AI Bubble or the Next Trillion-Dollar Boom?

0:05Hello and welcome to this very special

0:07episode of Geo interview with Miss Alice

0:10Wong.

0:11She is a certified financial analyst.

0:14Uh she is a finance professional and

0:16investor.

0:17She's a regular contributor to media

0:19outlets such as CNBC, Financial Times,

0:21Bloomberg, and Nikkei Asia on

0:23geopolitical and economic topics.

0:26Uh

0:26her fund, the Bamboo Asia Pacific

0:29excluding Japan, was awarded gold in the

0:32Fund Selector Asia Awards in 2020.

0:35So Alice, it is great to have you here.

0:36Hope you are doing well.

0:38>> Great. Yeah, thank you so much for

0:40having me. It's great to speak to uh our

0:43Indian friends

0:44um in a very important continent.

0:47>> Right.

0:48So Alice, could you please introduce

0:51yourself and tell our audience about

0:52your background and how do you become an

0:54investor focusing on Asia Pacific

0:56market?

0:58>> Yeah, so I uh was born in China. I went

1:01to Yale University. I studied

1:05Chinese intellectual history and then I

1:09was asked to join a fund in Hong Kong

1:13uh which was run by Robert Lloyd George

1:15and uh

1:16and I got my CFA during that time and I

1:19ended up taking over that fund and

1:22running it from London and I ended up

1:24launching another strategy that was

1:26focused exclusively on China markets. Um

1:30and uh so I run two strategies over the

1:33course of uh

1:359 years and 2 years ago uh there was a

1:40kind of uh

1:42risk call with the custodian

1:45um

1:46after which I decided that I I had a

1:50couple of the things I wanted to do with

1:52my life and [snorts] I wanted to explore

1:54and that I could always come back to

1:57running public markets if I wanted to.

2:00So,

2:01at the moment after that I took a break

2:04to

2:05I advise family offices right now.

2:08I advise two

2:10in in in main in focus and

2:13and I advise on private investments on

2:16infrastructure investments on M&A and

2:20I'm still doing a lot of China periphery

2:22work. But I'm trying to do it in a

2:26different way than

2:28what I did for 9 years which was check

2:30stock markets for every single day a

2:33million times and I think uh

2:37you know, I I even this year I think

2:39some people ask me

2:41do I want to go back and run a fund for

2:44them and it's something I think about a

2:47lot and I haven't made any, you know,

2:49decisions. The other thing I really

2:51wanted to focus on was I I had a

2:53lifelong dream of being an opera singer.

2:56So, I have two diplomas in singing now

2:59and I've been making great progress on

3:02that. So, I think I I I've I've I've

3:06developed a lot of different sides and

3:10that was by design. That was something I

3:11really wanted to do. So, yes, I still do

3:14a lot of investing. I get asked a lot.

3:17I'm still advising a lot of people on

3:19Asia, but I wanted my life to have more

3:22than just being a fund manager.

3:25>> That's great.

3:26So, the global market is currently in a

3:29frenzy around artificial intelligence.

3:33What do you think about the latest wave

3:35of IPOs in this space? Do you think that

3:37the current valuations are justifying

3:39the future value?

3:42>> Um

3:43I think So, we're talking about three

3:45IPOs in particular. So, SpaceX,

3:48Anthropic and Open AI. Um, think SpaceX

3:51is in a slightly different category,

3:53although a lot of their

3:55you know,

3:56sales are actually

3:58chip related as well. But

4:01but for open AI and Anthropic,

4:04I think that it's in a different bucket

4:06because their the competitive landscapes

4:08are much more intense than SpaceX at the

4:11moment. And I think that that's very

4:14that's very difficult to understand

4:17going forward because we're looking at

4:20you know, valuations that are pricing in

4:22the dominance that they have now. But

4:24the Chinese models are about six months

4:26behind and they continue to catch up

4:29with very strict limitations. And the

4:32Chinese models don't charge,

4:35you know, and so is there you know, if

4:38if if Western models are always six

4:40months ahead, then you know, maybe that

4:43distance will always exist, but do we

4:45reach a point of convergence at which

4:47the Chinese models are one month behind,

4:49you know, like zero months behind, maybe

4:51even ahead and they're still open

4:53source, right? Then then what is their

4:55pricing model going to be, right? And

4:57the other question I would really ask

4:59is, you know, we have had an

5:02unprecedented

5:04kind of infrastructure

5:06investment boom led by money that these

5:11companies haven't raised yet, right? Or

5:12not haven't made yet. They've they've

5:14only raised it and and raised it off the

5:16back of these

5:18huge valuations that are about to be

5:20checked by the market for the same

5:22for the first time. And those

5:25that infrastructure investment has

5:27already been priced into the rest of the

5:29market, the the physical infrastructure

5:31companies, the

5:33actual chip companies that are getting

5:35the money from investors having invested

5:38at huge valuations. So so that is a big

5:42question is if the valuations are

5:45impacted on when they go public and

5:49there's more competitive scrutiny then

5:51what happens to this

5:53you know, indiscriminate kind of

5:55infrastructure investing that's almost

5:57like a circular loop. Um, I know Nvidia,

6:00they they invest in a lot of companies

6:03that are ultimately going to be big

6:05buyers of their chips, right? So, it's a

6:07completely circular

6:09um, economy. And so, that's I think the

6:12greater question. Um,

6:14I won't talk about Space X in this

6:15because I think it's a very different

6:17model and it's and and and most of its

6:19valuation is from Starlink. Uh, but

6:22where I'm, you know, on the on the two

6:25AI companies and increasingly more, uh,

6:28I have some serious questions about the

6:30competitive landscape and the impact on

6:33the kind of circular economy that's AI

6:35right now.

6:37>> So, you talked about semiconductors.

6:39Uh, TSMC has been, of course, one of the

6:42biggest, uh, uh,

6:44stakeholder in the whole AI economy.

6:47Uh,

6:48has it become arguably the most

6:49systematically important company in the

6:51global finance? And, uh, do you believe

6:53markets are undermining the geopolitical

6:56risk around Taiwan?

6:59>> Uh, I think you can think about it in

7:01the opposite way that, you know, because

7:03TSMC is so important and so difficult to

7:06replicate that it actually becomes a

7:08great security,

7:10um, you know, mechanism for Taiwan as a

7:13country. Uh, they have no incentive to

7:17move their chip, um, production to the

7:20US because the more Taiwan is important

7:24vis-a-vis this company, the less it is,

7:27um, you know, you I mean, you could make

7:29a lot of arguments. Someone could say,

7:31"Oh, well, China could just invade and,

7:33you know, but it invasion

7:35takes a lot of capacity off the ground,

7:38you know, like there's there's there's a

7:40lot of other risks when that comes. And

7:42so it is it is very um it's very

7:47important.

7:48Um

7:49is it underpriced? I would actually say

7:52that it keeps Taiwan probably a little

7:53bit safer. That would be my perspective.

7:56And for sure TSMC is not going to be um

8:00trying to shift much more of the chip

8:03production abroad even if it were

8:05possible. So that would be my my view on

8:07that.

8:12>> So

8:14where does Southeast Asia stand in your

8:17current portfolio mix?

8:18Where do you see Southeast Asia?

8:21>> Uh I I think Southeast Asia is like not

8:24very well insulated from the oil price

8:27volatility. Um so and all the supply

8:30chain disruption. So I'm actually I mean

8:33it was never a big part of my portfolio

8:36anyways because

8:38>> [clears throat]

8:38>> to be honest there were just not that

8:40many good listed companies

8:42um on on any of the exchanges in

8:44Southeast Asia. And there's a lot of

8:46you know specific dynamics regarding

8:50different countries like Philippines is

8:52kind of dominated by five companies, you

8:55know, five families even. Um Indonesia

8:58has a lot more consumer

9:01uh but you know, it's it's it's pretty

9:03basic. There was this company in

9:05Singapore called

9:07SEA commerce uh that that everyone was

9:10invested in. So that was kind of an

9:12anomaly. But there there were just not

9:13that many options. And now that with the

9:16oil price and you know, a lot of these

9:19countries going back to like four-day

9:20work weeks, three-day work weeks. I I

9:22think there's just too much

9:24uh like risk. Um so we go back in these

9:26times to the bigger bigger countries

9:28like China. Um you know, countries that

9:32are more equipped to deal with

9:33volatility.

9:35>> All right.

9:37So do you see India's digital public

9:39infrastructure creating a unique

9:41investment mode compared to other

9:43emerging markets?

9:46>> I actually have a different like angle

9:49on this, which is um that what I see in

9:53India, like what I see with evaluations

9:55in India, is that they're often

9:57justified by companies overcoming the

10:00challenges of the lack of infrastructure

10:03or the kind of challenges of the country

10:05itself. China is a much more seamless

10:09country to get a lot of stuff done, and

10:11therefore like companies can be much

10:14more advanced like, you know,

10:16technically at advanced levels and still

10:19have much lower valuations than their

10:21equivalent one in India. And I think

10:24it's because in India it is so much

10:26harder, you know, logistically to get

10:29stuff around for the first place. Um

10:31it's harder to have like a stable

10:33electricity supply. It's hard, you know,

10:36the it's harder to work across a country

10:39that's very difficult in terms of

10:43languages that are spoken, religious

10:45diversity,

10:47um you know, like eating habits, um and

10:50that comes from an operational

10:52perspective within the companies and to

10:55the consumer market. Whereas, you know,

10:57in a country like China or even America,

10:59you have much more stable, reliable

11:02infrastructure,

11:04uh much more um

11:06uh you know, cohesive

11:08languages, cohesive people, cohesive

11:11kind of mindset in terms of how people

11:13work and how they behave and what they

11:15expect and

11:17um

11:18and I think I think that that the

11:20the companies that do are able to, you

11:24know, get past all these challenges

11:26actually have a significantly greater

11:28mode. And what you're you're about in

11:31terms of yes, it it was a step towards

11:33the government

11:35you know alleviating some of these

11:37structural issues, but I don't actually

11:39see that that helps on a

11:42you know apples to apples basis on the

11:44individual level. Maybe it helps the

11:46macro level economy work better,

11:49but I actually think that like the more

11:51the the more the government does to

11:53resolve its structural risk, the more

11:56competition you have in a country. You

11:59know, in China for any industry you have

12:02hundreds if not thousands of competitors

12:05and you just don't have the same same

12:07kind of like competitive pressures in in

12:10India

12:11you know, for for quite a lot of

12:14industries.

12:17>> So in a recent interview you noted that

12:20Chinese entrepreneurs are investing

12:22heavily outside China.

12:24Especially in Middle East and Africa.

12:26So where are what are the specific

12:28sectors they are looking?

12:32>> Um

12:33I

12:34I don't I mean I think if you look at

12:36Chinese exports this year first quarter,

12:39you know, they were up 16 17%

12:42year-on-year. So Chinese exports

12:44continue to be

12:46the most like strong most sparkling side

12:50of the Chinese economy.

12:52That you know, it's kind of like the US

12:54jobs number. It keeps on growing even

12:57though people say it's not going to

12:58grow. You know, China now has another

13:01like you like boost to its exports

13:05because the war is going to make all

13:09these countries more dependent on their

13:11own electricity own power supplies. So

13:14they all have to invest more in green

13:16technology and that is what China has

13:19been so strong at in the last 10 years.

13:21So I don't see this trend stopping

13:24anytime soon and with you know,

13:27depreciating currency from across the

13:31you know, basket of

13:33of countries including India.

13:35You know, you you will have lower

13:38purchasing power and if you have lower

13:40purchasing power, China is really the

13:42only country in the world that can help

13:44you you know, with this kind of

13:47deflation that they've been seeing

13:48internally. So, China is has is going to

13:52continue to export deflation, continue

13:54to export green technology across the

13:57world and I don't see that stopping

13:59anytime soon.

14:03>> So,

14:06coming back to other kinds of asset

14:08classes, I think gold really did well

14:10last year.

14:12What do you think was the reason behind

14:14it and also do you think that the

14:16broader investment demand in this metals

14:19impact their role as an inflation

14:21as an inflation hedge?

14:24>> Gold tends to do well. I mean,

14:27gold is such a divisive investment

14:29because

14:31people everyone has a different opinion

14:33on it, right? Like you know, you you can

14:35talk to very sophisticated investors

14:36that are like, well, there's no way to

14:38value it. You know, I mean, there's ways

14:40of valuing it.

14:41There's lots of ways of valuing it, but

14:45you know, you could take a percentage of

14:47all the money in circulation and divide

14:48it by you know, the number of gold

14:50physical gold and that that's one way,

14:53but you

14:55I think the main point is like gold is

14:58going to be a continue to be a proxy of

15:00confidence in fiat and confidence in

15:04Bitcoin or crypto. So, anyone who has

15:08you know, lack of confidence in both or

15:12just wants to diversify is going to

15:14probably buy gold.

15:16It is it isn't need like

15:19it is probably a sentimental investment,

15:21but it's it's an investment that

15:24bets on things not working out very well

15:26in the world.

15:27Um, and so things haven't been working

15:29out very well.

15:30>> [laughter]

15:31>> You know, at like

15:33below kind of headline economic numbers.

15:35So,

15:37that's what people will invest in.

15:40>> That is right. I see that there is a lot

15:42of reserve buying of gold going on all

15:44across the world. What do you think is

15:46driving that?

15:48>> Yeah, it's it's sovereign kind of

15:51um

15:52you know, diversification from fiat US

15:55dollar currency as well. I mean, I

15:59I I think there's like probably a couple

16:01of complex arguments around this. Like,

16:05for example, people are having

16:07conspiracy theories that China will kind

16:09of move to a gold-based currency or

16:12something and then, you know, and and

16:14there's also some questions around the

16:16sustainability of US bond issuances,

16:20particularly if the Middle East is not

16:22able to sustain their buying and you

16:24know, there there's a lot of kind of

16:26things to speculate on here. Um, I I

16:30think again, it's probably just a nice

16:34diversification for sovereign

16:36governments to have, um especially if

16:40you know, if if the if America continues

16:43to weaponize the US dollar as they had

16:45with Russia, you know, um

16:49like if you weaponize a like if your

16:53currency when the basis of the US dollar

16:56regime for the last, you know, since the

16:59petrodollar emerged. Like if the basis

17:01of that was that it was always going to

17:02be a reliable currency

17:05um to hold and to spend and to trade in,

17:07and then you nuke that. Well, you're you

17:10should expect that China will create

17:14either an alternative currency system or

17:17they will resort to something that's

17:19been in circulation for thousands of

17:21years, i.e. gold.

17:23Um,

17:24you know, I I think it's it's just a

17:25it's a long-term impact of a short-term

17:27move that they did.

17:31>> So, finally, if you would challenge the

17:33one common narrative about Asia

17:35investing

17:37that you believe is kind of misguided,

17:39what would it be? Cuz most of the time

17:42when I hear Asia investing, only two

17:44scripts that come to my mind are TSMC

17:46and SK Hynix.

17:48What else is out there that no one is

17:49looking at?

17:51>> Well, you just named one company from

17:54Korea and one company from Taiwan. So,

17:56you you missed out on every single stock

17:59in China.

18:00Uh, so so so that's there's a lot of

18:04stocks there.

18:06Um, I would say one frustration I had

18:10with

18:11people

18:13looping, you know, putting all of Asia

18:15Pacific into one basket and saying,

18:17"Here, manage this portfolio." is that

18:19Asia Pacific is not like a cohesive

18:22bucket, you know, it's it's so many

18:24different completely different economies

18:27that are driven by different things like

18:29Korea and Taiwan are very driven by

18:31chips, but they they the two of them

18:33have very different approaches to how

18:35they do chips and the kind of chips they

18:37make.

18:38Um, China is probably the most advanced

18:42market in the world outside of the US.

18:45So, it's it's a huge market in and of

18:47itself. Um, Japan is a small country,

18:50but it's got huge depths, too. Um, and

18:54it requires really a lot of Japanese

18:57fluency to even get close to these

18:59companies.

19:00Um, Korean as well. Um, Southeast Asia,

19:03you're and India, you can get by with

19:05English. Uh, Australia, obviously, yeah.

19:08Keep in mind, Australia is also part of

19:10Asia Pacific. And that's a very

19:12different uh country. So, you know,

19:16like it's one thing to say, "Okay,

19:18you're a Middle Eastern investor, you're

19:19a European investor, you're a you know,

19:22American investor, you're a Latin

19:24American investor." In some ways, those

19:26regions are way more cohesive than being

19:29an Asia Pacific investor is. Now, the

19:31the benefit is that you kind of have uh

19:34built-in hedges. Like India when India

19:37does well, China isn't typically doing

19:40well. When China's doing well, India,

19:42you know, tends to They tend to be

19:44natural hedges for each other. Um

19:46um Australia has some, you know, Western

19:50geared stocks. Although, actually

19:52India's pretty correlated to Nasdaq as

19:54well.

19:55Uh well, it used to be actually, not

19:57this year. But, um you know, like so you

20:01have some built-in hedges.

20:03Uh

20:04but it they are so different. Um and so

20:08it's it's becomes very difficult to talk

20:10about Asia Pacific as a uh

20:13like as a category. And you shouldn't

20:15think about it as a category. Um I

20:18actually think if I were

20:20you know, advising a new investor to uh

20:24look at Asia Pacific, I would just say

20:27concentrate on one vertical. Um and then

20:29see how it maps across the whole region.

20:32Um

20:33and it and it might be the case that you

20:35can find one that maps across the whole

20:38region because, for example, in chips,

20:40you can put some some of the Penang

20:42companies in Malaysia in there. Um okay,

20:46you know, as in there's stocks in China,

20:48Japan, Korea, Taiwan in this basket. Um

20:53but, you know, you you you could you

20:55could do like Home Depot, you know, you

20:57could you know, there's there's quite I

20:59can think of Ace Hardware in Indonesia,

21:01you know, uh in China there's definitely

21:03Home Goods come all the consumer

21:06markets, Australia for sure.

21:08Um but, you know, I would say like focus

21:12on a sector because like it's really

21:15difficult to think about the region um

21:18and you shouldn't really think about it

21:20as like it works the same way across

21:22everything.

21:23>> So, what I hear is that you select a

21:26specific sector,

21:28look at its whole supply chain, and look

21:31where the opportunities are lying.

21:33>> Uh no, that's not what I do. I would

21:36That's what I would suggest a beginner

21:37to do. Like if if they were approaching

21:40this region, I would say start from the

21:42micro and work up to the macro. Because

21:45in the process, you'll have to learn

21:46about how Indonesia works. But, at least

21:50you might get a sense of like well, how

21:53in this process you might understand

21:54like, "Okay, well, why are the multiples

21:57so different in India versus China?

21:59Like, why for the same company in China,

22:02which is so much more advanced like from

22:04an

22:06automation perspective and everything

22:07and customers, why are their margins so

22:10much smaller versus the Indian

22:11equivalent? Why are they valued so much

22:13lower than the Indian equivalent,

22:15right?" From from that, you could

22:17probably learn quite a bit in a

22:19self-guided study of a particular

22:21sector. Like because I have worked in

22:25this region for 10 years, I don't think

22:28that way. I I would think about, you

22:29know, broader themes like what how is

22:33this, you know, how is this new how is

22:36this war, you know, going to impact the

22:39region and which areas are most exposed,

22:42which areas will benefit the most, which

22:44areas will not benefit the most. But,

22:46that requires that you already have a

22:48quite, you know, good understanding of

22:51the region and know where to drill down,

22:53right?

22:54>> Right.

22:55So, at least thank you very much for

22:57doing this. Uh we

22:58>> Yeah, you're welcome.

22:59>> host of good.

23:01>> Thank you. All right. Thanks very much.

23:03Bye.

23:03>> Bye.

23:07>> [music]