Weekend reading links

1. China may be turning to its traditional industrial policy playbook to reduce its current import dependence and achieve self-sufficiency in food, especially animal protein, thereby upending global supply chains. 

Adam Tooze writes, pointing to analysis by the research group Systemiq.

This involves a combination of investment and innovation. Beijing is coordinating central and provincial government, state-owned enterprises and financial institutions around smart agriculture. It has licensed the commercialisation of genetically modified maize and soya. Research clusters are forming around neoproteins, fermentation-derived ingredients, feed additives and agricultural biotechnology. State banks are on hand to provide cheap finance. To channel demand, Beijing is tightening food and feed standards and tweaking procurement requirements. This is the kind of whole-system policy that has given China a commanding lead in the new energy sectors. With all the levers in play, we may, by as early as 2030, see a significant fall in soyabean demand, slashing imports from the US dramatically. By 2040, innovation and efficiency gains could plausibly turn China into a net exporter of poultry, dairy, eggs, fish and seafood. If agriculture follows the industrial policy timeline, by 2050 we should expect to see China emerging as a major source of “cultivated meat”.

2. Indonesia's President Prabowo Subianto has signed a presidential regulation cutting the percentage that ride-hailing platforms like Grab and GoTo can take from each order to a maximum on 8%, down from the current 20%. 

3. The latest on the dominance of the Magnificent Seven (US stocks make up 65% of global stock market capitalisation, up from 40% in 2010).

This is an important data point.

Bloomberg data suggests that almost 80 per cent of the S&P 500 companies that reported first-quarter results this month beat analyst earnings estimates.

4. Chinese ports facts of the week.

Chinese firms now operate or have a financial stake in at least 129 ports outside China (see map), and have spent at least $80bn on port construction from Antigua to Tanzania, with many of the investments tied to bilateral trade and regional shipping agreements. More than a third of China’s overseas ports are near maritime chokepoints, including the Strait of Malacca, the Strait of Hormuz and the Suez Canal, making them indispensable operators in strategic areas. China’s firm grip on global ports has rattled Western governments. MERICS, a think-tank in Berlin, found that after a terminal operating contract is signed, total trade with China rises by more than a fifth, while countries that allow Chinese firms to run all their terminals at one of their ports see a 19% drop in exports to the rest of the world. Operating ports allowed Chinese firms to prioritise their cargo and vessels and speed up customs and logistics...

China’s reach extends beyond physical infrastructure. LOGINK, a Chinese government-run logistics-management software, is used in at least 24 countries and 86 ports (America banned its use in 2023). LOGINK shares data with CargoSmart, another shipping-management software firm owned by COSCO, another Chinese state-owned firm, and in turn gives it access to the whereabouts of 90% of the world’s container ships. It also has a tie-up with CaiNiao, a logistics provider with hundreds of warehouses around the world... Chinese firms are also building industrial parks and manufacturing facilities close to their existing ports in Africa and Europe.

5. Good FT article on how data centres construction is triggering local backlash as residents fear for their water and electricity.

Around two-fifths of all US data centres are located in areas of high water stress, according to S&P Global... In DeKalb, a city of around 40,000 people, water demand averages just over 3mn gallons a day, rising to in excess of 4.5mn gallons at peak. The latter figure is broadly comparable to the needs of a single large AI data centre.

Data centres have already emerged as a significant driver of economic expansion in the US, accounting for 80 per cent of private sector growth in the first half of 2025, according to S&P Global... Researchers at the Lawrence Berkeley Laboratory forecast that so-called hyperscaler data centres will consume anywhere between 60bn and 124bn litres (16bn and 33bn gallons) of water on-site each year in 2028. This figure excludes the indirect water use tied to electricity generation, which the lab previously forecast could be as much as 12 times higher than direct consumption...

Of the roughly 100GW of additional electricity capacity that the US is projected to need at peak times by 2030, roughly half will be used by data centres, according to the Department of Energy... On average, American bill payers — including residential, commercial and industrial customers — paid over 6 per cent more for electricity year on year at the end of 2025. This increase was starkly higher in the mid-Atlantic states which house a large number of data centres such as Pennsylvania and Virginia, where bills rose by 19 and 10 per cent respectively.

6. Indian equities suffer from a high valuation gap with EM peers.

In recent weeks, a string of global brokerages – including Goldman Sachs, Nomura, HSBC, UBS, and JPMorgan – have downgraded Indian equities in their emerging market portfolios. The concerns converge around a common theme: Deteriorating macro conditions amid rising energy prices, weakening earnings visibility and, crucially, more attractive opportunities in other EMs... The relative valuation gap still stands at around 65 per cent—well above South Korea, Brazil, China, Mexico and South Africa. “South Korea is expected to deliver about 180 per cent earnings growth at around 7x P/E. Taiwan offers about 35 per cent growth at 18x. China delivers about 14 per cent at 11x. India, by contrast, offers 8–14 per cent growth but trades at ~19x,” said Amish Shah, head of India Research, BofA Securities. From a global allocator’s perspective, India remains expensive.

The weight of Indian equities in the MSCI EM index has continued to fall since March 2025, from 18.5% to 12.58% in March 2026.

7. India's trade deficit with China continues to grow.

On April 8, Xu Feihong, Chinese ambassador to India, posted on X: “Glad to know that China has become India’s largest trading partner in FY2026 — for the 11th straight month.” This was great news for China but not for India. The $151.1 billion trade between the two comprised $131.63 billion of exports from China to India and a meagre $19.47 billion of imports from India. It was a one-way street. China was flooding Indian markets even as it became India’s “largest trading partner”...

India must import electronics and electrical equipment ($40 billion-50 billion), machinery ($27 billion), organic chemicals ($12 billion-13 billion), plastics, steel, medical equipment, and so on from China every year. These are critical products without which the Indian economy would not be able to function. Alternative sources exist for some, but at a much steeper price. Moreover, China has diversified its supply sources, so even if not directly from it, Chinese goods would still reach India through Southeast Asian and other manufacturing bases.

8. One explanation with oil markets are still not rising as much as expected. 

In 1973, the year of the first oil price shock, I calculate from industry sources that about 80 per cent of one barrel of oil was consumed per $1,000 of global GDP in 2025 prices — 131 litres, to be precise. In 1980, the year after the Iranian revolution, this was down to 116 litres. Last year, it was 52 litres. The current level is still a lot, but the average oil burden is 60 per cent less than 50 years ago. If so much less oil is needed, real prices should have much more room to escalate before they cause the economic damage associated with previous disruptions. A simple illustration of today’s diminished oil cost burden to the global economy is to adjust the nominal price of oil not only for inflation but also for the efficiency improvements. If one does, a hypothetical price of $115 per barrel today compares with an average price of $339 in 1980 in today’s dollars. By this measure, prices have plenty of runway before the oil burden resembles 1980.

But it must be balanced against other factors pulling in the opposite direction.

Oil consumption today is more concentrated in high-value uses and in areas where there is no substitute, like road or air freight and maritime shipping. These are load-bearing economic activities, less price sensitive than discretionary or consumption-oriented drivers of growth. Once disrupted they are likely to cascade through the economy... Oil concentrated in high-value uses is a little bit like rare earths, tiny compared with the size of GDP but essential for much of it. If the size of a supply disruption requires demand to come down and prices surge to the required level, the response will be sudden with a potentially unforeseen and disproportionate impact on economic activity.

9. Jakarta's success with mass transit appears exemplary.

In 2014, Jakarta was crowned the world’s most congested city by the Stop-Start Index and a year later was ranked far below other Asian cities on livability by the Economist Intelligence Unit. Ten years later, Jakarta has the world’s largest and one of the most used bus rapid transit (BRT) systems. The old, crowded diesel commuter trains, famous for allowing passengers to ride on the roofs, are now electrified, air conditioned, and run on regular schedules linking the suburbs to the city center. There are multiple subway and light rail lines crisscrossing the city. The transformation has been remarkable: in 2015, less than 20% of residents were within walking distance of transit. Now, nearly 90% of the city has access to BRT or trains... 

The user experience has also been streamlined. All of the new MRT lines are part of an integrated digital fare system. A journey from one end of Jakarta to another is capped at 10,000 rupiah (about 70 US cents). According to WRI Indonesia, as of 2024, 10 percent of trips in Greater Jakarta are now made by public transit, compared to just 2 percent in 2015... While the JICA loans covered the cost of building the MRTS and training local staff, the full cost of operation has now fallen to the city government. So far, this has worked reasonably well, with Jokowi arguing that the cost of running the system — at about 800m billion rupiah (US$50 million) a year — is justified by the estimated 65 trillion rupiah (US$3.5 billion) in annual economic losses due to traffic.

However, much more remains to be done. 

The city has recently overtaken Tokyo as the world’s largest city, with a metro population of over 41 million people, and it is still growing rapidly. It is projected to add another 10 million people in the next 25 years. To serve this population, Greater Jakarta has only six train lines and under 250 miles (400 km) of track. Tokyo, by contrast, has an astounding 158 train lines and 2,930 miles (4,715 kilometers) of track connecting 2,210 stations throughout its massive metro area.

10. Foreign portfolio investors sharply cut exposure to Indian software firms.

Foreign Institutional Investors’ (FIIs) allocation to the Indian technology sector stood at an all-time low of 7.3% at the end of March compared to 10.1% at the end of FY25, according to brokerage Motilal Oswal Financial Services... So far in 2026, FIIs have sold $21.6 billion of Indian equities – more than the $18.9 billion they sold in all of 2025 – of which $2.4 billion worth of net sales have been of Indian IT stocks (until April 15). As a result, FII holdings in the IT sector reduced to $41.4 billion from $59.8 billion at the end of 2025.

11. TIDCO stake in Titan Company.

This state government-owned industrial promotion agency, TIDCO, has a 27.88% stake in Titan Company Ltd. That’s more than the combined 25.02% share of the Tata Group through its holding company and various subsidiaries. It makes TIDCO the main promoter of Titan, which was established in 1984 as a joint venture for manufacturing quartz analog watches at Hosur on the Tamil Nadu-Karnataka border. That company — originally Titan Watches Ltd — has today grown to a premier lifestyle accessories maker with a product portfolio spanning watches and wearables (Titan, Fastrack and Sonata brands), jewellery (Tanishq and CaratLane), eyecare, women’s bags (IRTH) and ethnic wear (Taneira sarees and tops). Titan Company earned a net profit after tax of Rs 3,337 crore on a total income of Rs 60,942 crore during the year ended March 31, 2025... at the share’s closing traded price on May 6... TIDCO’s 27.88% holding in Titan will alone be valued at Rs 1,07,873 crore... if TIDCO were to sell its entire stake in Titan Company, the Tamil Nadu government would be able to mobilise upwards of Rs 1 lakh crore and bring down its outstanding debt by roughly a tenth. The annual savings in interest outgo resulting from it will far exceed the Rs 272 crore that TIDCO received as dividend for 2024-25 from its 27.88% shareholding in Titan Company.

12. Ruchir Sharma makes some very important points about the critical role being played by retail investors in the US equity markets. Some numbers.

The share of US households that own stocks has surged this decade to nearly 60 per cent, the highest proportion in any country. Americans are all in on the market, holding more wealth in stocks than in their homes for the first time. And retail is now the most active class of traders as well. Retail’s share of daily trading in US stocks doubled in the past 15 years to 36 per cent, surpassing that of big banks or hedge funds, and making them the market price-setters. Last year US retail trading topped $5tn, exceeding the pandemic high, only this time Americans weren’t stuck at home or flush with savings.

He points to contributors to the rise of retail investors.

Three forces are encouraging small investors’ deep faith in the stock market: stimulus, bailouts and technology. Record sums of money pouring out of government and central banks, intended to lift the fortunes of the real economy, have instead been used by households (particularly the richer ones) to invest in the stock market. With policymakers rushing to rescue the economy at the slightest hint of trouble, investors have come to believe the government will always bail them out. And low-cost, mobile trading platforms have given everyone easy access to investments of all kinds.

Finally, a very important political economy dynamic arises from this trend. 

The larger the retail community gets, the more pressure builds on politicians to support the market. What was said of Wall Street banks after the crisis of 2008 can now be said of the stock market as a whole: it’s “too big to fail”.

13. The rise and rise of stock market concentration in the US.

Analysts at UBS said that a measure of how many stocks were materially contributing to the index’s performance — so-called “effective constituents” — hit a record low of 42 last week, far below the level of about 100 that has been typical in recent decades.

14. Nice interactive story of how oil from the Gulf reaches Japan, gets refined, and is distributed. 

15. The $725 bn capex spending projected by the Big Tech (Amazon, Alphabet, Microsoft and Meta) is estimated to leave them with their lowest free cash flow since 2014. 

16. Fascinating 5km split of Sebastian Sawe's sub-two-hour marathon.

Weekend reading links

1. The power of Thailand's constitutional court.

Thailand’s Prime Minister Paetongtarn Shinawatra has been removed from office... The country’s constitutional court on Friday found Paetongtarn guilty of ethics violations over a phone call with Cambodia’s former leader Hun Sen, in which she criticised the Thai military in the run-up to the border violence... she is now the fifth holder of that office to be removed by the constitutional court in the past 17 years... Paetongtarn, a political novice, assumed office last year after her predecessor, property tycoon Srettha Thavisin, was dismissed by the constitutional court for appointing a previously jailed lawyer as a cabinet member, an ethical violation... The constitutional court has dissolved more than 100 political parties over the past 30 years, including Move Forward, which received the most votes in the last nationwide election in 2023.

2. Boeing and Airbus

The success of the A320 family has been the driving force behind Airbus’s ascendancy in its five-decade rivalry with its US competitor. For years, the two companies had a roughly 50:50 split of the market for commercial single-aisle aircraft. But by the end of last year, Airbus held a market share of 61 per cent measured by order backlog and 72 per cent by deliveries... Boeing delivered 348 jets in 2024, fewer than half the 766 that Airbus managed, as 737 Max output remained subject to a 38 per month cap pending improvements to quality control. A shortage of engines has been one of the most persistent challenges for both companies. CFM International, a joint venture between France’s Safran and GE of the US, and Pratt & Whitney have struggled to keep up with demand. Both companies’ engines for the A320neo have also had durability issues.

3. India uses half the capital to raise output by one unit compared to China.

4. FT effectively calls out corporate America as a bunch of bullies who flaunt their muscle before the weak and prostrate when they are in turn bullied.

When Zohran Mamdani resoundingly won the Democratic mayoral primary for New York in June, Wall Street and Silicon Valley erupted in outrage at his promises of free buses, rent freezes and city-run groceries. Hedge fund billionaires Bill Ackman and Dan Loeb, Jamie Dimon of JPMorgan Chase and tech entrepreneur Brian Armstrong of Coinbase all warned about the risk of heavy-handed interference in the city’s economy. David Solomon, chief executive of Goldman Sachs, took to LinkedIn to slam Mamdani’s proposal to freeze city-controlled rents. “When New York tried it in the 1920s and 1960s, it limited affordable housing, narrowed investment in new housing, and made housing outside the control area more expensive,” he wrote. The reaction over the past few weeks as US President Donald Trump has unveiled a series of blunt interventions into the workings of both the financial system and the operations of private companies has been very different... 

Yet as Trump has stepped up his attacks on the Fed, Wall Street’s leading figures have offered only limited criticism. And while many of his corporate interventions amount to the sort of European-style dirigisme that the US business elite once loved to deride, the response to Trump’s agenda has been near silence. Indeed, some business leaders have offered praise of the president’s attempts to direct the economy... The juxtaposition with Mamdani is striking: vociferous criticism of the frontrunner to be New York’s mayor from business leaders, but calculated restraint as the president reshapes the rules of free enterprise in America... the principal explanation lies in fear. Criticising Trump, they argue, is risky business. “They’re more afraid of the guy in power in Washington than of the potential mayor of New York,” says Ilya Somin, a law professor at George Mason University and scholar at the libertarian Cato Institute. “Even if Mamdani does become mayor of New York, he will not have the kind of power that the president of the US has.”... Jamie Dimon, who last month dismissed Mamdani’s economic views as “the same ideological mush that means nothing in the real world” and criticised “idiots” in the Democratic party, has stopped short of criticising Trump directly.  

5. India is now becoming a more expensive mobile services market. 

6. The Ken has a nice story on how India’s private sector is making UAE as a choice investment destination.

Personal-care and pharmaceutical company Himalaya Wellness; electric-vehicle maker Omega Seiki Mobility (OSM); electric-bus manufacturer (and subsidiary of commercial-vehicle giant Ashok Leyland) Switch Mobility; and iron-and-steel-pipe manufacturer Jindal Saw. These are just a few among Indian companies who’re planning to set up fully-operational manufacturing bases across free-trade zones in the UAE. Others, such as consumer-goods company Dabur, eyewear company Lenskart, and conglomerate Tata already have operations there. Tata’s presence, in particular, is sprawling—from hospitality ventures such as Taj Exotica and The Palm Dubai, to Tata Steel Middle East’s downstream facility to manufacture steel flooring in Jafza. Of the total 11,000 companies in the Jafza free-trade zone, 2,300 are Indian… While India currently has 276 operational SEZs with around 6,300 companies, the UAE—which is smaller than the state of Bihar in area—has 40 free-trade zones boasting over 200,000 companies… The incentive comes in the form of financial backing from UAE’s sovereign-wealth funds, joint ventures, or loans. For instance, before Lenskart’s Dubai factory became operational in 2024, it had received $500 million from the sovereign wealth fund Abu Dhabi Investment Authority (ADIA)… Similarly, Himalaya Wellness secured $80 million in loans in 2023 from the Emirates Development Bank for its upcoming plant in Dubai’s free-trade zone. Spanning 225,000 sq ft, it is expected to create jobs for 250 professionals and produce 3 billion tablets, 15 million syrup bottles, and 3 million ointment units a year by 2030.

The numbers are truly disturbing. There are 2300 Indian companies in just one UAE FTZ, compared to 6300 firms in all of India’s 276 SEZs! Even with all the obvious attractions of UAE - tax-free zones, ports and logistics facilities, and access to international institutional finance - this scale of exit should be a matter of concern. 

7. Gartner's annual "digital automaker index" which compares carmakers on their potential to monetise their software has the following line up. 

Clearly, the traditional car makers have fallen behind, being overtaken by the new American and Chinese firms focusing on electric vehicles. 

Ultimately, analysts warn that the auto industry is likely to go in the same direction as smartphones and PCs, with a small number of operating systems like iOS and Android eventually dominating the software space. They add that the transition will fundamentally tilt the industry’s modus operandi away from designing, building and selling cars — a business model characterised by mechanical engineering and relatively thin profit margins — and towards software and services. Toyota and its peers are aiming to use these to create new sources of revenue as the industry shifts to autonomous electric cars. Investment across the industry is already shifting from superior engines and external design to the computer systems that will control everything from batteries to safety features and, eventually, self-driving functions.

8. Unit economics of food delivery e-commerce.

Both Swiggy and Zomato typically charge restaurants a commission ranging from 15-30%, depending on the scale of the business, with smaller businesses often paying higher commissions. Most restaurants say nearly half the order value disappears before it even reaches them. Explaining the math, restaurateurs indicated to Mint that on an order of, say, ₹300, about ₹75- ₹90 goes to the aggregator as commission, while about ₹60- ₹90 is lost in discounts; ₹15- ₹30 goes towards marketing on the platforms just to stay visible. In the end, a restaurant is left with only ₹150- ₹90 out of an order worth ₹300. This is a generalized estimate and the actual numbers can be higher or lower depending on each restaurant’s commissions and ad spends. “Pre-covid, commissions were as low as 8-12%. Now, the base commission is 33% and with payment gateway charges, marketing costs, taxes, the sky's the limit. Cost-per-click (the cost a restaurant pays when a user clicks on the ad listing by a restaurant) used to be around ₹1.25 but now it is more than ₹7," the owner of a restaurant chain based in Assam told Mint... Spiralling costs aren’t the only concern for restaurants. Owners are also upset over arbitrary discounts, hidden features and a near-total lack of communication from the platforms. Several restaurateurs allege that Swiggy and Zomato launch discounts or even enable dine-in reservations without their consent.

9. Ajai Srivastava of GTRI points to how Quality Control Orders (QCOs) worsens the business environment in India. Sample this.

A recent example is the steel ministry’s June 13 order. It requires not only finished and semi-finished steel products, but also the raw materials used to make them, to have a BIS quality certificate. The rule took effect with barely one working day’s notice, causing shipments to be stuck at ports, contracts to be cancelled, and court cases to be filed... Now, every upstream raw material supplier — even if located in a third country — must also be BIS-certified... This policy imposes a double-certification requirement. The first certification — the one that matters — is for the final product, which is already in place under FMCS. The second, newly mandated certification is for upstream raw material suppliers, often in third countries far removed from the Indian market. Getting BIS certification takes 6 to 18 months, involves substantial fees, and requires performance guarantees and compliance audits. Small overseas mills producing modest volumes for an intermediary exporter have no incentive to invest the time and money needed for certification. This means limiting the number of foreign suppliers for Indian buyers...

Additional licensing for raw material suppliers adds no meaningful quality assurance. Existing safeguards — mill test certificates, port-level Positive Material Identification (PMI) tests, and customs inspections — already prevent substandard imports... No major steel-producing economy — the United States, European Union, or Japan — requires separate raw material certification if the final product meets national standards. Instead, they rely on traceability through Mill Test Certificates, accredited third-party testing, and mutual recognition agreements. India’s double-certification model diverges sharply from these norms and risks being classified as a non-tariff barrier (NTB) under World Trade Organization (WTO) rules... By forcing upstream suppliers with no commercial interest in India to undergo a burdensome certification process, the government has added avoidable costs, and jeopardised India’s reliability as a manufacturing partner.

10. Interesting that Cantor Fitzgerald, an investment bank run by the sons of Howard Lutnick, has been buying up tariff refund rights in the expectation that the US courts will finally rule the tariffs illegal and force the government to refund them. 

11. Palantir may be the most over-valued firm in history!

Palantir’s market value has already soared to $430bn, more than 600 times its past year’s earnings and nearly triple the equivalent multiple for Cisco (or, indeed, Nvidia) at its peak. Software firms often prefer to express their valuation in terms of underlying sales, which puts Palantir’s multiple at around 120. For comparison, in 2005, the year before the Oxford English Dictionary added the verb “Google”, Google’s price-to-sales ratio peaked at 22... Adam Parker of Trivariate Research, an investment firm, has published a note entitled “Could Palantir be the best short idea?” Writing in late May, he examined the ratio of enterprise value (which adjusts market value to account for debt and cash on the balance-sheet) to forecast sales for the coming year. On this measure Palantir then scored 73 and now scores 104. Mr Parker looked for other listed companies that had hit a multiple of 70 since 2000. Excluding financial firms and those with annual revenue of less than $50m, he found 14, the largest of which has a market value around a quarter of Palantir’s... To reduce its price-to-sales valuation to “only” Google’s at its peak in 2005, while maintaining its current share price, Palantir needs to multiply its revenue by 5.6—substantially more than the barnstorming progress it has made over the past five years. Doing this over the next five would require an annual growth rate above 40%.

12. Staggering statistic about electoral support for Trump.

According to Gallup, just 1 per cent of Democrats approve of Trump’s job performance, while 93 per cent of Republicans do — equalling the biggest split since this survey started in 1979.

13. Fascinating graphic that shows the over-representation of extreme views in social media.

Recent work by US researchers Claire Robertson, Kareena S del Rosario and Jay van Bavel among others… find that social platforms’ inbuilt tendency to reward indignant and hostile content creates incentives that systematically reward the production of simplistic messages and extreme positions, while rendering moderate views less visible… with social media we essentially have a plethora of fiercely anti-establishment and ruthlessly eyeball-chasing broadcasters, and they’re reaching much larger and broader swaths of the population. This proliferation of views and narratives formerly considered beyond the pale, spread via individuals and platforms outside the control of erstwhile political and media powers, has shattered norms that previously kept radicals on the fringe... 

A 2019 study found that communities in Italy and Germany that received broadband internet access earlier than others also saw earlier upticks in support for populist parties. In his 2024 book The Normalization of the Radical Right, Vicente Valentim shows that support for many populist positions and politicians has long been higher than widely appreciated, and that the discovery that many others share these views — a process facilitated by the internet and social media — has led to them being voiced more confidently, and embodied at the ballot box.

14. Excellent article about the rise of high-bandwidth memory (HBM) chips as the "new frontier of the AI revolution" and how SK Hynix has become the dominant maker of such chips. 

For decades, memory chips were the unglamorous end of the semiconductor industry, overshadowed by the logic or processor chips designed and produced by companies such as AMD, Qualcomm, Nvidia and TSMC to conduct calculations and control an electronic device’s operations. But HBM designs, such as the HBM3E produced at the Icheon factory, are transforming the memory industry. Joon-yong Choi, vice-president and head of HBM business planning at SK Hynix, notes that whereas in conventional dynamic random-access memory (Dram), “cost was prioritised by customers over power and performance, with HBM power and performance are prioritised over cost”. They are helping developers of so-called large language models alleviate the effects of the “memory wall” — where limitations in storing and retrieving data are an impediment to improving performance — as well as boosting efficiency and lowering costs at thousands of data centres under construction around the world...

Intel began life in the 1960s as a memory chip company, but exited the Dram sector in the 1980s under pressure from Japanese rivals Toshiba and NEC. They, in turn, were supplanted in the 1990s by Samsung and the chip division of Hyundai Electronics, or Hynix, which would later be acquired by the SK conglomerate. The two Korean groups and Micron, of the US, have dominated the sector ever since. Samsung was until recently the undisputed leader of the heavily commoditised market in Dram chips, which are powered and store data temporarily while a processor is running. It used its superior scale to invest in production capacity during the cyclical industry’s regular downturns...

HBM chips, which Hynix began developing in 2013... involved stacking layers of Dram units connected by copper wires a tenth of the thickness of a human hair, like a multistorey library with lifts to quickly transport piles of books between floors. That means HBM chips can offer 1,024 pathways for sending data to and from a processor, Choi explains, compared with 64 for conventional advanced Dram chips. “Think of it like the number of taps filling a water tank, or the number of lanes on a highway,” he says. “When it comes to the memory requirements of AI, nothing comes close to HBM.”... Hynix’s early adoption of an advanced bonding technology called mass reflow-molded underfill, or MR-MUF, as key to its HBM success. It involves the use of a special resin-based insulation material to prevent overheating, crucial when stacking up to 16 Dram chips on top of each other...

HBM chips offer profit margins of about 50-60 per cent, compared with about 30 per cent for conventional Dram units. Because each HBM chip needs to be designed to fit the specific AI graphics processing unit to which it is paired, orders must be placed a year before production, typically on one-year contracts... while compute performance is more important for training AI models, memory is widely considered more important for deployment, also known as inference.

Weekend reading links

 1. Profile of Wang Chuangfu, founder of BYD

Born in 1966 in the eastern province of Anhui, Wang is part of a generation of Chinese entrepreneurs who escaped poverty to join the nation’s newly minted billionaire class... Wang’s obsession with batteries led to a pivot to vehicles in the early 2000s. Cracking the five-minute charge this week builds on his pioneering “cell-to-body” technology — sandwiching a battery cell inside a vehicle’s structure... The company’s stock rally has also taken Wang’s personal net worth, according to Bloomberg data, to just shy of $30bn, making him one of China’s richest men. Despite that he remains a workaholic who lives humbly. His house is walking distance from BYD’s main factories and he dispatches lieutenants to public-facing events unless his attendance is absolutely necessary. Underlings have long described Wang as a restrained, highly detail-orientated micromanager. His approval was once sought for a business unit to distribute fruit to team members. But his passion for batteries has revealed a performative flare. To demonstrate to an investor just how safe his battery cells are, he has drunk battery electrolyte fluid. He has reused cells after trucks drove over them and frequently shows visitors batteries being penetrated by nails.

BYD plans to manufacture in India with a JV partner.  

2. Interesting insights from a survey of over 30,000 GenZ professionals and 700 HR leaders. 

Unstop, the community engagement and hiring platform for students and graduates, said that 83% of engineering school (E-school) graduates and 46% of business school (B-school) graduates remain without a job or internship offer in its report ‘Unstop Talent Report 2025’. A significant 51% of GenZ professionals seek multiple income streams through freelancing and side hustle, with the number rising to 59% among B-school students. The report also delves into the glaring gender pay gaps. Two in three female arts & science graduates earn below ₹6 LPA, while their male counterparts largely surpass this mark. However, B-schools and E-schools demonstrate pay parity, ensuring fair compensation irrespective of gender.

3. Borders and proximity is what matters on defence spending in Europe.

There is an inverse relationship between the two, with the well-protected south of Europe skimping, and the exposed north-east spending well above the Nato mark of 2 per cent of GDP. What compounds this problem are the respective populations. Portugal, one of the lowest spenders, has more people than all three Baltic states combined. Spain is bigger than Poland.

4. Striking graphics on the rise of solar and wind generation globally since 2017.

China has built more than 120,000 wind turbines, nearly a third of the world total, and 1.5 million acres of utility-scale solar.

5. Africa's poor progress in electrification should count as one of the biggest failures of international development. 

Nearly half the continent's 1.2 billion people are without electricity.

6. The history of free speech shows that it's a more recent phenomenon.

For millennia, people thought differently about words, actions and liberty. Instead of valuing liberty of expression, their main preoccupation was to limit it. Because they were acutely aware of the power of words and the danger of lies, slanders and other kinds of harmful speech, the public policing of such things was a central feature of every premodern society across the globe. “Free” speech, by contrast, was an exceptional mode, which took different forms — divine prophecy, frank advice to a ruler, religious disputation or the exchange of ideas within the scholarly Republic of Letters. Only around 1700 did our modern notion of it, as a general right to speak out on matters of public concern, begin to emerge... 

In 1695, amid political and religious disagreements, the English parliament failed to renew a law mandating the pre-publication licensing of books. The result was an explosion of novel kinds of print, and a growing international fascination with “liberty of the press” as an engine of enlightenment. The two competing models of free speech that we’ve inherited were created in this new media world. The first approach contrasted press “liberty” (which was beneficial) with “licentiousness” (which was harmful) — responsible vs irresponsible speech, rights vs duties. That balancing attitude remains, globally, the norm... The alternative, absolutist model of free speech was invented in London in 1721 by two partisan journalists, John Trenchard and Thomas Gordon. As I discovered, they were mainly writing to defend their own corrupt practices, and their theory was full of holes. Nonetheless, the slogans of their hit column, “Cato’s Letters”, which proclaimed that free speech was the foundation of all liberty and should never be curtailed, were soon taken up across the world, including by the rebel colonists of North America, who enshrined its clumsy formulations in their First Amendment — “Congress shall make no law . . . abridging the freedom of speech, or of the press”. No ifs, buts or qualifications. 

In no other country have speech laws ever taken that absolutist form. The subsequent history of American attitudes is full of unappreciated ironies. Even before the First Amendment was ratified in 1791, Americans abandoned its approach in favour of the balancing model popularised by the 1789 French Declaration of the Rights of Man. Until the 1910s the First Amendment remained a dead letter; it was only the radical, now forgotten arguments of US socialists and communists that subsequently resurrected it. Early theorists of free speech mainly conceived of it in terms of public opinion, assuming that liberty of expression would eventually lead to consensus about everything...

But from the 1960s, as part of the cold war backlash against collectivist ideologies, interpretation of the First Amendment swung instead towards its current, libertarian outlook. This produced an American jurisprudence obsessed with clear and abstract rules — which was gradually achieved by ignoring libel, falsehood, civic harm, the responsibilities of the media and all the most difficult problems of how communication actually works in the world. Its simple, anti-governmental interpretation has also been increasingly hijacked to invalidate laws regulating businesses, restricting money in politics or otherwise attempting to uphold the common good. Legally, corporations are persons, and the First Amendment trumps everything.

The author makes an important distinction between free speech and its amplification.

It is a mistake, when grappling with freedom of expression, to focus too much on speakers. Especially in our age of 24/7 viral media, the critical issue is not speech per se but the responsibility for its amplification. It’s entirely reasonable to require the private media (whether printed, broadcast or online) through which most “public” speech is actually circulated and consumed to be transparent in their practices, and accountable to the society in which they operate. That means at a safe distance from direct governmental control, but more than just the fig leaf of “self-regulation”.

7. A frontline of the new Cold War, in central Africa.

Zambia and Tanzania are negotiating with a consortium led by the state-owned China Civil Engineering Construction Corporation for a $1bn concession to rehabilitate and run the iconic... Tazara railway that links copper-rich, landlocked Zambia to Tanzania on Africa’s east coast... reviving the strategic export route to Beijing... Tazara showcases an attempt to use more equity investment by Chinese state companies after Beijing’s Belt and Road Initiative was marred by defaults in borrower countries, including Zambia... Started in 1970, the Tazara railway was designed to help copper-rich Zambia access overseas markets after white-controlled neighbouring Rhodesia, today Zimbabwe, shut its borders in opposition to the country gaining independence from Britain... 

Under Mao, Beijing forked out Rmb1bn in interest-free loans to build the Tazara, with thousands of Chinese labourers working alongside locals. At its peak, it ferried more than 1mn tonnes of copper, consumer goods and passengers annually. “The Tazara to this day is still the biggest Chinese aid project implemented in Africa,” said Tim Zajontz, a lecturer at the University of Freiburg. “It continues to be a symbol of the Chinese-African all-weather friendship, as many officials on both sides often refer to  it”...A rival US-backed project is under way to upgrade the colonial-era Lobito Corridor and ferry Zambia’s resources westward through Angola instead. Agreed under former president Joe Biden through the US International Development Finance Corporation, Washington is lending $553mn to the railway in a model that brought in private investors such as Trafigura and Mota-Engil.

8. While the tech stocks and US stock markets appear to be in a bubble, there are historical precedents. The US has been the leader throughout most of the last century, except a brief interregnum when Japan took over.

Big Tech's 37.4% of the market capitalisation in 2025 pales before the 62.8% capitalisation of Railways in 1900. 

9. Starlink and Space X are now the most valuable assets for Musk.

Roughly half of Musk’s $314bn net worth is now tied to SpaceX — which was valued at $350bn in a recent private tender offer — while his 20 per cent stake in Tesla has dwindled to $100bn. Morgan Stanley estimates Starlink will generate $16.3bn in revenue this year, up 74 per cent from an estimated $9.3bn in 2024, with subscribers almost doubling to 7.8mn from 4.65mn, according to a January report. By comparison, SpaceX’s rocket launch business is forecast to make $5.8bn in 2025 revenue, up 20 per cent from $4.9bn last year... Starlink has said its more than 7,000 low-orbit satellites provide service to 118 countries and territories, with Niger the latest to be connected last week... It has won contracts with major airlines including state-backed carriers Qatar Airways and Air France, shipping groups including MSC and Maersk, and cruise operators Cunard and Carnival. About a quarter of the company’s revenues come from government contracts, however. According to US filings, SpaceX has already secured 39 different Starlink contracts across the US government worth around $3.5bn, including multiple military contracts with the Department of Defense.

10. Even as he takes the chainsaw to the US federal government, it emerges that Elon Musk's companies have received $38 bn in government contracts, loans, subsidies, and tax credits in the US over 20 years, with nearly two-thirds coming in the last five years. 

“Not every entrepreneur at this scale has been this dependent on federal money — certainly not Nvidia, not Microsoft, nor Amazon, nor Meta,” said Jeffrey Sonnenfeld, professor at the Yale School of Management, who noted that much of the funding has come during Democratic administrations. “With DOGE, there does seem to be a paradox there. He has been a big beneficiary of national industrial policy, especially Democrat industrial policy, through government funding.” Government funding also provided key early infusions to Musk’s ventures. NASA and the Defense Department nurtured SpaceX in its earliest years with contracts that helped it build infrastructure, while the agency tolerated the company’s failure to meet required milestones on time, according to congressional investigators. The $465 million Energy Department loan, which arrived in 2010, helped fuel Tesla’s meteoric rise: With that money, the company engineered and assembled its luxury electric sedan — the Model S — and bought a factory in Fremont, California, according to the agency. Tesla went public six months later... Since its 2003 Silicon Valley founding, Tesla has benefited from billions in rebates and tax credits from California. The state’s governor, Gavin Newsom (D), has claimed that “there was no Tesla without California’s regulatory bodies, and regulation.”... About a third of Tesla’s $35 billion in profits since 2014 has come from selling federal and state regulatory credits to other automakers... Tesla is the largest seller of these credits to automakers that don’t meet the standards and want to avoid paying a fine.

And that of Space X

11. Big Tech and job creation graphic of the day, Nvidia edition. (HT: Adam Tooze).

Even as its revenues doubled in 2024 from $61 bn to $130 bn, its headcount went up by just 20%!

12. The rise of Chinese e-commerce giants, Shein and Temu, has become a lightning rod for the backlash against cheap imports. President Trump ordered a halt in February to the so-called de minimis shipments, duty-free entry without inspections of parcels worth up to $800. 

The number of duty-free shipments to the United States has risen more than tenfold since 2016, to four million parcels per day last year. Similar shipments to the European Union have climbed even faster, reaching 12 million parcels a day last year. Duty-free shipments to developing countries like Thailand and South Africa have also surged… Last summer, South Africa imposed 45 percent tariffs on even the smallest imports of clothing. Thailand ended its exemption of low-value imported parcels from sales taxes, although it continues to allow tariff-free entry of parcels up to 1,500 Thai baht ($44). And the European Commission, the executive arm of the European Union, proposed this month to end the 27-nation bloc’s duty-free treatment of packages worth up to 150 euros ($156)…

Guangzhou has emerged as the global hub of de minimis shipments… Shein and Temu, competing Chinese e-commerce giants that together hold at least a third of the de minimis industry, coordinate much of their supply chains from large offices in Guangzhou… Yiwu, a city 600 miles northeast of Guangzhou with a vast wholesale market, has become another hub. It coordinates de minimis exports of toys, hats and other small items from towns scattered across the Yangtze River delta.

13. Mihir Sharma hits the nail on its head in his diagnosis of the ongoing trade wars

The fundamental flaw at the heart of how international trade in the era of the World Trade Organization (WTO) functions is the polite assumption that all economies are similarly structured. In other words, that costs, subsidies, and protections are transparent. Unfortunately, the biggest trading power in the world does not meet these criteria. If the People’s Republic of China violates this assumption, then the entire trading system is built on a lie. It is to this baseline problem that US actions, and those of others from the European Union to India, are responding. China’s accession to the WTO was premised on the assumption that its economy was, or eventually would be, comparable to the market economies that designed the system. The fact that it was not then; nor has it tried hard enough since to become one. As a consequence, it has built up imbalances domestically — and, thanks to its sheer size, those imbalances have expanded and mutated till they cover the entire world...

Hidden subsidies to power, land, and capital mean that competing with Chinese manufacturing has become very difficult for more transparently-run economies. By some estimates, China has the lowest average electricity price for industrial users among major economies. It is about 60 per cent of the equivalent in India, and about a quarter that of Germany’s. Meanwhile, it has increased and is still increasing the use of targeted tax subsidies in export-oriented sectors such as electric cars, batteries, and solar panels. There is no recourse within the WTO system for China’s trading partners if they want to correct this issue. It is not entirely surprising that both parties in the US have lost faith in WTO dispute settlement.

14. Africa's India rice dependency

Africa is typically a large market for broken rice — accounting for more than 80 per cent of India’s exports over 2018-20, according to data from the International Food Policy Research Institute. In 2022, Indian rice accounted for more than 60 per cent of rice imports for 17 African countries and more than 80 per cent in nine, including Somalia.

15. Trump bump has raised the flagging prospects of political leaders in many allied countries. 

16. In so far as it brought together the Bannonite nationalists, the MAGA populists, and plutocrats under one umbrella, the Trump coalition was one of opportunism. And its internal contradictions are now starting to show on the back of the DoGE cuts on welfare spending and associated departments. 

Over the next few months, he will have to find a way to balance the interests of both the fiscal hawks and billionaire allies, who want to radically downsize the federal government, and his working-class Maga base, which has become heavily reliant on government support... a growing section of voters has come to rely on government transfers, the result of an ageing society and rising inequality. These include Medicaid for poorer families and Medicare and Social Security for retirees. In 2000, according to the Economic Innovation Group, a think-tank, just 10.4 per cent of counties in the US derived a quarter or more of their total personal income from transfers. But by 2022, that had risen to 53 per cent of counties in the US. Many of those counties are in the sort of rural areas where Trump is hugely popular. 

“As much as Republicans like to rail against big government, [their voters are] often its biggest beneficiaries,” says John Mark Hansen, professor of political science at the University of Chicago. Or as Steve Bannon, one of the architects of Trump’s initial rise to power, put it in a recent podcast: “Medicaid’s going to be a complicated one . . . a lot of Maga’s on Medicaid.”... Income from government transfers was the fastest-growing major component of Americans’ personal income, according to the EIG report last year. It said they made up 18 per cent of all personal income in the US in 2022 — a total of $3.8tn — with the share more than doubling since 1970. Transfers, which include state pensions and state health insurance, as well as veterans’ benefits, food stamps, unemployment insurance and other benefits, were now the third largest source of Americans’ personal income, after income from work and investments, EIG said. The main driver of this trend, EIG said, was the ageing of the US population. Because the largest transfer programmes — Social Security and Medicare — are aimed at people of retirement age, transfer payments expand as the elderly population grows... 

The trend is not confined to a few poor pockets of the country. The report says that “most US counties depend on a level of government transfer income that was once reserved only for the most distressed places”. It said the transfer share runs highest in parts of the country that are “rural, old and poor”. Some of these, Appalachia and the rural South, are firmly Republican... A report by the Center for Children and Families at Georgetown University in January found that there are 15 states where at least one-fifth or more of non-elderly adults in small towns and rural areas are covered by Medicaid. Of these, eight voted for Trump in November.

Weekend reading links

1. On mangoes

India is the world’s biggest mango producer, with volumes greater than the next nine growers combined, according to Tridge, a data firm. Yet its share of the global export market by value is a meagre 7%. Mexico, which produces a tenth as much as India, accounts for a quarter. The reasons are many, writes Sopan Joshi in “Mangifera Indica”, a new book about mangoes. Chief among them are the delicate nature of the fruit, poor growing practices in India and strict standards in Western markets.

2. Interesting fact about the state where US companies are getting incorporated, Delaware stands out with over 70%.

3. Data does not bear out signatures of deglobalisation.

4. Some facts about Big Tech 

Since early 2019 the combined worth of the tech giants (Microsoft, Google, Amazon, Meta, and Apple) has more than tripled, to $11.8trn. Add in Nvidia, the only other American firm valued in the trillions, thanks to its pivotal role in generative artificial intelligence (ai), and they fetch more than one and a half times the value of America’s next 25 firms put together. That includes big oil (ExxonMobil and Chevron), big pharma (Eli Lilly and Johnson & Johnson), big finance (Berkshire Hathaway and JPMorgan Chase) and big retail (Walmart). In other words, while the tech illuminati have grown bigger and more powerful, the rest lag ever further behind...

Since 2019 the five tech giants and Nvidia have doubled their capital expenditures, to $169bn last year. Tot up the 25 next firms’ capex and it was just $135bn—up only 35%. As for brain power, over the same period, the big six added 1m jobs, doubling their headcount. No one can accuse them of resting on their laurels. They have invested in ai startups, ploughed fortunes into building large language models and, in Meta’s case, created open-source offerings that almost anyone can use. This year they are doubling down on their ai spending if only to protect their flanks.

5. Striking facts about the importance of immigrants to the US economy.

Immigrants are 14% of the population in America, 16% of inventors and directly produce over 23% of innovation, measured by patents, patent citations and the economic value of those patents, the authors estimate. Taking into account how they make their native-born collaborators more productive, they are responsible for a staggering 36% of total innovation.

6. Law of unintended consequences strikes at the Chinese government ban of tutoring centres for the gaokao entrance examinations.

Researchers at Peking University... analysed surveys of household spending before and after the tutoring ban and found that low- and middle-income families were, on average, spending less on after-school education. The richest families, though, were spending more. Tutors were still active. But because they were acting illegally, they charged more, pricing most people out.

7. Very good summary of the performance of State Bank of India under Mr Dinesh Khara who stepped down as CMD after four years. These are very impressive numbers

Between October 7, 2020 and last week, SBI stock has delivered a 328.36 per cent return to investors, compared to Bank Nifty’s 122 per cent return and Bankex’s 122.9 per cent. During this time, the Nifty returned 111.4 per cent, and the Sensex 103.3 per cent. The largest private bank, HDFC Bank Ltd, saw its stock rise 39.9 per cent, while ICICI Bank Ltd rose 214.6 per cent in this period. For SBI, the return on assets (RoA) moved from 0.43 in September 2020 to 1.10 in June 2024. During this period, return on equity (RoE) increased from 8.94 to 20.98, and earnings per share (EPS) from 19.59 to 76.56... While the bank’s assets have grown over the past three-and-a-half years at a compounded annual growth rate of 10.56 per cent, from Rs 43.58 trillion to Rs 61.91 trillion, its gross non-performing assets (NPAs), as a percentage of total assets, have more than halved, from 4.77 per cent to 2.21 per cent. After provisioning, net NPAs have decreased from 1.23 per cent to 0.57 per cent. Meanwhile, the net interest margin (NIM) — loosely the difference between what it spends on deposits and earns on loans — has risen marginally from 3.31 per cent to 3.35 per cent.

Who said public sector institutions must be inferior also rans compared to their private sector counterparts?

8. Since the pandemic, apart from the Bank of Japan and the Swiss Central Bank, the RBI has undertaken the least number of interest rate changes. 

It's also one of the very few that have not yet moved on reducing rates. 

9. Ruchir Sharma talks about a return of emerging market economies in the coming years. For a start, corporate earnings are growing faster in EMs than elsewhere.

This means that we could see a reversion of the trend since 2010.

10. Some numbers to put in perspective why the US equity markets stand alone globally. 

At the beginning of the 20th century, the US accounted for about 15 per cent of world market capitalisation, second only to the UK, which was at 24 per cent. By 1910, the US had crossed the UK to become the largest equity market in the world. It has since retained this title, unchallenged except for a brief period in the late 1980s when Japan held the top position. Japan peaked in 1989 at 40 per cent of world market capitalisation, while the US was second at 29 per cent. Today, the US remains unchallenged, accounting for more than 62 per cent of world market capitalisation. The next largest market is Japan at 6 per cent, followed by the UK at 3.7 per cent, and China at 2.8 per cent (all based on the FT World Index and free float adjusted). Just 12 markets, including India, account for 90 per cent of world equity market capitalisation. Looking at the longest available data series on equity market performance (1900-2023), spanning 124 years, we see that the US has delivered the best real returns, with an annualised rate of 6.5 per cent. The only market even close is Australia at 6.45 per cent in dollar terms, though there is no comparison in terms of size or absolute market capitalisation created. The UK has delivered 4.9 per cent real return, while Germany and France lag with return profiles of only 3.3 per cent and 3.16 per cent, respectively. Japan delivered 4.2 per cent (all in dollar terms). Compared to the 6.5 per cent real return of the US, the world ex-US, delivered 4.3 per cent, a gap of 2.2 percentage points compounded over 124 years. This leads to huge differences in terminal value. The US has undoubtedly been the right place to invest. If an investor had been exclusively invested in the US for the entire 124 years, their return would have turned one dollar into $2,443 in real terms. The same dollar invested in non-US markets would have grown to only $191, not even one-tenth of the US investment portfolio.

And about India

Over this 30-year period (ending July 30, 2024), MSCI India has delivered a nominal annualised return of 8.65 per cent in dollar terms, compared to 5.3 per cent for MSCI.

11. FT has a nice report from Panyu, a suburb in the southern Chinese city of Guangzhou, which is nicknamed the "Shein village" for its centrality in the retailer's business. The $66 bn valued firm, due for listing at the London Stock Exchange, has shaken up fast fashion with its $5 dresses and $2 T-shirts. 

The article captures the reasons for Shein's competitive advantage.

But going to the heartland of Shein’s supply chain, it was clear that its low prices are in spite of, not because of labour costs, which have been rising in China as the working-age population shrinks and young migrant workers shun factory jobs for the lower-paid service sector. Factory workers that source to Shein typically get paid between Rmb7,000 ($982) and Rmb12,000 monthly, depending on how many clothes they finish. By contrast, the average wage for other blue-collar workers in the area is between Rmb5,500 and Rmb6,500. Part of the reason the clothes are cheap is, well, because they are cheap. One factory manager held up a baggy dress — probably destined for the US or UK — and joked that she would never sell such low-quality clothes to a more discerning Chinese clientele. She says she uses cheaper fabrics for Shein orders than for Alibaba’s Taobao, because the domestic platform gives more money to the factories to cover their costs. 

Shein has also cut out expensive middlemen by shipping goods directly from warehouses in China to shoppers in the west — a model that has the added benefit of the great majority of its packages bypassing import duties. Panyu highlights the attraction of Chinese manufacturing. Like other manufacturing hubs specialising in anything from socks to sex toys to steel pans, it has the entire supply chain concentrated in one district. That means factories can within half an hour place an order, take delivery of fabric or get an engineer to fix sewing machines with components made nearby... China’s migrant worker population also brings it an edge. While in Vietnam and Bangladesh workers tend to return home to their families at night, the labourers in Panyu sleep in nearby dormitories, cutting down commuting time and meaning they can work longer hours if a large order arrives.

12.  Good graphic that shows how the markets over-react to economic news.

Robert Armstorng writes in Unhedged in FT.

Here is the futures market’s expectations for what the federal funds rate will be in December 2024, as well as the Fed’s projections from its quarterly summary of economic projections (the last SEP was released in early June)... One cannot help but notice the pattern of overreaction and correction on the market side. It’s like a car on an icy road. There is a whole sub-industry — Unhedged is part of it — that spends its time arguing about why the Fed is too loose or too tight. But in retrospect we probably overstate the importance of the current and expected level of rates. What matters is keeping expectations anchored on the one hand, and avoiding an unnecessary recession on the other.

13. BCG and Angola

BCG has admitted it paid millions of dollars in bribes to win business in Angola, and agreed to give up more than $14mn in profits from contracts it won with the country’s economy ministry and central bank. The consulting firm sent money to offshore accounts controlled by middlemen connected to Angolan officials and members of the ruling political party, according to a US Department of Justice investigation made public on Wednesday. The bribes were paid by BCG through its office in Lisbon, Portugal, between about 2011 and 2017, the DoJ said... BCG agreed to pay an agent with ties to Angolan officials between 20 per cent and 35 per cent of the value of the contracts it won, routing the money through three different offshore entities, the DoJ said... The period of the bribes coincided with the end of the rule of the late José Eduardo dos Santos, who stepped down in 2017 after 38 years in power... In total, BCG won 11 contracts with the Angolan ministry of economy and one with the National Bank of Angola over the years in question, bringing in $22.5mn in revenue. The firm will return the $14.4mn in profits that the contracts generated.

14. But KPMG and UK validates the adage that the more things change, more they remain the same

KPMG has won a UK government contract worth up to £223mn to train civil servants, the second-largest public sector contract awarded to the Big Four firm and agreed before the Treasury set out plans to drastically reduce Whitehall’s reliance on external consultants last month. Under the 14-month deal with the Cabinet Office, which commenced this month, the consulting firm will manage learning and development services across Whitehall, including overseeing courses on policymaking, communications and career development. The maximum value of the contract represents close to 8 per cent of KPMG’s annual UK revenues, making it the second-biggest public sector contract awarded to the firm, according to data provider Tussell. The most valuable piece of public sector work awarded to KPMG was a separate learning and development deal with the Cabinet Office worth £237mn, Tussell said. That four-year contract, which expires in October, involves the firm overseeing technical training for civil servants, such as professional qualifications. The lucrative contracts demonstrate a return to positive relations between the government and KPMG. The Big Four firm stopped bidding for UK government contracts in 2021 following a threat by the Cabinet Office to ban it from winning public sector work after its involvement in a series of scandals. It resumed bidding for public sector contracts in 2022. They also come as the Labour government has committed to halving Whitehall spending on consulting firms during this parliament, with chancellor Rachel Reeves last month ordering departments to stop all “non-essential spending” on external consultants. A government spokesperson said the KPMG contract was agreed before July’s general election. The Conservative party also pledged to halve Whitehall spending on external advisory firms in its election manifesto. The Treasury estimated in July that reducing the government’s reliance on advisory groups would save £550mn in the 2024-25 financial year and a further £680mn in 2025-26, when the policy to halve total spending on consultants came into force. The savings would, in part, help fund significant public sector pay rises, the chancellor said.

15. Very good article on how Nvidia is working to protect its domination of the high-end chips design market. 

The key issue is when the main focus in AI moves from training the large “foundation” models that underpin modern AI systems, to putting those models into widespread use in the applications used by large numbers of consumers and businesses. With their ability to handle multiple computations in parallel, Nvidia’s powerful graphical processing units, or GPUs, have maintained their dominance of data-intensive AI training. By contrast, running queries against these AI models — known as inference — is a less demanding activity that could provide an opening for makers of less powerful — and cheaper — chips... Nvidia’s lead in this newer market already looks formidable. Announcing its latest earnings on Thursday, it said more than 40 per cent of its data centre sales over the past 12 months were already tied to inference, accounting for more than $33bn in revenue... But how the inference market will develop from here is uncertain. Two questions will determine the outcome: whether the AI business continues to be dominated by a race to build ever larger AI models, and where most of the inference will take place. Nvidia’s fortunes have been heavily tied to the race for scale... Yet it is not clear whether ever-larger models will continue to dominate the market, or whether these will eventually hit a point of diminishing returns. At the same time, smaller models that promise many of the same benefits, as well as less capable models designed for narrower tasks, are already coming into vogue. 

Meta, for instance, recently claimed that its new Llama 3.1 could match the performance of the advanced models such as OpenAI’s GPT-4, despite being far smaller. Improved training techniques, often relying on larger amounts of high-quality data, have helped. Once trained, the biggest models can also be “distilled” in smaller versions. Such developments promise to bring more of the work of AI inference to smaller, or “edge”, data centres, and on to smartphones and PCs... The range of competitors with an eye on this nascent market has been growing rapidly... The data centre market, meanwhile, has attracted a wide array of would-be competitors, from start-ups like Cerebras and Groq to tech giants like Meta and Amazon, which have developed their own inference chips. It is inevitable that Nvidia will lose market share as AI inference moves to devices where it does not yet have a presence, and to the data centres of cloud companies that favour in-house chip designs. But to defend its turf, it is leaning heavily on the software strategy that has long acted as a moat around its hardware, with tools that make it easier for developers to put its chips to use.

16. Finally, Japanese startup scene is finally waking up after long drawn persistent efforts by the Government.  

The ambitions are charged with the faith that start-ups can drive GDP growth and productivity, rescue the country from a long-term innovative tailspin and channel its talent in the right — or at least less wrong — direction. It has a belated, even desperate feel to it, but start-ups now seem to be Japan’s core industrial policy. The extent of both central and local government backing is striking. In addition to the many subsidies now on offer, state-backed entities like the Japan External Trade Organization have been drafted into the effort by providing acceleration programmes and other services. The government-backed Japan Investment Corporation has invested close to $1bn into 32 private venture capital funds. Under heavy government pressure, Japan’s three biggest banks have recently begun offering start-ups loans backed against current and future cash flow, breaking their long, entrepreneurialism-crushing habit of only lending against hard collateral such as the property of a would-be start-up founder. By many metrics, all this is working. In 2013, said the Ministry of Economy, Trade and Industry in a recent paper, the total investment into start-ups in Japan was a minuscule $600mn; a decade later, that had risen to over $6bn. Between 2014 and 2023, the number of university start-ups more than doubled to 4,288, with METI research showing that roughly half of university students would prefer to start their careers at one.