “better than almost all humans at almost everything” within 2 years. Implicit in this forecast is the rapid realisation by the rest of us that AI systems are soon going to be coding their own optimised functions. If you’re thinking Terminator and Skynet you wouldn’t be far wrong and we’ll definitely need more than Arnold this time. As the global geopolitical balance shifts towards lawless autocracy and fascist ‘might over right’, we seem as a species particularly ill-equipped for what’s to come. Amodei himself describes the challenge:

     

    “Humanity is about to be handed almost unimaginable power, and it is deeply unclear whether our social, political, and technological systems possess the maturity to wield it.”

     

    It feels like a moment of AI truth is approaching. If I were to strike an optimistic note, I’d be encouraged reality is beginning to break through to the public consciousness on a number of fronts. This could bring a very welcome return to valuing credibility, data and honesty. Populists beware and feast your eyes on these beauties:

     

    Brexit: The UK’s Office of Budget Responsibility (OBR) has estimated the various costs of Brexit at 6-8% of GDP, £100 billion per year of structural economic losses, 4% productivity loss and 15% lower trade volumes.

    US Manufacturing: All the trade shakedowns, foreign investment ‘promises’ and noise about making America  manufacture again (Oh Mama!) resulted in 2025 manufacturing/factory construction spend actually FALLING by 7%. Oh, and the US has lost 70,000 manufacturing jobs since tariff ‘Liberation Day’ last April.

    US Trade: Just in…. the US trade deficit remained a stubborn $900 billion in 2025. That’s a microscopic 0.2% reduction in the deficit despite all the ‘winning’ and tariff chaos trumpeted by Agent Orange. And now for more breaking ‘winning’ news…. The Supreme Court of the United States has reportedly ruled, in a 6–3 decision, that tariffs imposed by Donald Trump were illegal. The ruling could leave the U.S. facing more than $150 billion in potential tariff refunds.

    That final datapoint of almost zero deficit reduction is just embarrassing. But it gets better. Shockingly, to nobody outside the US, other countries trading with the US are smarter than Howard “Nutlick” and his Commerce Department lackeys. The US trade deficit with Taiwan is now bigger than that with China. The last time that happened was in 1992!! It seems like the rubber is meeting the road for quite a few of these populist distractions. Indeed the final irony, 250 years after the US gained its independence, might be that the epic downfall of a British prince reveals the true colours and deceptions of a ‘King’ in Washington…..

  • A Wave Of Huge Numbers And New Thoughts

    A Wave Of Huge Numbers And New Thoughts

    Freezbrury waters are imminent, but I sense things are actually hotting up. I’m also conscious it’s Friday before a bank holiday weekend so will keep it light. Let’s just highlight a few significant datapoints from the tsunami of numbers bombarding our screens this week. Then, next week we might dive deeper. Not quite as low as Cruella “Reformed” Braverman, Commandant Greg “Himmler coat” Bovino, Stephen “Peewee German” Miller, or Kristi “ICE Barbie” Noem who definitely fall into wannabe Waffen SS territory. There’s something deliciously ironic about a world which has embarked on an artificial intelligence (AI) space race while “Trump Is Making America Stupider” per The Bulwark newsletter headline. Maybe the bots won’t need to be that good? Anyway, that possibility doesn’t seem to be stalling spending by global technology giants on AI… for now.

    My favourite AI datapoints this week come from Microsoft, Meta, Sandisk, OpenAI and ElevenLabs. Given these numbers are like an assault on the senses I think it’s best to present them in bullet form:

     

    • Microsoft’s fiscal Q2 update this week showed its cloud/AI order backlog rocketing by 110% to $625 billion. But, that wasn’t the show stopper or the share price killer (down 10% overnight). A whopping 45% of that backlog ($281 billion) was linked to one private start-up company, OpenAI.

     

    • Meta/Facebook also announced a huge number, but not a future revenue one. Its planned capital spending on AI infrastructure and development this year will be $135 billion. For context, as recently as 2023 Meta did not even generate this much money as its entire year’s REVENUES (not profits).

     

    • Lesser-known memory chip player, Sandisk, was the S&P 500’s best performing stock last year (+577%) as a beneficiary of investors’ search for AI ‘picks and shovels’. That story continues and is a reminder not to quit on your winners. Sandisk’s quarterly update this week beat expectations with 600% earnings growth and another 25% jump in the share price in after-hours trading. So far this year, the Sandisk share price is up 127%. Yep, just January.

     

    • In start-up land ElevenLabs is the hot AI Voice tool backed by Sequoia. It’s not just a hot investment, it’s a hot career choice. Only 0.018% of 180,000 job applicants in a 6 -month period get a job. As the brilliant VC commentator and fund manager, Harry Stebbings, pointed out, you are 200x more likely to get into Harvard.

     

    • Back to OpenAI. Yes, people worry about that famous FT graphic and OpenAI as the potential AI investment “weakest link”. However, the capital cavalry could be on its way. Latest chat is that OpenAI plans to IPO in Q4 2026 with a raise of $100 billion on a valuation close to $1 trillion. For historical context, the previous biggest IPO raise in history was $26 billion by Saudi Aramco.

     

     

    There’s now a bigger qualitative exploration of the AI theme due, given the pretty scary comments from OpenAI rival, Anthropic, CEO founder Daro Amodei. He reckons we are moving towards “AI systems that will be better than almost all humans, at almost all tasks….by 2026, 2027.” Check out the videos on social media showing how the likes of Moltbook and Clawd are blowing people’s minds with the power of their agentic capabilities.  Here’s a few other mind-blowing datapoints in a variety of areas where regular readers will know I have been thematically focused.

    Opportunity outside USA: We talked about real things (atoms) versus digital code (bits) previously. So, see how Brazil’s real asset-rich stock market has clocked 14% gains in January alone. However, the genuine head-rocker outside US stocks is the latest earnings growth  estimates for South Korea’s stock market. Goldman’s reckon earnings growth for the entire blue chip Kospi Index will be 75% in 2026. Note most of that earnings growth will come from two companies who are critically plugged into the supply squeeze for memory chips (RAM, DRAMs, thank you Mam) – Samsung and SK Hynix. Amazingly, South Korea’s stock market is now worth more than Germany’s DAX index ($3.25 trillion).

    Automation/Power Infrastructure: It’s not a huge surprise software stocks (SaaS) like SAP are being hurt by AI speculation, investment capital shifts. However, we should note the recent overtaking of SAP as the highest valued German company by Siemens. Its key three divisions? Automation processing, power/grid systems and transport infrastructure. Note none of the famous German auto stocks feature in this table-topping race.

    Electric Vehicles: Europe hit an inflexion point in recent weeks. Latest data shows EVs as a percentage of new car sales overtook traditional internal combustion engine (ICE) powered vehicles. Looks like ICE on two levels this week faces an existential threat. Thinking of not nice people, it was amusing to see Tesla post a 61% decline in profits in its results this week. Who knew, apart from Ryanair’s Michael O’Leary, that idiotic interfering in other people’s business (politics and privacy too) can be brand destructive…?

    Last thought, and this merits a much bigger discussion. The problems for Tesla might result in a $3 trillion mega-merger/pivot of SpaceX, Xitter, xAI and Tesla, but also subtly highlights the scale of manufacturing dominance exerted by China in the electrification race. While Trump focuses on Bruce Springsteen, White House ballrooms, Melania movies and Venezuelan oil grift, the Chinese are stealing a march on the US in so many technologies. Oh, and the Chinese consumer might be coming back. Apple just told us it had its greatest ever quarter in The Middle Kingdom. A 38% jump in China sales blew the hinges off all the ‘expert’ analyst expectations.

    Lots to think about over the weekend and well done to all who invested in Social Voice before its dramatic funding close; a great illustration of investor ‘social listening’  in the venture world of little gems.

  • Don’t Get Angry, Get Ready….

    Don’t Get Angry, Get Ready….

    I was right. The first of my predictions for 2026 was spectacularly on the money. Sadly, it won’t make any of us wealthier given its focus on noise rather than direction. To refresh memories, the final words in my last article, Themes and Dreams For 2026, were as follows: “I’ve a feeling I won’t be short of writing material in 2026.” Little did I know there would be a year’s worth of material in just the first 10 days of 2026. Where do we start?

    The US is celebrating its 250th birthday by re-branding as an exploration company with an army (hat tip George Carlin) as Venezuela is ‘acquired’ and ‘takeover bids’ are lined up for the Panama Canal and Greenland. Back at HQ, the Boss re-asserts control of executive salaries and cash flows in the company’s defence supply divisions while promising a 50% expansion of investment ($1 trillion to $1.5 trillion) in its Business Development unit, previously known as the Department of War, and before that, as the Department of Defense. Meanwhile, the company’s traffic stop management division has secured immunity from regulatory or criminal oversight of its shoot-to-kill (or stop) policy on a nationwide basis, not just in Minneapolis. Of course, none of these revolutionary business initiatives can happen without funding. The company’s Treasury unit has set up overseas bank accounts to deposit proceeds of its newly acquired Venezuelan oil unit. In the interests of tax efficiency these bank accounts will be overseen directly by the Boss, and will not be consolidated in the parent company accounts. But, of course. However, US Inc is not the only company turning to oil….

    It is probably more accurate to say some companies are breaking with a seismic global shift to electric power. Again, it’s American-sourced exceptionalism. This week General Motors (GM) has followed Ford and abandoned its move in to electric vehicles (EV). These recent investment write-offs amount to $7 billion and $19 billion respectively which will hurt. But… that might not be the end of the pain. The train, or car, has already left the station. The Electric Age, per the superb Noah Smith, is here with 25% of cars purchased in 2025 of the EV variety. In many Asian and a few European countries that penetration rate is through the 40-50% level. China leads the world in the entire EV technology stack and have focused their attentions on battery production, manufacturing scale and grid expansion (solar). Fewer moving/motor parts, efficiency and superior performance are the current and long-term edge for EVs which will kill the internal combustion engine (ICE). Writer’s note: Be careful how you say or ‘weaponise’ that acronym these days.  All is political these days rather than factual which highlights why the US is making a fatal error on oil over electric. Noah Smith writes:

     

    The main reason America is missing the EV transition is that we’ve insisted on thinking of EVs in terms of climate — as a “green” technology whose purpose is to save the environment, rather than a superior technology whose purpose is to save you time and money. Trump canceled EV subsidies because he associates them with the environmental movement and the political left.

     

    It’s not just electric vehicles(EVs) experiencing their electric break-through moment. EVs share the same components as drones, trains, cameras, phones …..and robots. Just this week at the massive CES 2026 conference in Las Vegas, Nvidia’s Jensen Huang didn’t even blink when asked how long it would take for humanoid robots to match human-level ability. “This year”, he said. Guess what – those robots run on many of the exact same components which go inte EVs. Think batteries, power/motor electronics, sensors, software…..and AI. Clearly, in the AI piece of the assembly package, the US is perceived as the global leader. However, even AI and its support infrastructure is inextricably tied to electric power. And, before you say “but, but, but… the Venezuela oil reserves”, get ready for more non-delivery from the “stable genius” back at HQ. Venezuela currently produces less than a million barrels of oil per day. It’s like a rounding error of less than 1% of global oil production. Yes, that production level can grow but please note the lack of announcements from US oil company executives about investment plans and potential commercial negotiations with Venezuela’s 5,000 plus generals and regional warlords. While the Department of War was planning ‘business development’ in Latin America, China built more solar power capacity than the rest of the world combined in 2025. For perspective, that additional solar capacity of 380GW built in 2025 equates to 5x China’s total existing nuclear capacity (58 plants). Get ready or get digging on two fronts.

    First, we have written a lot in 2025 about the asynchronous explosion of excitement and revenue projections for the AI world and the mining sector. At certain times in 2025 one AI company, Nvidia, was worth 4 times more than the entire publicly listed mining sector. Get ready for a change. Gold, silver, platinum and copper prices have soared which has finally juiced the risk spirits of mining sector executives. We said the sector needed a big deal. Well, global giants Glencore and Rio Tinto are talking a megadeal again with a copper focus (yep, all that electricity) and a $260 billion valuation. Metals of course in earlier times were the basis for currency. In time, central banks became the back-stop or guarantor of currency but we might have to dig again.

    The global reserve currency, the US Dollar, lost almost 10% of its value in 2025. In isolation, this is not unprecedented. In fact, the Trump regime are quite keen on a softer dollar and lower interest rates for trade deficit and investment reasons. However, we must get ready for a further assault on institutional independence in the US. The current Fed Chair, Jerome Powell, is due to leave his post in May this year. The new appointee (apparently already decided by the Boss) will be expected to cut interest rates dramatically to keep Trump happy. However, the potential unintended consequence of this action in the context of a $40 trillion US national debt is loss of credibility for the Fed and its ability to prudently manage that debt, and the currency. Hopefully, the bond markets are more effective than Russian or Chinese radar systems in spotting and thwarting that assault on Fed and dollar credibility. A final word on markets and pensions.

    Those of you reading your pension updates/reviews for 2025 might be underwhelmed by the performance. Before you get angry, I would recommend a read of Terry Smith’s own review of his $20 billion fund which underperformed in 2025. As always, my former boss writes superbly and highlights some key factors driving investment markets these days. Terry always sticks to the basics and this might well be a theme for 2026. The thoughts above should ready minds for investment opportunities in electrification, real assets, financials, mining and assets located outside the exploitation company, US Inc, formerly known as the United States of America…..

  • Big Deals And Big Themes To Watch….

    Big Deals And Big Themes To Watch….

    Been a tough week. And that Epstein dog hasn’t even barked yet. Anyway, let’s not dwell on the ‘what ifs’, let’s focus on more positive action. In particular, activity in the M&A and funding worlds, which should be taken as generally upbeat pulse-takes for individual investors. These deals also reflect the key structural drivers for the rapidly changing global economy. Change, you say? Well, Germany has had an engineering/capital goods trade surplus with China for decades. Not anymore. China in 2025 is now running a surplus with Germany. Oh, and nobody in the Oval Office will tell the Donald…. but “America First” has caused US equities to underperform overseas equities for only the third time in a decade. I know, whoodathunk amid all the giddy AI headlines? Interestingly, the deals I’m seeing in recent days also have a non-US focus.

    Infrastructure is still a huge magnet for investment capital. Blackrock’s Global Infrastructure Partners vehicle has swooped in Spain to acquire the Digital & Energy unit of domestic construction giant, ACS. Yep, that’s a data centre and AI play with a whopping $27 billion price tag. Sticking with AI, and back in the US, Mira Murati’s Thinking Machine Labs is currently doing a funding round with valuation in the $50 billion region. In its last funding round in July (checks notes, yes) that valuation was $12 billion. Not to be outdone, Elon Musk’s xAI is raising $15 billion at a $200 billion valuation. So, I think we can safely say AI and the US are still leading the giddy stuff. Elsewhere, the deals are more fundamental. Try energy.

    Private equity monster, Carlyle, is exploring an acquisition of Russian oil giant Lukoil’s global assets valued at almost $22 billion. Meanwhile, Spain’s energy champion, Repsol, is considering a reverse merger of its $19 billion upstream unit with potential partners including US energy producer APA. In addition, Google has signed a deal with French oil giant, TotalEnergies, to buy 1.5 terawatt hours (TWh) of solar electricity over the next 15 years in Ohio. That’s enough power to run the entire state of California for 10 days. Again, data centres are the key driver for the energy land-grab, be it fossil-fuel or renewable. However, as Spark closes out a lightning-quick raise of €1.5m for the impressive AuriGen Medical team, we should not forget demographics and the hugely significant structural growth in healthcare opportunities(check out our May 2025 series of articles on Japan).

    Pfizer has acquired weight-loss start-up, Metsera, in a $10 billion all-cash deal. Then the rebuffed original buyer of Metsera, Novo Nordisk, went to the debt markets to finance the $5.2 billion purchase of US biotech Akero Therapeutics. The sense of a deal ‘cluster’ in pharma-land was further heightened by Merck’s likely acquisition of another biotech, Cidara Therapeutics, in a $3.3 billion deal. Like the Metsera deal, the bidding war for Cidara was intense too. So, things are looking pretty healthy in health M&A. As for the unhealthy world…. we continue to watch ‘Whiskey Pete’ deploy US Navy assets off Venezuela.

    If ever there was a classic ‘wag the dog’ distraction mission this might be the one. Particularly, given both Jeffrey Epstein and Ghislaine Maxwell in emails from 2011, sound mystified about the “dog (Trump) that hasn’t barked” in the criminal investigation under way at that time. Venezuela is yet another prompt for all sovereign nations and the investment world to be thinking defence. Some aren’t just thinking. Valor Equity Partners have led a chunky $510m funding round for a counter-drone radar start-up, Chaos Industries, at a $4.5 billion valuation. Also, watch out for Germany’s Quantum Systems which manufactures interceptor drones which can climb 4 kilometres in 30 seconds(!). Last heard on the street, they were raising $150m at a $3 billion valuation.

    All of the above sectors, bar health, position power sources and storage as key elements in competitive advantage. Note infrastructure and power are closely linked. The best positioned infrastructure assets will be those which bring energy/cost efficiencies in a world where AI is gobbling up more and more electricity, possibly at the expense of everyday consumers and traditional businesses. There is a reason why 40% of e-commerce deliveries in Europe are now done in out-of-home (OOH) parcel lockers. It makes sense for both the primary carriers (DHL,UPS, FedEx etc) and the consumer to make ‘the last mile’ more efficient. At Spark Private, we also think OOHPod makes a load of sense with lots of exit opportunities (and founder exit track-record) and great infrastructure positioning. In all of the above deals, everyone is trying to take the lead in positioning in the market. It can feel good too when it’s good for the world. In fact, I can still remember seeing a much-loved guy on his cool new electric bike just 5 years ago, and thinking to myself how happy he looked. I will keep that thought always…..

                  W.H. RIP.

  • Numbers Which Make You Wonder….

    Numbers Which Make You Wonder….

    I’m quite enjoying the “rubber meets road” moment for the leaders whose numbers never add up. In a previous political era they might just have been called liars and shunned by serious media. Now, it’s about eyeballs for the media and their audiences retaining some memory cells. Good ol’ Nigel Farage has moved from trying to avoid discussing the number of white people in ads (thanks to Reform MP Sarah Pochin) to rowing back on previous tax promises. Currently, known as “aspirations”. Like Brexit, more lies. In the US, gold-plated ballrooms and newly minted tech billionaires don’t quite cut it for the 50% of US have-nots who don’t benefit from 401k investment savings. But, the have-nots do have votes…..for now. New York has just voted for a Democrat socialist mayor with the biggest mandate since 1969. Meanwhile public representative seats and offices have flipped this week from MAGA red to Democrat blue in New Jersey, Georgia, California and Virginia. Even Mississippi is turning. In Washington adjacent, Virginia, the political landscape has morphed back to 1987 as Federal workers, either sacked or not being paid, discover some numbers are very real. Here’s a few other numbers flagging change which caught the eye in recent days….

    Sports betting was legalised in the US in 2018. Americans bet over $148 billion on sports last year, which is more than they spent on movies, books, concerts and sports tickets…. combined.  Meanwhile, Disney through its sporting broadcast arm, ESPN, is teaming up with DraftKings as its new sports betting partner. Expect more deals in the sports betting space with $148 billion of US wallets on offer and then wonder about societal shifts. Housing shortages and fewer children seems to be freeing up a lot of discretionary spending power. Watch also prediction marketplaces like Kalshi and Polymarket. The latter is doing over $1 billion of volume each month and is fully crypto-native. More traditional financial businesses are taking notice. Robinhood’s share price is up 235% year-to-date and has reported 2.5 billion prediction contracts (fees of $25m) traded on its platform in just October 2025. That is more than all of the contracts traded in Q3 2025. Any more predictions…?

    You can probably bet on OpenAI doing more AI/cloud infrastructure deals. The famous Financial Times graphic of OpenAI playing a central role in $1 trillion of AI projects is worth revisiting. OpenAI has recently announced a re-jig of its corporate structure to allow for a profit making entity under the stewardship of the original non-profit foundation. The profit bit is going to have to wait. Thanks to Microsoft’s recent results (and a circa 27% stake in OpenAI) analysts have estimated quarterly losess at OpenAI could be as high as $11 billion. Per quarter! Now think about those trillion dollars of projects planned. Then digest this little gem…

    OpenAI is requesting US government support to help guarantee financing for the massive investments in AI chips and data centers it needs for expansion, per Bloomberg.

    The latest OpenAI infrastructure project commitments, per Wall Street analysts, are heading towards $1.4 trillion. UK water utility observers will be familiar with the privatise-the-gains and socialise-the-losses model. It doesn’t end well. And, Fox News and Trump think Zohran Mamdani is the communist….

    On a more capitalist pursuit, M&A deal flow, the news is very encouraging and starting from a less frothy base. Deal research house, Pitchbook, gives the latest update on confidence levels in the C-suite. As we often say, it’s what companies DO, not say, which counts:

     

    “Q3 activity increased by 25.6% in M&A value and 3.8% in deal count as buyers jumped back into the market after macroeconomic headwinds disrupted momentum earlier in the year. Moreover, 2025 is shaping up to be an incredible year for global M&A despite the spooky headwinds present in the market, including geopolitical volatility, stubborn inflation, and a slowing global economy. YTD, there have been 37,096 M&A transactions for an aggregate of $3.4 trillion….. This resurgence in large-scale deals leaves the door open for two consecutive years of M&A deal value growth for the first time in over a decade. Deal count itself is on pace for year-over-year growth, with an active fourth quarter that could see the ecosystem hit nearly 50,000 deals for the year. ”

     

    One can expect more deals in the electricity/power sector. Close to home, Energia was bought by French private equity house, Ardian, and Blackstone bought TXNM Energy for $11.5 billion earlier in the month. It’s all part of the AI infrastructure story but the daddy of the AI rush is Nvidia’s Jensen Huang. He had some sobering thoughts in an FT interview. “China is going to win the AI race.” warned Huang, citing China’s advantages in energy and less‑stringent regulation. He later clarified that China is “nanoseconds behind” the US, adding “it’s vital that America wins by racing ahead and winning developers worldwide.” Huang might have backed away from his original statement but consider that last year China added 426 GW of electricity generation capacity. In the US that number was 30 GW. A growth differential of 14x doesn’t take many ‘nanoseconds’ for China to establish a dominant cheaper electricity base. If electricity is going to decide the global AI race then “drill baby, drill” could cost US industrial policy dearly. Go ask Germany, where manufacturing output is 20% below 2019 levels thanks to disastrous energy policy decisions. But there are prescient decisions to be made too…..

    Investors can see M&A activity pick up, corporate earnings growth above 12% year-on-year, cost of capital shift to a lower trajectory and even the possibility of the US Supreme Court stifling Trump’s ‘emergency’ tariff powers. It’s always awkward to claim ‘emergency’ in court when your lawyer (for US government) agrees the consumer pays 30-80% of tariff costs, and the judges note that tariffs have been imposed on countries like Brazil and Great Britain who actually have trade DEFICITS with the USA. More ketchup on the walls of Mar-a-Lago me thinks. However, the key point is that the investment environment for private investors is picking up momentum. And, Spark Private can help. A flow of new EIIS season deals has just hit our investors’ in-boxes. In this instance, the numbers are real, and do warrant real attention. This is a genuine opportunity to build an exciting diversified portfolio of 8-10 companies with a variety of timing/risk horizons and big thematic exposures in a matter of weeks.

  • Strong Grounds For Optimism, And Action….

    Strong Grounds For Optimism, And Action….

    I should be terrified. Watching Netflix’s House of Dynamite was definitely disturbing. In real life, the guy with the nuclear codes is having another Canada tantrum and refusing to rule out a third presidential term. Meanwhile, financial market headlines are full of ‘bubble’ talk as Hallowe’en approaches and yet…… I’m suddenly very optimistic. It might be Hallowe’en season but there are two other ‘seasons’ in full swing which could bring significant wealth enhancement. Firstly, we are in the middle of corporate earnings results for Q3. Secondly, Irish earners will soon be looking for opportunities before year end to invest in EIIS-eligible deals to reduce their income tax costs and balance their investment portfolios. My sense is that the stars are aligning nicely for a further burst of action in the next few months. As always, companies need to lead so check out the latest developments.

    We mentioned Q3 earnings season but we didn’t mention the “Magnificent 7” superstar tech stocks dominating the financial headlines. Deliberately so. The latest ‘tot up’ of Q3 earnings reveals a much broader participation of companies in healthy earnings reports. So far, 145 companies out of the S&P 500 index have reported Q3 earnings. A whopping 84% of those companies “beat” analysts earnings forecasts which is the highest “beat” rate seen in four years (Source: Bloomberg).  Average earnings growth across the reporting companies is on track for a year-on-year acceleration of 15%. The bottom line, literally, is that operational fundamentals are very strong. Critically, this profit growth is spreading to smaller companies; the Russell 2000 index of smaller companies is clocking an even higher 2025 profit uplift of 25%. You might have to pinch yourself, then check your notes re current challenges faced by companies. Try these for starters:

     

    • Global disruption to supply chains and energy markets due to Ukraine war.
    • Relatively high interest rates since 2022.
    • Tariff and trade chaos thanks to the unstable ‘genius’ in the White House.


    In many ways these are historical known ‘unknowns’ in Rumsfeld-speak. However, the positive twist on this uncertainty is that, if companies are able to generate significant profit growth despite these challenges, then this generation of corporates must be fundamentally very robust. This opens up another possibility, a very exciting one. What if interest rates were now beginning to fall and China and the US were about to agree a trade framework? Well, there’s a 97% chance (per money markets) of the Fed cutting interest rates this week and the news from the Trump trip to Asia is positive on a China deal happening too. Dare we dream of a Ukraine breakthrough? We might ease up on the Kool-Aid there, but we do note a weekend article in The Telegraph about Putin’s fears of a coup. We will continue to dream. However, the deal junkies in the private equity world seem to be picking up on the same fundamental positivity.

    Blackstone’s COO, Jon Gray, in its Q3 results call with Wall Street analysts was certainly pointing to more activity:

     

    “Directionally healthier markets, more liquid markets, better credit markets, better IPO markets; that’s healthier for realizations….The deal dam is breaking.”

     

    Closer to home, private equity exits in Europe’s financial services have reached an all-time high with 77 deals year-to-date worth $31 billion. As we wrote last week…… Banks are SOOOO back! However, it would be a mistake to think this was frothy financial ‘engineering’. In fact, it’s more engineering than finance on a global basis. Private equity investment deals in global infrastructure have rocketed by 44% year-on-year to $25 billion. That’s the second highest total deal value seen in a decade. Clearly, there is a lot more going on than an AI revolution. In the Spark Private world of venture funding and smaller private equity deals we keep a close eye on smaller company activity benchmarks. Two caught the eye this week:

     

    • Smaller company tech equity indices in the US are up 23%…. in just 3 months.
    • Small company industrials are hitting new all-time highs and breaking out on technical charts.

     

    An environment where global trade tensions, interest rates, corporate earnings, smaller company valuations and private equity deal activity are all moving in the right direction will undoubtedly generate more deal opportunities. Pitchbook’s latest review of European private equity (PE) activity is telling:

     

    “A run of large-cap deals in Q3, buoyed by interest rate cuts and improved macro stability, saw European PE dealmaking grow to €177.1 billion (about $206.7 billion) in Q3…….37% of overall PE deal value, €66 billion, came via 19 deals worth over €1 billion—more than Q1 and Q2’s mega-deal value combined. In total, 48 mega-deals took place in Europe over the first nine months of the year. That figure is expected to approach 70 by year-end, making 2025 one of the most active years for such deals in the region on record.”

     

    So enough of the headlines, where’s the action for private investors? The key questions for many investors at this time of year are…

     

    How can I access the deal flow?

     

    Can I do it in a tax friendly manner?

     

    Spark Private can help on both fronts. More specifically, investors can quickly build a well-diversified portfolio of 7-8 companies with top-calibre teams, EIIS tax rebates and genuine structural growth opportunities in a matter of months. Now, for the action…..YOUR action.

  • Have You Checked Your Pension’s American Assets Recently?

    Have You Checked Your Pension’s American Assets Recently?

    I’m nervous. This won’t win me a Nobel Peace Prize, a Pulitzer or a Green Card but it must be said. The United States is the richest, most successful and most powerful country in the world. On a global basis, we owe the United States on many levels, be it culture, sport, technology, education, medicine, defence, investment capital, tourism or friendship. Closer to home, our fortunes and miraculous recovery from a Troika bail-out are inextricably linked to US commercial supremacy. The vast majority of our pensions reflect that supremacy by holding significant amounts of US debt/bonds or stocks. EVERY pension should have exposure to US assets but risk radars are flashing red for a seismic investment shift. Behind the headlines and in the critical plumbing of the global financial system, there is increasing evidence of a global ‘exit’ from the US. That might sound odd and inevitably the counter view will cite current data which paints a record-rosy picture.

    US and global stock markets are regularly hitting record highs in recent weeks. However, the US stock markets have been clocking up vastly superior returns compared to other major bourses in the 16 years since the GFC. This outperformance of US assets has resulted in extreme levels of US weightings in global indices/benchmarks which your pensions are attempting to either track or beat. A recent Deutsche Bank research note flagged IMF data showing US equities now accounting for 67% of Bloomberg’s World Index. That’s quite the weighting for a country which represents 15% of global GDP. Go back 20 years, and the US actually accounted for a higher 19% of global GDP.  In 2005 US equities made up 51% of the same Bloomberg World Index. For context, Europe(EU) accounts for 12% of global GDP and 14% of the Bloomberg index. Of course, the big driver is technology stocks where the 6 top US tech companies are currently valued at $20 trillion, or more than the GDP of China. The AI/cloud (AI) revolution might be the more specific driver but is this hiding a bigger picture?

    According JP Morgan’s always interesting Michael Cembalest, “AI related stocks have accounted for 75% of S&P 500 returns, 80% of earnings growth and 90% of capital spending growth since ChatGPT launched in November 2022.” AI is indeed the gift that keeps on giving for US markets. But there’s giving and then there’s giddy. I’m not sure if anyone can keep up with tech companies trying to out-do each other on the size of their investment spend announcements. It has clearly been noted by the tech C-Suite that, if you announce huge investment spend on chips, data centres or any AI related infrastructure, your share price and stock options go up. Microsoft says $100 billion, Google says $85 billion, Alibaba says $53 billion and Nvidia thinks they’ve a better twist. This week Nvidia promised to invest $100 billion in ChatGPT parent, Open AI. Excellent news but where’s the $100 billion going? Ah, that would be mostly going back to Nvidia whose AI chips will be used in Open AI’s data centres. Yep, readers might see the Baldrick-esque possibilities around circularity and vendors(Nvidia) financing customers like Open AI. Anyway, investors seem optimistic, for now. Moving away from AI, and the risk of over-investment, there’s a bigger worry for US corporates and their share prices.

    The S&P 500 broke another record in recent weeks. Valuations observed by investors these days seem to ignore earnings multiples (Tesla P/E of 200x anybody?) and focus on revenues. However, there’s a traditional metric, the price-to-book ratio, which compares the market value(price) of a company to net assets (total assets minus liabilities aka book value). Where the ratio exceeds 1x, the valuation of the company is capturing ‘intangibles’ like goodwill, brand and future investment/revenue acceleration. Currently, the S&P 500 is trading at a price/book of 5.3x. That’s higher than the peak of the TMT ‘bubble’ in 2000. For context, that metric dropped to 1.6x in 2009. Of course, many companies are more ‘asset-lite’ these days and enjoy higher price/book and revenue multiples. But… there is an intangible element in many US companies’ valuation which is critically important to their premium rating over competitor companies in other countries; goodwill and/or brand power. You can see the potential goodwill problem.

    I’m no Jimmy Kimmel so it’s best be straight rather than funny. Corporate America from Disney to Tesla to law firms is haemorrhaging “goodwill” and brand value. Two thirds of the global middle-class will come from India and China by 2030. Yet, right now the US assets of Chinese video platform, TikTok, are being seized/transferred to White House friendly oligarchs while India is dealing with punitive Ukraine-related tariffs (not Russia?) and a shake-down on vitally important H-1B visas for overseas technology professionals (70% of recipients are Indian). Friendly countries like South Korea are in shock after ICE raids on Hyundai’s plant in Georgia and the detainment of more than 300 Korean workers. Trump’s speech this week to the UN with “your countries are going to hell” could have been shortened to a simple message of “Go to Hell” to the rest of the world. Anecdotally, the news from Canada is a window into future “ally” consumer behaviour. Supermarket shelves are seeing a buyers boycott of many US products as car traffic across the US-Canada border craters by 34% according to latest August data. Meanwhile, corporate America and its leaders cower in silence while the Trump White House vandalises US institutions, global trade and sovereign alliances. The assault on US rule of law is captured in almost every headline emerging from Washington:

     

    Trump’s new ABC threat proves Jimmy Kimmel right – CNN

     

    Former FBI Director James Comey expected to be indicted on criminal charges – The Guardian

     

    Trump pressure on Bondi to charge political foes could backfire – NBC News

     

    US Supreme Court ruling lets Trump fire top official – BBC News

     

    The final headline featuring the Supreme Court is critical to the risk profile of the US. Investors are worried that the Supreme Court will let the Trump regime interfere with the Federal Reserve Board, the most important financial institution in the world. The Fed underpins the status of the US dollar as the world’s reserve currency. That credibility is under threat as the dollar’s value against a basket of major currencies has fallen by 10% this year. That ‘fallen’ bit is people selling the US dollar and buying other stuff. Like Gold. Lots of investors are liking bullion’s 40% increase in value year-to-date. I’m not so sure it’s a positive signal. I’m also watching deposits sitting in US money market accounts hit a record $7.7 trillion, treble the number just 8 years ago.

    These depositors are not the only ones not fully convinced about the US being the “hottest” country on the planet. Investors SOLD $3.8 billion of US stocks last week (Source: BofA Securities) with institutions and hedge funds the biggest sellers by far in one of the highest exit numbers seen this year. Oh, and if record US stock markets sound positive, context is everything. The whole world is up this year and OUTPERFORMING the US. The S&P World ex-US Index is up over 20% year to date compared to US equity markets up only 10%. But…it’s worse than that if you factor in US dollar weakness. Returns for overseas investors in US equities are closer to ZERO this year. To be clear, this re-rating of US assets will happen over years not weeks but commercial contracts, the law and international treaties require a high degree of confidence. Imagine how Canada and Mexico feel right now re-negotiating a deal which Trump himself shook hands on as recently as July 2020. His own deal. Investors will deal too, and consider a sea change in how the US attracts talent (H-1B, visas), investment capital (Fed, US dollar) and goodwill (premium equity ratings). Sadly, US-based investors might struggle for similar analysis in their media.

    Despite Trump railing against windmills (literally) and media bias, the awkward truth is that the wealthiest person in the world, Elon Musk, owns Twitter/X. The second wealthiest person in the world, Larry Ellison, owns Paramount(including CBS) and will now be taking over TikTok and CNN. Jeff Bezos owns The Washington Post and Twitch. Mark Zuckerberg owns Facebook and Instagram. Throw in Larry Page as Google’s controlling shareholder and that looks like the top 5 richest men in the world are ALL media owners. It also looks like oligarchy. US corporate leaders should also consider another consumer shift within the borders of the US.

    Research from Moodys using Federal Reserve data shows the top 10% of earners in the US now account for 50% of all consumer spending. In the early 1990s (before Fox News) that number was closer to a third of all spend. Disney just discovered (as corporate America said zippo) that the average person felt that taking a comedian off air after government threats was plain un-American, and proceeded to cancel in massive numbers their Disney+ and Hulu subscriptions. Maybe, the 90% will push back on other White House over-reach? I’m not so sure, and that’s not good for US assets or pensions in the long run. Investment securities, after all, are contracts and the undermining of the rule of law will end in tears. Or, something less oligarchic. As my favourite bear strategist, Albert Edwards, said this week when posting the Bloomberg chart below, “When I look at this chart, I look at my calendar and just wonder when I should pencil in the next revolution..”   The chart dramatically shows consumer sentiment splitting sharply between the ‘have yachts’ and ‘have nots’…..

  • Are We Watching The Wrong Bear…?

    Are We Watching The Wrong Bear…?

    I am worried now. And, I’m not talking bear markets. Not yet. I’m not even talking about the Russian bear heading for the Alaskan Trump TV-fest. Of course, Europe should be worried about the Dear Orange Leader trading Ukrainian sovereign territory with his Putin pal but this summit feels more and more like a photo op with minimal progress. Another chance for the Donald to host, and hallucinate. Even the Kennedy Centre Awards for the Performing Arts have been threatened with a Trump MC slot. Bill Kristol of The Bulwark amusingly described Trump as claiming “his aides had wept, pleaded, besought him to host the awards personally” with reluctant success.

     

    “I’ve been asked to host—I said, ‘I’m the president of the United States! Are you folks asking me to do that?’” Trump said. “‘Sir, you’ll get much higher ratings.’ I said, ‘I don’t care, I’m the president of the United States. I won’t do it.’ They said, ‘Please.’ And then Susie Wiles said, ‘Sir, I would like you to host,’ I said, ‘OK, I’ll do it.’”

     

    Grown men crying again. The former reality TV star can’t resist the cameras or weepy stories but he’s certainly showing a  curious resistance in one aspect of his gyrating global trade war. China was the original bipartisan focus of US trade deficit ire. Now, not so much. China trade tariffs are now lower than those smacked onto many US allies. In fact, Trump has once more delayed the imposition of escalating 100% + tariffs on China by 90 days. Global trade watchers and geopolitical risk analysts have been left scratching their heads. Apart from China tariff leniency, other developments indicate a shifting Trump focus. Here are three moves which are causing most confusion:

     

    1. Check out US Treasury Secretary Bessent describing to an incredulous Fox TV host, Larry Kudlow, the intention of the US to “appropriate” funds from allies in Europe, UAE and Japan to be invested in their trillions at the whim of the US government. Incredible stuff.
    2. Pity poor Switzerland. They are, as a friendly ally nation, currently topping the global tariff league tables with draconian 39% rates, higher even than China.
    3. After decades of US diplomatic efforts to woo India, the White House now seems determined to provoke the Modi government with tariffs because of their purchases of Russian oil. Never mind that China is in far bigger sanction infringement territory with its oil purchases, and weapons parts supplies.

     

    It has not escaped the notice of most risk analysts that China must be very happy with how things are playing out. Arguably, they might even be encouraged. That’s not good news for Taiwan which sits in Beijing’s crosshairs for ultimate political annexation or military invasion. The bear to watch, in my view, is the China panda bear. We are already seeing the US and Trump caving on rare earths/critical mineral supplies and even the export of high-end AI chips in exchange for a 15% cut of Nvidia and AMD Chinese revenues. Yep, if that sounds like the actions of a Politburo centrally-controlled economy, you’d be very close to the exact definition of same. However, there’s a real danger the US is slipping in the ‘imitation’ stakes of competing in many key technologies.

    We already know China controls close to 90% of electric battery cell production. Its dominance of the entire battery ecosystem from raw materials to processing capacity to battery components looks unassailable. Batteries might not be the only technology of our future racing to Chinese dominance. Research from the Australian Strategic Policy Institute (ASPI) shows that China is now leading the way in 57 out of the 64 technologies assessed by its Critical Technology Tracker, which has been updated to cover the last 20 years. The tracker measures a country’s performance based on the high-impact research it produces, specifically looking at the number of publications its institutions released in the top ten percent of cited papers in that specific field. The data studied was from a range of fields, like AI, cyber, defence, and robotics.

    Yep, even AI might not be the US lead technology you thought it was. Perhaps, looking at share prices and massive AI infrastructure spend by Big Tech might not be the best indicator of future leadership. The WIPO Patent report tracking generative AI patents filed in the period 2014-2023 showed China filed 6x more patents than the US, or 70% of the global total. This feels like a very focused busy China, not quite a playful low-energy panda. Recent visitors to China speak to warp-speed adoption of autonomous transport, delivery, digital currencies, robotics and digital services. Then consider our recent article flagging solar power capacity being built at a rate equivalent to 5 nuclear power stations…..per week!  It’s all about power, political and physical. It’s a language Trump understands, and one wonders has he decided it’s a battle he won’t win? If so, there’s one more focus for the panda.

    Taiwan historically has enjoyed the security protection of the US and its allies in the Asia-Pacific region. Right now, nobody is sure that will continue. China will also be hugely encouraged by the former gameshow host’s preference for transactional relationships, rather than principles or loyalty. Meanwhile, the general risk view in Asia is that we should be very concerned. We missed Ukraine. Dare we miss Taiwan….?

     

  • Tech Sovereignty Getting Very Real

    Tech Sovereignty Getting Very Real

    Random thought – did music break the USSR? As I watched 40 year old re-runs of Live Aid last week, I found myself trying to recall the emotions and vibe at that moment in time. The Live Aid concert itself was a significant exhibition of global solidarity in raising awareness of famine in Ethiopia. In hindsight, the long-lasting impact of Live Aid on preventing famine might be questionable as global leadership values currently go AWOL on the Gaza and Sudan catastrophes. However, the sheer reach of that day’s broadcast to over 2 billion people in more than 150 countries was a display of communications tech power which has to be considered against the geopolitical backdrop of the time. Saigon had finally fallen to Communist North Vietnam only 10 years earlier, Afghanistan had been invaded by the USSR just 5 years before and Poland had recently come out of a period of martial law. Nobody felt like the USSR empire was faltering. But…. its “iron curtain” was failing to block the reality of better living elsewhere.

    In 1981 MTV, the US music video channel, launched on cable television and was syndicated to countries around the world. Global audiences were seeing music combined with video imagery celebrating freedom, democracy and the rewards of talent and endeavour. Live Aid confirmed communications technology was moving rapidly and posed a real threat to those who needed message control to stay in power. The Chernobyl nuclear disaster happened a year after Live Aid, the Berlin Wall fell 3 years later, and the USSR imploded 2 years after that. Today’s Russia is a rogue state with a GDP of barely $2 trillion, or about half the value of one US tech company, Nvidia. This stark reversal in geopolitical and commercial leadership is a reminder to the leaders of today about “network” power. My sense is that there are three particular ‘networks’ where governments are now beginning to assert sovereignty for national security reasons. I’d flag three stories in recent weeks which illustrate the point well.

    European satellite internet network company, Eutelsat, is a competitor to Elon Musk’s Starlink and is listed on the Paris and London stock exchanges. The company is raising €1.5 billion of capital funding with a sovereign twist. The French government is investing €750m and the UK is putting in €163m in exchange for shares in the company and maintaining ownership stakes of 29.65% and 10.89% respectively. However, Eutelsat’s fleet of just over 600 satellites has a lot of catch up to do. Starlink’s network has deployed more than 7,500 satellites thanks to the dizzying rocket launch timetable of sister company, SpaceX. If you were looking for one area of European urgency on tech sovereignty, then it’s probably defence. Germany is stepping up with €500 billion earmarked for defence investment, so it was no huge surprise to see Berlin-based Planet Labs win a €240m satellite services contract from the German government earlier this month. Planet Lab’s brief is to deploy its fleet of 600 next-generation Pelican satellites to deliver high-resolution SkySat imagery, and AI-enhanced surveillance tools, specifically designed for security, infrastructure monitoring, and maritime awareness. Clearly, it’s time to look up and keep an eye on a rapidly shifting space race, but don’t forget what’s under our feet.

    Earlier in this piece I kinda said that communism died in the ‘90s but the idea of centrally controlled economies is making a bit of a comeback. Bizarrely, the US is leading the charge. Again, I’m going to park the politics and walk you through a few developments in recent weeks. First, the US government via the Pentagon announced it was getting into the mining business. Yep, the Pentagon (Department of Defense) invested $400m in MP Materials, a US company which extracts and processes rare earths materials. These rare earths are the essential basic materials for the high-end magnets used in technologies from mobile phones to medical equipment to ballistic missiles. Anyway, we know the world is overly dependent on China (90% market dominance) for these rare earths/magnets and is a primary reason for the Trump TACO pause on trade tariffs with China. Clearly, critical raw material supply chains/networks are a focus of all Western governments. So, the move to back a home-grown producer with a 15% ownership stake was logical enough. However, within days Apple announced a $500m deal with MP Materials to buy magnets produced in Texas. Cue the MP Materials share price doubling within hours and you can just feel it in your bones that Apple was strong-armed by Washington into doing this deal. This is the sort of government intervention you’d expect from Beijing, but ….Washington? We live in interesting times, as the Chinese might say, but arguably there’s another network of even more importance where the Washington government is happier for China to lead.

    The electrification of the global economy is very real. The advent of AI and the enormous energy appetite of cloud-supporting data centres only adds to the pressures on electrical grid networks everywhere. The race to source power is focusing the minds of Big Tech and driving deals which could be described as “outside the box” thinking. Consider these recent deals:

     

    • Google last week agreed a $3 billion deal to modernise two hydropower plants in Pennsylvania.
    • Meta said in June that it had struck a 20-year deal with a nuclear plant in Illinois to power its data centres.
    • Microsoft is preparing to reopen a nuclear reactor at Three Mile Island in Pennsylvania, the site of the most serious nuclear meltdown in US history.

     

    However, the bigger energy story is elsewhere, but with a US context. The Trump administration is actively pushing investment capital away from renewable energy solutions like solar and wind. Year-to-date in the US, more than $15 billion of clean energy projects have been cancelled. In Europe, venture capital funding of cleantech companies has nosedived by 71%. Meanwhile, China is taking a longer-term view on electrical grid networks. The numbers are absolutely staggering. China controls 80% of solar panel production and leads the world in wind turbine manufacturing. This year China will account for 74% of all solar and wind energy projects…. globally. But, it’s the electricity generating capacity numbers which truly blow the mind. Last year China added 370GW of renewable energy capacity (wind, solar, hydro) of which 277GW was solar. For context 1GW (or 1000MW) is the equivalent energy capacity of the average nuclear power station. So, on solar energy alone, China is adding the equivalent electrical capacity of five nuclear power stations to its power grid….. every week.

    The headlines might be dominated by $4 trillion companies driving the AI revolution, cloud-based software economics, chip manufacturing and data centre construction. But…. two of the three networks above focus on real basics. China’s raw materials supply chains and its electricity grid are critical to its future and geopolitical power. One can only hope it’s not an “MTV moment” for other countries playing catch up, or worse – blocking the signals of rapid change.