💥 The International Chip War

^{“Price is what you pay. Value is what you get.”}

— Warren Buffett

👋 Friends, Rallie here. The newsletter coming in with the latest in crypto, finance, and tech.

On the menu:

• 💥 The International Chip War

• 🗞️ Headlines That Hit

• 📈 Refresh: P/E Ratio

• ✌️ Trivia Thursday

• 💯 Top Tweets

The Rallie Recap

💻 Why are nations having international fights with each other over chips? And how are some trying to take advantage of the conflict… Here’s what you should know:

• Why are these chips so important? 🤖 The specific types of technology that is being fought over are memory chips, which make up over 25% of the semiconductor industry, and semiconductor chips. Both are mostly in all cutting-edge AI applications.

• Additionally, they are critical for national and economic security with most tech requiring increasingly data intensive bandwidths for current and next-gen infrastructure. 🛤️

• 👀 If nations and businesses want to be key players in these industries projected to reach trillions, they need to play the game.

🌎 The main nations involved:

• 🇺🇸 The United States

• 🇨🇳 China

• 🇰🇷 South Korea

• 🇯🇵 Japan

  • 🤺 U.S. v. China. In 2022, the American government banned Chinese companies from acquiring the tools needed to make advanced computers chips and their access to specific chips used for supercomputers and AI algorithms.

  • But, the restrictions set on China and its companies have escalated. ⛔ The White House may ban the export of nearly all advanced AI chips made by U.S. firms, including Intel and Nvidia, to China. 

  • Netherlands also announced new export restrictions on chip-making machines to China. 🇳🇱 ASML, a Dutch company, is targeted because of its international monopoly on advanced chip making machines.

  • ⛏ China’s retaliation. Starting August 1, China will restrict metals vital to chipmaking (gallium and germanium), resources which the country dominates in its production. A big move that impacts dozens of international industries reliant on these resources.

  • 🤨 The public’s reactions are mixed, some sparked further frustration, regional pride and even hate.

• 🏁 So, how are South Korea and Japan joining the ring?

  • With South Korea’s domestic firms, Samsung and SK Hynix holding ~70% of the memory chip market share while the U.S. and China fight it out, the nation could get a head start in the AI chip race.

  • With more of South Korea’s companies boasting the same or better performance than competitors such as Nvidia, and a $630M USD investment from the country through 2030 for the development of high-end chips. 💪

  • 🤝 Meanwhile, a Japanese company, JSR, with a ~30% global market share in photoresists, chemicals critical for circuit designs on chip wafers, has accepted a $6.4B USD buyout offer from the Japan Investment Corporation (JIC), a fund under close supervision of Japan’s Ministry of Economy, Trade, and Industry.

  • Additionally, Japan has aligned itself with the U.S. by imposing restrictions on certain semiconductor manufacturing equipment to hinder China’s chip production.

  • So, these nations are not to be overlooked. 🧐

• 📣 Everyday, more information is coming out about this massive international battle that will affect you. Who will come out on top? Keep up with The Weekly Rallie!

Headlines That Hit

• ⚔️ Twitter watch out! Meta’s new app, Threads, aimed to compete with Twitter went live today and passed 30M signups!

• 💸 Behind on taxes? The company that owns the Toronto Maple Leafs and the Toronto Raptors has an unpaid $1.18M tax bill dating back to 2019.

• 🇨🇦 Ad beef. The Canadian government plans to stop advertising on Facebook and Instagram in response to Meta’s plans to no longer link to Canadian news sites in the near future.

• 💼 The U.S. advantage? Research shows union workers across the U.S. have more hope than ever before, with a tight labour market highlighting the value of employees in negotiations. Is Canada following the trend?

• 📱Phones away! Netherlands and Finland announces a phone ban in schools to prevent disruptions.

• ⛟ 340,000 workers at play. UPS and Teamsters Union struggle to find compromise, will a strike put a min. of 20 million packages at risk?

Rallie Refresh: P/E Ratio

🤔 Hate it or love it, this metric has a mixed bag of support. Here’s how you can use this ratio:

 🧮 What is a P/E Ratio?

• A price/earnings ratio looks at the price of a share compared to its earnings/market value to analyze the attractiveness of a potential investment.

• The measurement factors into why some stocks are considered “steals” when a company’s earnings come out in comparison to its low price per stock.

• There are different types of P/E ratios. Today, we will talk about trailing P/E and forward P/E.

👩🏻‍💻 What are trailing and forward P/E?

• 🗂️ Trailing P/E gets its metric through the current share price divided by the total earnings per share (EPS) for the past year.

• Forward P/E follows the same steps with the exception of the prediction of the EPS being over a certain timeframe instead of using historical data. 🔭

• How much faith you can put in the past and predictions with your money?

😳 To trust or not to trust?

• 🏢 When looking at this ratio, it is recommended to compare it within its specific industry to see if the metric is telling more about the sector’s environment rather than the stock.

• Economic booms can create false hope for stocks, so DYOR on investments with high P/E ratios in these booming periods. 🚀

• 📉 Low P/E ratios can be worrying too, with stocks that have a decrease in their prestige or relevance, do not put too much faith in companies’ history to drive up its price and earnings for the future.

• However, they can be valuable forms of data about a company and/or industry when you are conscious of some of its pitfalls.

👍 Remember to not trust just one measurement when making financial choices, even if it is what is making headlines, DYOR and trust your knowledge.

✌️Trivia Thursday✌️

😲 The answer for Tuesday’s newsletter (which Hollywood movie covers short selling?) is The Big Short! Tune in next time for today’s fun fact answer.

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DISCLAIMER: This is not financial or legal advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions.