Video: How China and the U.S. Approach the Digital Age Differently
In the fourth installment of a public webinar series inspired by their Yale SOM elective course, former Dean Ted Snyder and Logan Bender ’19 explain how the technological rivalry between China and the U.S. actually benefits both countries.
Core ideas
- China and the U.S. may be engaged in a rivalry, but these two powers have been and remain in a mutually beneficial economic relationship.
- In fact, China and the U.S. constitute the most successful G2 in history, responsible for more than 40% of the world’s GDP.
- Even though both China and the U.S. have declared their intentions to build independent supply chains for semiconductors, we should not expect this to happen.
- We do not expect China to restrict rare earth elements, though it will build infrastructure to have that option in the future.
- AI may be changing the stakes, as both countries wish to be the leaders in the AI race.
On NVIDIA’s rise to become the largest company in the world
- Ted Snyder: What I find interesting is that this rise in NVIDIA’s market cap comes at a time when others are also getting big increases in market cap […] Despite the emergence of important competitors to NVIDIA at the leading edge, NVIDIA is going up. So we’re not close to, I think, the peak in demand and supply responses with respect to these high-end GPUs.
- Logan Bender: That shows you a couple things. One, the street, the investor base has enormous expectations for payoff for the company to grow into that valuation… It also forecasts that all of these cloud providers, these tech firms are going to continue to spend into this AI trend.
On the possibility of an AI bubble
- Snyder: The AI spends are huge and accelerating. Then, secondly, the stock market is saying bravo, good, we like this. They’re rewarding companies that are spending in terms of expectations for future earnings. If there’s an AI bubble, both the firms are wrong and the street is wrong. I tend not to think that we are in an AI bubble. Instead, what we’re in is, as Lisa Su says, the second inning of a nine-inning game.
- Bender: My view is that the private market has gotten ahead of itself in some of the valuations for firms that are pre-product. They don’t have a product, and yet they may have billion-dollar valuations. Large public companies, they have lines of business that can support initiatives for longer. Their balance sheets are stronger.
Ted Snyder, the William S. Beinecke Professor of Economics and Management, served as Yale SOM dean from 2011 to 2019. With technology investor Logan Bender ’19, he teaches the elective course Economic Analysis of High-Tech Industries, which interprets global economic phenomena through industrial organization concepts and valuation frameworks. Their public webinar series, Ted and Logan’s Briefings on High-Tech Industries, offers timely insights on major trends shaping the tech sector.
