Boockvar on China and AI
From Peter Boockvar:
‘When China walks into the room, profits walk out the door’
As my friend Louis Gave likes to say, ‘when China walks into the room, profits walk out the door’. They continue to raise their game when it comes to AI models and to remind again, CXMT goes public in Shanghai next week. Ignore the Chinese competition at your stock market peril. Today, the first day of the World AI Conference taking place in Shanghai, Moonshot said its Kimi K3 model is as good as OpenAI and Anthropic. We have US tech that has spent extraordinary amounts of money to build these models, powered by the computing power from the data centers and now they have a price war with lower cost Chinese models.
It’s not just US hyperscaler stocks that are down this morning in response but Chinese rivals to Moonshot too. Z.AI (otherwise known as Zhipu) fell 29% in Hong Kong, MiniMax, the maker of the MiniMax M3 model, was lower by 16% and Softbank, a big backer of OpenAI as we know, fell 9% in Tokyo.
According to OpenRouter, Chinese AI models now have almost 60% of weekly token market share being used by US companies.
The coming CXMT IPO (oversubscribed by 212 times by the way), along with the massive CapEx announcements from Micron, Samsung and SK Hynix over the past few weeks, continues to weigh on semis too as seen this week. The Kospi was closed but the Nikkei was down 4% and the TAIEX was lower by 6.5%.
I’ll say for the umpteenth time, US tech faces a competitor in the Chinese that they never really faced before outside of the Japanese in the 1980’s. And again, Chinese companies first focus on market share rather than profits and your margin is their opportunity.
Voting member Lorie Logan, President of the Dallas Fed, gave some forward guidance yesterday afternoon by saying “I currently believe modestly higher interest rates would better balance the outlook and risks…If inflation is not heading all the way to 2% on its own, then at least some policy restriction is needed to help get it there.”
To some earnings calls of note.
From Taiwan Semi, down 7.3% overnight:
“Looking ahead, we observe consumer and price sensitive end market segments are being challenged due to the impact of rising component prices and macroeconomic uncertainties. As such, we are being prudent in our business planning while focusing on the fundamentals of our business to further strengthen our competitive position. Having said that, AI related demand continues to be extremely robust. The AI megatrend continues to drive the need for more and more computation, which supports the robust demand for leading edge silicon.”
“Our customers and customers’ customers, who are mainly the cloud service providers, continue to provide us with a very strong signal and positive outlook. Thus, our conviction in the multi-year AI megatrend remains very high. Supported by our robust technology differentiation and the broad customer base, we now expect our full year 2026 revenue growth to be slightly above 40% y/o/y in US dollar terms.”
Manpower stock went meme stock like to the upside yesterday, rallying by 32% and this staffing company said this of note:
“We are seeing positive momentum across verticals, including manufacturing, automotive, aerospace, logistics, and retail.”
With respect to their clients, “I’d say we’re hearing a couple of things. One, they continue to be very resilient in the face of a changing landscape, whether it’s geopolitically or economically or demographically. But in these times of uncertainty, customers are increasingly seeking flexible workforce solutions. And as you know, that’s where we shine.”
From US Bancorp:
In terms of an improvement in the mood of their customers, “The sentiment rebound from the pause with tariffs last year has been the story. We have heard it certainly in the middle American footprint that we have had. A lot of people who had paused last year to say where is all of this going are seeing a very resilient consumer and a lot of demand and beginning to lean into that in a fair way. So, it’s more broad based and healthier loan growth and loan demand than just a concentrated AI trade.”
From Prologis:
“Customer demand is broadening with notable and growing strength across e-commerce, advanced manufacturing, and increasingly customer supporting the build-out of digital infrastructure. Our research estimates that each $1 trillion of data center CapEx will generate 30 million to 40 million square feet of incremental logistics demand, creating a durable multi-year source of growth. Alongside these secular additions, demand from our largest segment, basic daily needs, and the logistics that support them, remain healthy.”
After quite the run higher, container shipping prices moderated w/o/w. After 10 weeks in a row of price increases, the Shanghai to LA container price fell $210, or 3.2% to $6,272. It was at $2,191 the last week of February. The Shanghai to NY route fell $25 to $7,879 and was $2,771 right before the conflict. These prices join the sharp rise in trucking and air transportation costs with the only thing benign being rail in terms of price.
Shanghai to NY
Positions: None
