Ben Thompson on Big Tech, China, and the AI Boom Running Out of Money - [Invest Like the Best, EP.487]

Ben Thompson, the insightful author of Stratechery, joined Patrick O'Shaughnessy on the Invest Like the Best podcast to dissect the multifaceted impact of artificial intelligence. Their conversation spanned from the geopolitical implications of an AI race to the economic realities of scaling AI infrastructure, touching on everything from the future of manufacturing to the intricacies of tech giants' business models.

The AI Race: Winning, Losing, and Game Theory

Patrick kicked off the discussion by asking Thompson what it would mean for the US to "win" the AI race. Thompson's response was provocative: he believes it would be "very problematic" for the US to win. He painted a fantastical scenario where controlling AI leads to military superiority and manufacturing dominance. However, he quickly pivoted to the game theory optimal response from China in such a world: to blow up TSMC. This stark example highlighted Thompson's fundamental disconnect with much of the Silicon Valley rhetoric surrounding AI. He argued that achieving a meaningful military or national security superiority through AI would be dangerous for the world. The conversation then delved into the practicalities of such a scenario, questioning how much the US could truly decouple from global supply chains, particularly in semiconductor manufacturing, even if it were to develop its own fabs.

Thompson emphasized that the degree to which the US is dependent on China is "underappreciated" and that fixing this dependency is unlikely to happen outside of a conflict. He argued that it would be "dramatically dumb" for a company to shift its sourcing from China to the US if its competitors were not doing the same, as it would create a significant disadvantage. This leads to the conclusion that such a shift would only occur when there is "literally no choice." He used Apple's partial shift of iPhone manufacturing to India as an example, noting that it's a diversification rather than a complete move out of China, driven by the astronomical costs involved in such a transition.