Biden's NEW Rules Bankrupt U.S. Companies to Punish China.

oh yikes the Biden Administration just

published some new rules on chips and

China that could devastate the United

States chip makers like Nvidia and AMD

and have some big implications for even

companies like Tesla some are calling

this the biggest hit to chips and Chip

trade since the 1990s maybe even a new

tech Cold War in this video we're going

to talk about what's going on and why

it's the potential ramifications for

some of the companies that I mentioned

that includes Tesla so let's go ahead

and start by talking about the who what

and the why so the by demonstration is

instituting these new rules that are

similar to the kind of blocks they set

up against Russia after Russia invaded

Ukraine and the rule is simple any

companies around the world if they use

any kind of American tools Machinery or

software to manufacture chips and those

chips meet a certain criteria which will

go into the specific criteria a little

later they are not allowed to sell those

chips to Chinese companies or Chinese

buyers who without a specific license

and the goal here is really to limit the

growth of China as a military and

economic superpower so this is going to

include chips that are used in

artificial intelligence you know China

wants to be the biggest artificial

intelligence player by 2030 this is

going to hurt that opportunity for them

super computer chips uh which could be

chips that are also used in nuclear

weapons Hypersonic missiles missile

defenses surveillance systems any really

kind of chips related to all these

things are going to be impacted here

this is a really big move and things

like this have been done before like

what happened to Huawei which we'll talk

about them in just a moment but this

could really impact electric vehicles

and certainly even smartphones I mean

unsurprisingly that could actually be

good for Tesla because if you think

about it chips made by Tesla are used

for Tesla and it's an American company

right now there is always this potential

risk for Chinese backlash uh and then

Tesla would be an easy target to lash

back against especially since they kind

of hold it Shanghai Factory hostage but

in the meantime you've got the CEO of

x-sping Motors Chinese uh electric

vehicle company warning that these

United States restrictions will actually

push back and delay China's ability to

expand their self-driving sector China's

Global times which is a paper it's

called Global times they call this a

quote Savage attack on free trade which

I thought that was kind of Rich given

that the global times is part of the

Chinese propaganda apparatus apparatus

and it's it's part of the state-run

media of China so it's kind of like

really part of the Communist Party of

China's media is going to suggest that

this is an attack on free trade I mean

it is but let's be real it's kind of

like the pot calling kettle black but

anyway uh really this is this is really

interesting uh and some folks are saying

hey but I mean like is this like even a

big deal after all we hear about new

restrictions and sanctions getting

passed all the time nothing ends up

happening well that's not necessarily

true see this has happened before just

look at Huawei more recently back in

2019 When Donald Trump called Huawei

security threat and banned most tech

sales to Huawei in May of 2019. you

might remember also the surveillance

camera manufacturer hickvision was also

targeted by these and the the argument

back then was the belief that the

Chinese government would be able to tap

into Huawei to spy into the West

especially with any kind of servers or

infrastructure or cameras or chips that

are actually installed in the west and

then potentially would have access to

you know turn off those feature or sort

of those those products if you will or

other services related to those products

in the United States which could disrupt

our United States infrastructure and

think of it as simple as let's say

you've got you know 100 computers at an

electrical distribution center but two

of them two of your main mainframes use

uh Huawei products or or whatever other

Chinese manufacturer products if those

are able to just be turned off that

could create a pretty coordinated and

disastrous uh uh you know problems to

our electrical grid at a time when you

could see that sort of attack

coordinated with other attacks right and

so this was at least the Trump

administration's security threat

argument that let's let's get Huawei out

of here other countries like Sweden have

since followed in footsteps lots of

European countries have followed and so

uh yeah it really even culminated in the

media like all of this drama with the

daughter of the Huawei founder famously

being arrested in Canada in 2018 right a

year before that at the request of the

United States she was known as the

princess of Huawei and she was arrested

for violations or alleged violations of

Iranian sanctions with Huawei and now

she's back in China expecting the

charges to be dismissed after admitting

that you know Huawei screwed up what

whatever you know that story doesn't

matter so much but the point is the

Huawei ban banned Android apps in the

Google Play Store no YouTube no Google

Maps you know really normal conveniences

on Huawei phones and so what you really

saw is a collapse of international phone

and Telecommunications equipment sales

now China was up 20 or about 15 percent

in 2021 for Huawei Chinese sales but

they had double digit losses

internationally as much as a 42 percent

decline in smartphone shipments in 2020

versus 2019. and massive reputational

damage so you know for for anybody to

suggest like ah whatever another set of

sanctions isn't going to do anything it

was devastating for Huawei and these

things are probably going to be

devastating to not only China but also

companies like AMD and Nvidia

unfortunately see American tools and

software is is pretty broad this means

if you're let's say Taiwan

semiconductors and you have an American

uh wafer CNC router or a chip etch or

whatever you want to call it you're

banned from using that American machine

to make any chips to sell to China that

means you now have to use Chinese tools

which might not be of the

quality of American tools uh and so

since tools are also limited to be sold

to China China's kind of got to make

their own and the chips that are

included here really anything smaller

than 14 nanometers in general right now

we're working on chips that are going

from really seven nanometers to five so

14 encompasses a lot and it even

includes memory chips anything for Dram

chips below 18 nanometers uh Nan chips

below or with 28 layers or more uh and

and logic chips under 16 nanometers I

mean these are some pretty broad

implications and we'll have impacts too

companies like Nvidia AMD kll KLA Lam

Research Applied Materials Micron you

name it and this is all being done under

the foreign direct product rule and it's

happening at a really really terrible

time I mean consider the fact that AMD

just last week released preliminary

results with reduced Revenue a potential

slowdown in its integrated chip segment

that's like its server division which

everybody thought would be like immune

to a Slowdown uh even Amazon's talking

about a potential optimization by their

customers and server spend so basically

a slow down and spend we're seeing a

collapse in PC sales uh flat gaming

sales including uh crypto so really this

this broader pain

Samsung's seeing a deeper than feared

slow down with talk about potentially

cutting their production by 30 which

kind of makes them sound like OPEC to me

but that's because they just saw a 32

drop in operating profit and they're

like crap why why are we working so hard

to produce more when when our revenue is

going to crap here you've also got

Micron seeing a 45 drop in revenue and

lowering their guidance if they still

want to produce 100 billion dollar

Factory in New York to make more dram

chips you know memory is a huge part of

the industry here remember represents 27

of the chip Market

crazy and it's only expecting point six

percent growth next year because

everything's Contracting right uh you

know the prices for memory are already

down 15 for Dram 28 for nand Flash uh

just uh just year over year here uh

which is um

well actually I'm sorry this isn't your

year that's quarter over quarter that's

quite terrible and we kind of expect

prices to continue to fall at least

until the fourth quarter of the year and

then maybe maybe flatten out next year

but we're going to talk about some of

the impacts here and they're big

especially if you're into chips now

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uh let's talk impact here I mean first

of all you're going to see more

protectionism at home for China after

the Trump sanctions on China in 2018 and

19 China's chip industry really focused

on growing doing their own local chip

industry and that actually by some

accounts exacerbated the supply chain

issues that we had over the last couple

years

by June of this summer 2022 19 of the 20

fastest growing chip industry firms over

the last year came from China

that's compared to just eight in the

year before that so you've really you

know encouraged China to grow at home

now the problem is they're going through

what's probably a deep recession if not

a depression so that's going to slow

their ability to advance and now not

having access to Western tools and

machinery and software to make chips I

think is going to be an issue but that

doesn't mean that AMD and companies like

Nvidia are immune and it kind of makes

sense now why Nancy Pelosi sold her

Nvidia stake she kind of wrote up the

enthusiasm of the 54 billion dollar chip

sack getting passed as soon as it gets

passed she dumps and it's like oh what

happens next oh sure enough you get

these new Biden Administration rules

that affect Nvidia and AMD now why why

would it affect Nvidia and AMD well

it's actually pretty obvious because if

you jump on over into this right here

this is the annual report for AMD you

can see that China including Hong Kong

including Hong Kong makes up about 25 of

the revenue for AMD it's pretty terrible

when you jump over to nvidia's annual

report you see that China actually makes

up more Revenue than the United States

does at 7.111 a billion dollars for the

year ending January 30th 2022 making up

about 20 uh what do we got 26 of their

total almost 27 billion dollars in

Revenue pretty substantial that's a

really big hit now a stock liking video

is already down somewhere around 61 this

year so of course there's a lot of uh

talk about oh you know Now's the Time to

buy the dip in Nvidia this is a great

company and it's true it is a great

company but I mean they're very clear

that their Outlook uh is is entirely

affected by the by potential hits to to

China especially with new regulations

coming to China I mean look for example

over here

sales to North American hyperscale and

cloud computing customers increased

nearly double year over year but that

was offset by lower sales to Chinese

hyperscale customers so they actually

only ended up growing 61 year over year

and one percent quarter over quarter so

you've got this giant anchor of China

because well they're selling less to

China not only because their economy is

sucking but also probably now because

more so even now because of of these new

Biden Administration rules so

on one hand you get these sort of rules

that come into effect for National

protectionism for you know uh home

security concerns but on the other hand

it's bad news for NVIDIA it's bad news

for AMD even if you lost half of that

Revenue that would still represent

somewhere around 12.5 percent of the

revenue for these companies so it's

definitely a hit now does it justify

them being down 61 percent uh probably

not I mean the other aspects would be

we're going into a recession we are

seeing you know computer and PC demand

down server demand potentially rotating

down and we're going to a recession

right so multiple compression has

certainly also taken a hold of a stock

like uh AMD and Nvidia but uh yeah this

this is a problem it could actually

ironically as long as we don't get like

a really big backlash from China it

could actually be really good for Tesla

now I don't really suspect like it

certainly wouldn't be my base case to

suspect that China would want to lash

out against Tesla because I think that

China

actually incentivizes Tesla because not

only is Tesla a massive employer but

they want Elon Musk to build more

factories in China or expand factories

because China needs the infrastructure

they need the stimulus they need the

manufacturing right

and China I think is is very smart in

that they realize look if we can get two

or three more gigafactories throughout

different parts of China well we could

build real estate around those areas we

could prop up real estate values we

could prop up infrastructure I do think

the Chinese people are smart uh and and

even though you know a lot of us in

America have negative impressions of

their government I don't think they're

as irrational as certainly like a Putin

kremlin-led government

and so I do think that uh and hopefully

I'm not saying this from an angle of

like just being a fanboy but I think it

would be silly for Tesla to be punished

by China because it would really be

punishing one of their large employers

uh and potentially an employer that

could be a larger employer in the future

uh in a really stabilizing force in uh

sort of China's recovery from This

Disaster they're going through that all

of that would be at risk if they started

doinking with Tesla because Elon Musk

would just immediately say fine screw

you you know we'll we'll go build in

India instead or somewhere where we

don't have to worry about you using us

as political Pawn so I imagine elon's

well aware of that

but um wow anyway there you have it some

crazy uh crazy uh new rule here so uh

more things to pay attention to all

right hopefully this was helpful if it

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one thanks goodbye