Dana Blankenhorn

Sell Nvidia, Buy Amazon

These are heady days for Nvidia, and profitable ones for my retirement account.

I bought 100 shares of Nvidia about 5 years ago, which soon turned into 300. I sold one-third of them to get my money out, but the remaining shares are worth nearly $500 each.

Nvidia is the chief arms merchant to the cloud. Its GPUs are essential to AI applications. More important, so is its software. It’s the Nvidia software stack that keeps chip rivals like AMD and Intel from gaining traction.

I also own stock in Amazon.Com If you’re into AI, Amazon.com is the better opportunity.

While Nvidia is at the front-end of AI, Amazon is at the back end of it. It’s Amazon that will reap AI’s rewards, in its supply chain, in its warehouse operations, and in its media business. Imagine if you could speak to Alexa casually and get real answers.

Amazon’s AWS cloud still has one-third of the market. Its approach in AI is to offer a wide range of tools, rather than insist companies buy any particular one. This makes sense to me.

Can China Be Turned?

A quiet effort is underway to turn China from the path of war back to the path of prosperity.

If it works, it’s the biggest story of the decade.

Secretary of State Antony Blinken got a surprisingly warm reception in Beijing last week. He even got an audience with Xi Jinping, complete with a handshake that shows Xi as an old Chairman Mao.

China’s establishment is torn between two ambitions.

Its military and political establishment want Taiwan back. They’re willing to kill millions of their own people to get it. They see the price being paid for their depredations in Xinjiang and Hong Kong as worthwhile. They want what Japan wanted before World War II – a “Greater East Asia Co-Prosperity Sphere” that can stand as an equal to America’s dominance of Latin America.

China’s business establishment, and its people, want the deal they signed up for 45 years ago. Deng Xiaoping made a compact with his citizens in 1978, capitalist prosperity in exchange for absolutist unity. Westerners read Tiananmen as the destruction of freedom, and China’s efforts to forget it as ignoring the lessons of history. Both are true. But the other side in that exchange, an apartment, a car, and a chance at real wealth, is just as real.

The Most Important Technology in the World

It’s not AI.

AI is software which runs on hardware. Hardware may be software, but it must be manufactured to implement the software.

The makes the most important technology in the world EUV.

Extreme UltraViolet lithography (EUV) uses high frequency ultraviolet light to etch circuits on silicon chips. It’s important because, as circuits grow closer, the wavelengths of visible light become too wide to etch with them.

A Dutch company, ASML, was the first to perfect EUV lithography. Creating a microprocessor with an ASML EUV system isn’t that simple, either. Taiwan Semiconductor was the first processor maker to do it. (Micron will soon start using EUV for memory chips.) Intel is also working on adapting EUV, and their “roadmap” includes EUV chips with line distances measured in Angstroms, one-tenth of a nanometer.

The AI Silly Season

We’re currently in the “silly season” of hype over “Generative AI,” machine learning programs whose output can be text, code, pictures, audio, or video.

There’s a lot of experimentation and there are a ton of bad takes.

Here’s how it’s going to go.

There are two things to know.

First, any software requires training before it becomes useful. Right now programs like ChatGPT are creating garbage. Interesting garbage, but garbage. As people learn how to get value from these tools, however, there will be huge jumps in productivity. The timing and size will differ from industry to industry, and from organization to organization. But it will happen. People will be able to do more, high-quality work in less time. This won’t reduce the need for people. It will give people more things to do.

Run on the Bank

The collapse of Silicon Valley Bank may prove to be a bigger story than it appears.

The reason goes back to a story I ran away from, the 1981 collapse of the Houston oil industry.

I didn’t intend to run away. I finally got a job at a daily in Birmingham, Alabama. It was a job I’d hold only 4 months before being fired. But I left Houston June 1, 1981. The collapse began soon after.

As in this case, the Fed had telegraphed what it was going to do. Paul Volcker was going to raise interest rates until inflation gave up, just as Jerome Powell is doing now. Inflation was much higher than, double digits in fact. Add to that the Reagan Administration jawboning the Saudis for lower oil prices and it was a perfect storm.

That 2002 Feeling

The last tech crash began in 2000 and I was in the center of it, a mid-career writer with a specialty called Internet Commerce.

That year saw denial and bargaining.

The next year saw anger and depression.

It was only in 2002 that acceptance came.

We know what followed. Talented programmers worked on open source projects and standards bodies created what became the Cloud. When proprietary advantage became worthless, and there seemed there was nothing to do, people worked together with technical goals in mind rather than just financial ones.

It was a slow build. In 2002 my gross income was zero dollars. In 2003 it was zero dollars. I got interested in what’s now the Machine Internet, which I christened the World of Always On, and in 2004 I finally made a few dollars. The next year I was asked to cover Open Source, and my career took off. For a time.

I’ve mentioned before how, in every photo of a stock market crash the people in it look similar. Similar age, similar backgrounds. They’re different people. Those who watched the 1987 crash were different from those who saw the 2000 crash, different from those who saw 2008, different from those who saw 2022.

Where Computing Happens

I met my first computer in 1976, in the basement of Herman Brown Hall, on the campus of Rice University in Houston.

The computing happened in a big room, separated from me by a window. I passed a stack of punch cards, tied with a rubber band, through the window. They came back along with my output. Which usually said the program had died on Line 3.

By the time I got out of journalism school, two years later, computing was moving to desktops. A neighbor bought a $20,000 Cromemco machine that could run 3 terminals. She hired friends to work at the terminals, transcribing court records. I think they got 50 cents a page. Computing had come home.

Wintel (1990-2023): Death of a Monopoly

An era ended this week, as the control over technology Microsoft and Intel held with Microsoft Windows and Intel x86 chips crashed and burned.

From the launch of Windows 3.0 in 1990 to this last week, there was an assumption that Wintel, as the two were called, were where computing happened. No more. OEM sales of Windows fell by a third, and so did Intel’s x86 chip sales.

Client computing has moved from your desktop to the palm of your hand. An iPhone or high-end Android device can cost over $1,000 but you don’t need a manual to use them. They’re intuitive. When they fail, you get another, and all your software follows you from the cloud.

Microsoft was ready for this. They became a Cloud Czar during the 2010s, building a huge network of scaled data centers using open source software and cheap hardware. Intel supplied the cloud, and its data center business beat expectations last quarter, but it was not ready for the change. Its stock fell another 10%, and the company is now worth barely one-fourth the new chip leader, Nvidia.

The Other Arms Race

We talk a lot about guns in the US, without doing anything about them.

But there’s another, even more dangerous arms race, going on.

It involves cars.

It’s not just that there are too many of them. They’re too damned big. Spending $60,000 for a pick-up that will never see a trailer hitch, or an SUV higher than an elephant’s eye, is stupid. Especially since these cars are sitting, unused, 90% of the time.

People buy giant cars for the same reason they buy guns. They make you feel safe. They buy as much car as they can afford, like these things are houses.

The Word for 2023 is Efficiency

If you can save costs, in business or consumer markets, you can make money.

This is technology’s big opportunity in 2023.

The cloud has already transformed how people interact. It’s now going to transform how machines interact.

Sensors and network software can be applied everywhere. Thanks to falling chip prices this can now be done cheaply. There is labor available to write the software, build the companies, and reap the rewards.

Consider the water system. Why aren’t sensors monitoring the condition of pipes, warning of potential failures, and identifying leaks the moment they occur? Why are water authorities still depending on people finding cracks in the street with water coming out of them on their own?