More Tales From Nvidia: ‘It’s Chinatown’ (Issue #209!)

‘Forget it, Jake. It’s Chinatown’ 

– Chinatown Forget it Jake, it’s Chinatown.

As more biz moves to China, the core problem is they all have no business model. To grow, they have to give it away. That requires infinite financing, which does not exist, even for money-making businesses.  Nobody should really finance anything with these economics, which are price-to-profit, too expensive for anyone to use it (it becomes more expensive than human labor), price-to-grow, it loses $1 for every $1 of revenue. This is a pure commodity industry. Business is moving to lower-cost Chinese models for a reason. Some 98%-99% as good at 2% of the price. The low-cost player in a commodity industry wins.  This industry is the definition of commodity. Highly undifferentiated, all about capital. Even Microsoft ($MSFT) is thinking of using the Chinese (Deepseek) now for Copilot. MSFT sees the writing on the wall.  See tweet and subtweet. The first part about Anthropic begging the government for money comes from a credible source:

This is what’s causing Anthropic to aggressively beg for govt protection (see below). Customers are finding cheaper alternatives. Keeping employees requires continuing ultra-rich secondaries ($$$) that are dependent on revenue growth. When you can’t win on the field go to DC. https://t.co/fbO2MfiWHu

— Bill Gurley (@bgurley) June 26, 2026

This was forwarded to me by Jim Chanos:

 If you haven’t seen it yet, this graphic from Artificial Analysis (via JP Morgan) has gone viral overnight. It highlights the cost-benefits of the cheaper (primarily) Chinese open-source models for inference tasks. OpenAI may already be feeling this pressure. And if normal tech-deflation hits token prices…will hardware/AI infrastructure be next?  

Position: MSFT VS

• Category: Daily Diary
• Tag: MSFT