Asia in the AI Money Machine

Watch Asia in the AI Money Machine - Bloomberg on Dailymotion

Transcript

00:00We're thoughtful, along with OpenAI, thoughtful in aligning on and taking into consideration

00:08visibility of demand and their financing capabilities. And so I think the ambition's

00:17large, but the execution is disciplined. As tech firms ramp up spending on advanced

00:22chips and data centers, concerns are mounting that the AI boom is being propped up by a wave

00:28of circular deals. At the center of it all is NVIDIA, the company often described as selling

00:34the shovels in today's AI gold rush as it strikes mega deals to invest in the very companies

00:40that buy its products. With capital flowing into companies that have yet to turn a profit,

00:45cycling back into data centers and ultimately returning to NVIDIA as revenue from their chips,

00:51trillions of dollars are rapidly being spent on technology that remains somewhat unproven

00:56as a business model. If we're not going to find $2 trillion of revenue to justify

01:01the AI revolution, which I think is impossible by 2030, the likelihood is we're going to have

01:08a significant correction. Many of Asia's largest tech firms are exposed to the AI boom as they play

01:14a critical role in the global supply chain. SoftBank is positioned primarily as a financier,

01:20with active investments like OpenAI feeding into its profits. Its stakes in chip companies also

01:26provide real cash income. In November, the Japanese conglomerate revealed it had sold off its entire

01:33stake in NVIDIA for $5.8 billion to bankroll founder Masayoshi Son's AI ambitions. This has amplified

01:41market anxiety over an industry bubble. Meanwhile, South Korean heavyweight Samsung Electronics and SK

01:48Hynix have seen margins rising on a commodity that NVIDIA's GPUs can't function without,

01:54high bandwidth memory chips or HPMs. Bloomberg Economics sees demand for Korean chips surging

02:00by 45% next year, almost twice the current clip. If you are in the player, then I don't really see

02:07that there was that much bubble. There's a lot of potential. NTSMC's results are often seen as an

02:12impartial barometer for the real demand underneath the hype. It's the go-to chipmaker for NVIDIA and

02:18its competitors AMD and Qualcomm. In October, when TSMC posted its slowest monthly revenue growth in

02:25more than a year, it fueled fears that the AI rally itself had become unhinged from fundamentals.

02:31Relative valuations of Asian markets suggest that companies in this region are generally more

02:36protected by real earnings expectations compared with U.S. counterparts. As we get forward into this

02:42bubble-like period, it becomes an even more difficult question as a capital allocator in terms of whether

02:47you continue to shovel cash into this potential inferno. And while some skeptics continue to warn of

02:53an overdue correction, others remain confident in AI's long-term potential. The bubble is merely that

03:01it's gotten ahead of itself, not the likelihood of growth in the future. Okay, not saying it's worth

03:07its price, but there's absolute substance under the foam. Sherry on Bloomberg, Tokyo.