New Cold War, New Risks: Why AI Stocks Might Be Overlooking Geopolitics

During their latest episode of the VALUE: After Hours Podcast, Tobias Carlisle and Jonathan Treussard discussed New Cold War, New Risks: Why AI Stocks Might Be Overlooking Geopolitics. Here’s an excerpt from the episode:

Jonathan: Yeah. And I’m like, “No, all we know is what’s happened.” I guess my point to you is, if you think about what’s going on here with US capital markets, and I’m just going to start with the AI stocks. I think there’s this huge thing– Yes, there’s the excitement, the frothiness, the bubble mentality of AI is the future, and I’ll pay anything for this damn thing. But I think there’s something more fundamental going on here, which is, AI, one, still very much feels like a non-fundamental human need. So, if things go really badly from an economic standpoint, my guess is we’ll choose food over computer chips.

There is the other part of it, which is, who’s going to be buying the computer chips? Well, my suspicion is we have a pretty high appetite for them. And by we, I mean the US and the West, call it. But we know that a huge amount of the demand for them is going to be coming from China. By the way, again, this is the stuff I don’t know. But I wouldn’t be surprised if some of the prices we’re seeing today are reflective of some premium for getting these chips into China. But what happens if we really get divorced from China, and all of a sudden, Nvidia, which thought had a truly global market really doesn’t.

And so, the point is I think, if you’re the shareholder in one of these companies that is squarely at the intersection of the new Cold War dynamics, every day that the rug isn’t totally pulled out from under you is a good day, and you require compensation for that. So, it’s a very long way around the block to say, “I don’t know that we’re in a bubble, but I think we’re living in a world that we haven’t lived in a very long time,” which is one in which there are these massive risks, cracks, whatever you want to call them, under our feet. Every day that we get to skip over these things, we just cheer on and get compensated. But all it’ll take is for us to trip or fall through one of the cracks, and all of a sudden, that massive compensation you’ve gotten for unrealized risk won’t look all that great. So, that’s the way I think about.

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