US-China Tech Race Faces New Strains

Watch US-China Tech Race Faces New Strains - Bloomberg on Dailymotion

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00:00As you track trade right now, I'd like you to answer, does software actually play any role in

00:05any of this negotiation? Yeah, you know, I think it plays a really significant role in this

00:09negotiation, right? Because as we talk about AI and the importance of really being a leader

00:14in this space, we know that the US right now outspends China on a ratio about five to one.

00:20But of course, there's a lot of accusations around distillation. And when we zone out from

00:26an economist's point of view, it becomes a lot less about what's the marginal cost to China to

00:31produce a model and more about are we doing what we can to protect US innovation? And it's really key

00:38that we get this right because this is an industry that's estimated to translate into trillions of

00:44dollars in global GDP over the next decade. So when we think about the actual US names that get caught

00:50up in this, analysts have pointed to Cadence Design Systems, Desso Systems, Synopsis, as well as being

00:55companies that might be limited in their ability to export to China. But more broadly, what is the

01:00biggest element that US can bring to bear? It still seems to be semiconductor. It still seems to be

01:06the IP when it comes to GPU and compute. Yeah, I would absolutely agree with that. You know, our power is

01:13really an intellectual property. We've shown a lot of resiliency there, a lot of leadership there.

01:18That's our key metric for as we move forward, what we bring to the table. Absolutely. And we'll have to

01:24sort of continue to lean into that and really have these conversations around policy to continue to

01:28lead in that space. Right now, are you seeing any data, primary data or secondary data from any

01:38economy around the world that tariffs in the technology context or export controls are damaging

01:45any industries that we're talking about here? It's actually been really incredible. Tech has shown

01:51an amazing resiliency. Our global economy has shown an amazing resiliency when we talk about the effect

01:57of tariffs, right? And where we would anticipate to see it when we talk about especially these

02:02relations with China, we would anticipate it to see in consumer electronics. Now, the story of 2025

02:09so far, and I wouldn't just say this for the US, but globally, has really been this idea of delayed

02:14pass-through effects. Now, as we get into the later half of 2025 into 2026, very likely that it's going

02:21to not continue in that way, expect inflation to be persistent, really moderately accelerate as we go

02:28into 2026. So there will be an impact. We're talking about the environment and some of it is about

02:32headwinds and risk. But actually, when I think about where your research is at, you're looking at M&A,

02:39you're looking at investment flows, deals are getting done, at least the infrastructure-wise

02:44in this country. That's all quite positive. Yes, absolutely. I mean, in many ways, the tech sector

02:50has acted as a macroeconomic stabilizer for greater economic growth, and it's been fascinating to see.

02:56What's also been fascinating is how we discern where we protect talent or not. Look, there's been a lot

03:04of focus on H-1B visas. There's been a lot of focus on trying to make the US more self-sufficient with

03:12its own people. But should we be looking more broadly at who the AI talent is in some of these

03:17big tech companies and where they're coming from, from a national security and, indeed,

03:20an economic perspective, Natalie? Yeah, I mean, it is such a fair question, right? When we take a step

03:26back, we see that overall the labor market has softened meaningfully. But when we talk about the

03:32specific talent around AI and machine learning, we see a lot of labor market tightness, meaning

03:39there's so much demand. So as we talk about H-1B visas and the overall impact, it is very likely that

03:44the demand is absolutely there for AI investment to necessitate global talent in this space.