Weekend reading links

1. Adani plans to enter wind turbine manufacturing, unsettling Suzlon.

After scaling India’s renewable energy landscape faster than anyone else, across solar parks, transmission networks and green hydrogen, the Adani Group now wants to manufacture wind turbines not just for itself, but for the market... Adani has said it wants to deploy around 30GW of wind capacity by 2030, or a third of the country’s 100GW target by then. Until recently, Adani’s turbine manufacturing was widely assumed to be a captive exercise, designed primarily to feed the group’s own rapidly expanding power needs... For Suzlon Energy Ltd, India’s largest wind turbine maker and one of the few global survivors in a brutally cyclical industry, the timing is unsettling. The company has only just emerged from a long financial winter. It is debt-free, profitable again, and benefiting from a renewed policy and market push for wind as India confronts a structural mismatch in its power mix... Apart from Adani, the JSW Group and Reliance Industries Ltd have also disclosed their intent to manufacture turbines. These are conglomerates that can absorb early losses, compress supply chains and tolerate long gestation periods.

2. Italian and Spanish bond yields have declined as markets reward them for measures taken for fiscal discipline. 

Government borrowing costs paid by Italy and Spain have fallen to their lowest level relative to Germany in 16 years, as investors reward Rome and Madrid for belt-tightening and grow more worried about surging debt elsewhere in the Eurozone. The extra yield on 10-year Italian debt compared with German Bunds — a closely watched measure of the risk associated with lending to Italy — narrowed to within 0.7 percentage points this month, the lowest since late 2009. Strong economic growth in Spain has helped to cut its 10-year spread with Germany to less than 0.5 percentage points. That is also the lowest since before the Eurozone crisis, when high debt loads drove up both countries’ borrowing costs and stoked worries about the currency bloc breaking up... Investors point to Spain’s improving economic trajectory and Italy’s prudent fiscal policies under a politically stable government, as part of a broad reduction in fiscal risks for these countries as well as for other previous debt hotspots such as Greece.

3. Roger Federer's commencement speech at Dartmouth College is a classic. He makes the point by invoking the fact that, though he won almost 80% of his 1526 singles matches, he only won 54% of all points. 

“When you lose every second point, on average, you learn not to dwell on every shot,” he told the crowd. “You teach yourself to think, ‘OK, I double-faulted. It’s only a point.’ When you’re playing a point, it has to be the most important thing in the world, and it is. But when it’s behind you, it’s behind you. This mindset is really crucial, because it frees you to fully commit to the next point and the next point after that, with intensity, clarity and focus.”

This has resonance elsewhere. 

It’s an easy concept to apply to almost any field. In 2022, Ronald van Loon, a portfolio manager at BlackRock, authored a paper on the percentage of investment decisions that need to be correct to beat market benchmarks for returns. He researched markets, crunched the numbers and came up with a number: As low as 53 percent.

4. Men's athletics records dating back to the 20th century.

Jonathan Edwards (triple jump, 18.29m, 1995), Mike Powell (long jump, 8.95m, 1991), Jan Železný (javelin, 98.48m, 1996), Javier Sotomayor (high jump, 2.45m, 1993) and Yuriy Sedykh (hammer throw, 86.74m, 1986)

5. Frothy US equity markets

The so-called Shiller cyclically adjusted price-to-earnings ratio of the US stock market, which is ending 2025 just shy of 40, an extremely high level relative to history. The only time the S&P 500 has had a higher ratio was just prior to the dotcom bubble bursting in the early 2000s. Starting from valuations at this level, Adler said, the market has never generated a return above inflation for investors.

6. The Big Three IPOs expected in 2026

OpenAI, which is currently valued at $500bn, is engaged in discussions with investors about a new fundraise at a valuation of $750bn or more... SpaceX is working on a secondary stock sale which would value it at $800bn, according to multiple people with knowledge of the deal. Anthropic is also in talks for new funding, which investors expect will value the company at more than $300bn... Figma, Klarna, CoreWeave and Chime were among the technology groups to list in 2025, contributing to a total of more than $30bn in US IPO proceeds in the first nine months, the bulk of it from technology groups, according to EY. This year’s total is likely to dwarf that sum, if even one of the three big start-ups goes public. SpaceX alone is widely expected to surpass Saudi Aramco’s $29bn raise in 2019 to become the largest public listing.

7. Good interactive graphic of President Trump's epic conflicts of interest in his government deal-making.

8. Japanese scallop exports have become the latest victim of China's weaponisation of trade. 

As China has emerged as a global economic power, its 1.4 billion citizens have become critical consumers of international goods. Beijing has dangled market access to its growing middle class as a diplomatic lever, imposing import restrictions for Taiwanese pineapples, Australian wine, American soybeans and Lithuanian beef in recent years... 

The latest trade spat between Japan and China began in August 2023, when Beijing suspended imports of Japanese seafood after the release of treated wastewater from the decommissioned Fukushima Daiichi nuclear plant. While Japanese officials and U.N. regulators defended the move — noting the water was filtered and heavily diluted — Beijing protested. Before the freeze, China was the top buyer of Japanese seafood, with scallops accounting for most of that trade. Hokkaido’s scallops, harvested from the region’s nutrient-rich, frigid waters, are prized for a distinct buttery flavor and deep umami. They command a premium in China, where they have become a staple luxury at high-end celebratory banquets... In 2022, the year before the halt, Japan exported roughly $641 million worth of scallops, with China accounting for more than half of all sales. Scallop exports plunged 30 percent in 2023 from a combination of China’s trade ban and a fallow period of production... 

Japan’s prime minister, Sanae Takaichi, stated in the National Diet that a Chinese attack on Taiwan could be a “survival-threatening situation,” a legal trigger implying Japan could use military force. It was a rare public declaration regarding an island that Beijing considers a breakaway province. Within two weeks, Beijing abruptly froze all new seafood export applications.

9. Nokia's successful reinventions.

By 2000, Nokia had 26.4 per cent of the global handset market, according to CCS Insight. At its peak in 2000, amid the mania of the dotcom bubble, Nokia was worth about €286bn and was estimated to be contributing about 4 per cent of Finland’s GDP… However, Nokia’s failure to grasp the signficance of the smartphone era, ushered in with the release of the first iPhone in 2007, ultimately cost it dearly… With the writing on the wall, Nokia sold its devices and services division — which housed its once world-beating mobile phone business — to Microsoft for €5.4bn in 2014. Its revenues had fallen from a peak of €37.7bn in 2007 to just €10.7bn by the time it was sold…

With the Nokia brand rapidly disappearing from consumers’ minds, it fell to new chief executive Rajeev Suri to chart a new course for the company. Nokia’s €1.7bn acquisition of Siemens’ stake in a networks joint venture in 2013 suddenly made up about 90 per cent of Nokia’s revenues after it got out of the handset business. “That had to be the foundation because you cannot invent a company on a weak core,” Suri, who left Nokia in 2020, told the FT, adding that his “first priority” was to “remove any ambiguity about what Nokia was going to be”. To turn Nokia into a major player in the networks business. Suri made the biggest acquisition in Nokia’s history: a contentious €15.6bn deal for French network provider Alcatel-Lucent in 2015.

10. BSE Sensex

The BSE Sensex has compounded at just over 13.5 per cent annually over the past four decades, making the Indian stock market one of the best performers globally in US dollar terms.

11. Another K-shaped signature of the US economy (HT: Adam Tooze)

12. Finally, the audacious US invasion of Venezuela and capture of President Nicolas Maduro and his family will be discussed much in the days ahead. The NYT has an early editorial that highlights one aspect.

Mr. Trump’s recently released National Security Strategy... claimed the right to dominate Latin America: “After years of neglect, the United States will reassert and enforce the Monroe Doctrine to restore American pre-eminence in the Western Hemisphere.” In what the document called the “Trump Corollary,” the administration vowed to redeploy forces from around the world to the region, stop traffickers on the high seas, use lethal force against migrants and drug runners and potentially base more U.S. troops around the region.

Venezuela has apparently become the first country subject to this latter-day imperialism, and it represents a dangerous and illegal approach to America’s place in the world. By proceeding without any semblance of international legitimacy, valid legal authority or domestic endorsement, Mr. Trump risks providing justification for authoritarians in China, Russia and elsewhere who want to dominate their own neighbors. More immediately, he threatens to replicate the American hubris that led to the invasion of Iraq in 2003.

For India, the National Security Strategy, and its operationalisation through actions like the above, should be a wake-up call that the US can no longer be relied on in any meaningful manner in case of any conflict with China. 

Weekend reading links

1. As grocery prices rise and popularity ratings dive, President Trump rolls back tariffs on certain agricultural products where import reliance is high. 

Trump issued an executive order on Friday afternoon saying that imports of certain goods that were generally not grown or produced in the US would no longer be subject to “reciprocal tariffs” — the high levies he set based on emergency powers starting in April. The president’s order said the tariff exemptions would apply to common and tropical fruits including oranges, tomatoes and bananas — as well as cocoa, coffee and tea. Beef imports were also included in the list, as well as spices and some fertilisers, according to a factsheet provided by the White House.

Beef prices have surged in the US, with the average price of a pound of ground beef rising 13% in a year, while uncooked steaks rose 11%, leading to steakhouses raising prices or trimming portions or both.

The exorbitant tariffs of 50% on Brazil, the world's largest beef exporter, have been a major contributor. 

Before the Trump administration levied a sweeping 50 per cent tariff on Brazil in July, the US had been steadily increasing imports from Brazil in order to keep up with domestic demand. In the first five months of 2025, the US imported some 215,000 tonnes, more than double during the same period in 2024. After July, the effective rate for out-of-quota Brazilian beef rose to more than 76 per cent. Exports to the US, Brazil’s second-largest beef market year-to-date, fell 41 per cent in September to $102.9mn.

2. Continuing on the tariff front, Switzerland has reached an agreement with the US to lower tariffs from 39% to 15%, the same rate as EU exports to the US. In return for the deal, Swiss companies have promised to invest $200 billion in the US by the end of 2028. White House has said at least $67 of the investment would occur in 2026, and Swiss businesses would set up apprenticeships and training programs in the US. 

This also follows trade deals with Argentina, Guatemala, El Salavador, and Ecuador over the week. 

3. Good news on the South African economy, as S&P upgrades sovereign ratings for the first time in two decades to BB, two notches below investment grade, on the back of reforms and fiscal revenues. 

The rolling blackouts that hamstrung the economy have largely been avoided this year and Eskom, the state power company, returned to profit after eight years of losses and reliance on government bailouts... S&P said the upgrade reflected South Africa’s recent record of budget surpluses, excluding interest payments, and less financial pressure from Eskom... After a decade in which GDP expansion remained below 1 per cent, there have been other positive developments. The country was recently removed from the Financial Action Task Force’s grey list while the survival of the government of national unity has improved investor confidence. This week, the government cut its inflation target for the first time this century to 3 per cent, bolstering a rand rally...

S&P said it expected South Africa’s GDP growth to pick up to 1.1 per cent this year, from 0.5 per cent in 2024. South African assets have stood out this year even in the midst of a rally in other emerging markets, while the rand is up about a tenth against the dollar in spot terms. The Johannesburg all-share index has risen about a third this year, or nearly 50 per cent in dollar terms. The yield on South Africa’s 10-year rand government debt has fallen from 11 per cent in April to about 8.7 per cent.

3. The latest in rent-seeking by the Trump family is a report that the Trump Organisation is in talks to bring a Trump-branded property to a $63 billion government-owned project that is set to transform the historic Saudi town of Diriyah into a luxury destination with hotels, retail shops, and office space. The Organisation is also talking to bring Trum branded property to other developments in Saud Arabia. 

The negotiations are the latest example of Mr. Trump blending governance and family business, particularly in Persian Gulf countries. Since returning to office, the president’s family and businesses have announced new ventures abroad involving billions of dollars, made hundreds of millions from cryptocurrency, and sold tickets to a private dinner hosted by Mr. Trump... In Saudi Arabia, a Trump tower is planned for Jeddah, and two projects have been announced in Riyadh. A Trump hotel and tower has moved forward in Dubai, the largest city in the United Arab Emirates. And a golf course deal in Qatar has put the Trump family in business with a government-owned real estate firm there... Each venture generates licensing fees for using the Trump name... Licensing deals can be lucrative, particularly if a development does well. Often, a company is paid for the use of its name and is not required to invest any money in the project itself. The Trump Organization’s licensing agreements are not public, making it impossible to know the terms.

4. Sustainable high growth rates in India is not possible without broad-basing aggregate demand. More here. 

5. Corporate India's R&D problem in a graphic.

And global comparison.

And it does not seem to be improving.

Most of the top six sectors saw a dip in their share in the R&D expenditure by Nifty 100 companies during FY23-25.

6.  Retail is an illustration of the deeply price-sensitive and low-margin nature of Indian market. 

Foreign brands including West Elm, Pottery Barn and Superdry have stores in Reliance’s shopping malls in upmarket Mumbai. However, those joint ventures have largely struggled to gain traction with shoppers in India, where the per capita income remains less than $3,000. The conglomerate’s foreign brands business housing these joint ventures lost Rs2.7bn ($30mn) in the financial year through March 2025, according to the latest available accounts... Reliance’s high-profile partnership with fast-fashion retailer Shein has also been underwhelming... Shein’s app has been downloaded just 11mn times so far, according to market intelligence firm Sensor Tower. Its discount prices are largely matched, if not undercut, by many Indian ecommerce and fashion retailers, say analysts... Blinkit, Swiggy and Zepto, which together control more than 90 per cent of the quick commerce delivery market and compete with Amazon and Walmart-owned Flipkart. None of the companies are profitable.

7. Arvind Datar has a good explainer of the telecommunications adjusted gross revenue issue that the Supreme Court has just allowed for reconsideration (after having created the problem in the first place).

8. Even as Delhi grapples with toxic air pollution levels, here's something from England.

In my home country of England, levels of PM2.5 — fine particulate matter which is widely seen as the most damaging pollutant to human health — have plummeted. A report by the Institute for Fiscal Studies describes “remarkable progress” over the past two decades. Between 2003 and 2023, the average level of PM2.5 roughly halved in every region of England, and almost everywhere is now already below the target the UK government set for England for 2040.

Also India's VC industry facts

The country has created more than 120 unicorns, start-ups valued at more than $1bn, according to Tracxn — the third highest number after the US and China. Indian and international venture capital firms have invested $96bn over the past five years, according to consultants Bain, in around 8,000 funding rounds. Most of this has come from foreign investors but the domestic long-term capital base is developing fast, from family offices to insurance companies and pension funds.

9. The remarkable precision of Chinese economic forecasts raises red flags.

10. The spectacular reduction in the cost of renewable energy.

Since 1976, the price of solar modules has fallen by 99.6 per cent. With each doubling of installed capacity, the price fell by 20 per cent.

11. Janan Ganesh may well be spot on with his assessment of Rachel Reeves, the British Chancellor of Exchequer,

Rachel Reeves: one of life’s triers, but never cut out for this particular office at this particular time. At next week’s Budget, she will announce a second round of tax rises, which she said would never come. She has spent 2025 fanning and then dousing speculation about certain levies, such as higher income tax, with predictable effects on confidence. (A Tory who behaved like this would be called a vandal.) Most workplaces, including newspapers, contain staff who are out of their depth but survive because the boss is too embarrassed to fire them. They just tend not to be the second-highest person in the organisation.

And on her boss, the Prime Minister, Keir Starmer.

There were warnings about Starmer’s character in opposition. He let others stand up to Jeremy Corbyn, whom he served in shadow cabinet. He let others fight woke dogma, until the tide turned against it. Even now, he makes liberal use of human shields. Notice that every crisis for Starmer quickly becomes a conversation about his underlings. His then chief of staff Sue Gray used to be the problem. Now it is her successor Morgan McSweeney. What rotten luck the prime minister has with recruitment. The British are having to relearn a lesson that Theresa May should have fixed in their minds forever. Don’t assume that uncharismatic people have hidden depths. Being boring does not make someone a “technocrat”. One can be dull and inept.

12. Britain has the biggest difference between the bottom and top tax slabs. 

According to the latest figures from the OECD, 45 per cent of top earners’ salaries goes on taxes and social contributions, compared with 29 per cent for the average worker, for a top-to-middle gap of 16 percentage points. Scandinavian gaps come in at about 12 points. Northern Europe’s social democracies tax everyone from bottom to top at a moderately high rate. In Britain, taxes at the top are comparable to Denmark and Norway but the average Briton is taxed less than the average American.

13. John Martinis, Professor of Physics at the University of California, Santa Barbara, and the winner of 2025 Nobel Prize in Physics, poses a manufacturing challenge to realise quantum computing.

Anyone who has looked inside a modern quantum system can see the truth of this. Look at the diagrams or pictures of devices and what do you see? A jungle of wires and discrete components, all designed to cool and control a single, small chip hidden at the bottom of the cryostat. We have reached a stage where the complexity of the plumbing completely overwhelms the quantum device itself. My vision is that the entire, spaghetti-like control system must be replaced by a single, integrated chip. Think of it as the transition from the room-sized mainframe computers of the 1960s to the microchips of the 1970s and beyond. That transition wasn’t an innovation in abstract mathematics; it was an industrial engineering marvel. We need cryogenic integrated circuits to operate at the very low temperatures required for superconducting qubits. Using this approach, we can put not hundreds but 20,000 high-fidelity qubits on a single, clean wafer, and then achieve the target of millions of qubits per system by interconnecting those wafers. Quantum computing must adopt state-of-the-art chip manufacturing — the same technology that builds billions of transistors into every modern smartphone. This means getting rid of outdated, inefficient methods, such as the 60-year-old lift-off fabrication process used in the development of quantum computing chips, which simply is not clean or scalable enough.

He sees this as an industrial engineering challenge for the US and wonders whether the modern culture distracts from its realisation.

When the classical semiconductor industry offshored much of its fabrication capacity, it shifted technological leadership overseas. I do not wish my scientific legacy to simply mint a few more billionaires... I wonder whether modern culture, with its focus on the latest result and aggressive marketing, makes the necessary, difficult and frankly less glamorous work of deep industrial engineering harder to justify and fund. But the path to scalable quantum computers is paved with high-tech fabrication equipment, not just high-impact papers. It is time for the superconducting qubit community to shift its focus from chasing the next algorithmic demonstration to tackling the immense manufacturing and engineering challenge that lies ahead. The moment for foundational scientific discovery needs to give way to the era of industrial manufacturing.

Weekend reading links

1. Subsea cable is fast becoming a sector of strategic importance. Globally, there are four major companies - Japan's NEC, New Jersey-based SubCom, France's state-owned Alcatel Submarine Networks (ASN), and China's HMN Tech, a former Huawei subsidiary. The last three own cable-laying shipping fleets, while the first charters its vessels and is now set to receive government support to buy ships to put them on a par with their counterparts. A subsea cable-laying vessel could cost about $300 million. 

It currently relies on a subsea cable-laying vessel leased from a Norwegian group in 2022 on a four-year charter, partnerships with other companies and on renting the specialist ships on an ad hoc basis to meet surging demand for fibre-optic cabling in the Indo-Pacific. NEC dominates installations in Asia and has laid more than 400,000km of cables globally. It also specialises in armoured cables that can better withstand sabotage. Globally, there are 63 cable-laying ships, according to the International Cable Protection Committee. ASN owns seven, while SubCom and HMN Tech are believed to own seven and two, respectively, but did not reply to requests for confirmation. Japanese telecoms groups NTT and KDDI own cable-laying vessels, which are rented out to NEC, but they are not the larger kind of vessels required to lay transocean cables.

This is a description of the challenges being faced by the industry.

A shortage of ships is one of the major bottlenecks to achieving the 26 per cent rise per year predicted for global data transmission to 2031, driven by video streaming and artificial intelligence services led by Big Tech groups such as Meta and Google, according to the TeleGeography telecoms data service... Up to 200 cables are damaged annually, primarily due to fishing or anchors, but also through sabotage, as seen in the disruption caused to two cables in the Baltic Sea last year. Chartering for an accurate period has become increasingly difficult due to the unpredictable timelines for securing the cables’ passage. There is now a two-to-three-year wait to get permissions from countries whose waters the cables pass through, up from six months to a year about a decade ago.

2. Salaries in India have not kept pace, even with inflation in the FY16-24 period.

More here. 

From Diwali 2023 onwards, Indian companies’ earnings growth has decelerated at a rapid rate. Underpinning this deceleration is a sharp conk-off in consumption growth, long the mainstay of the Indian economy. Key drivers of this consumption downturn are a sharp deceleration in white collar job creation alongside a reduction in real wages for white collar workers over the past eight years.

And here

This should be a matter of deep concern.

The weak consumption demand will constrain India's sustained high growth ambitions. It will restrict private investment, limit job creation, squeeze salary growth, and increase household indebtedness. The only solution is broad-based, equitable economic growth. But that, in turn, requires conditions that are far from 

3. Rhodium Group has a report on the challenges faced by foreign car manufacturers in China. The German car makers and Tesla have the largest China exposure, while the Japanese and Korean car makers have far smaller engagement. 

It is important to note that while Tesla is likely even more dependent on China for profits than German OEMs, the sources of those profits are fundamentally different. German automakers still earn most of their China income—though at shrinking margins—by selling vehicles to Chinese consumers, whether locally produced or imported. Tesla, by contrast, likely earns the bulk of its China profits from two sources: the sale of regulatory credits—its CFO disclosed that three-quarters of Tesla’s global credit sales in 2024 (Q1–Q3) occurred in China—and a highly profitable export business built on China’s low production costs. In short, German OEMs depend on Chinese consumers, while Tesla depends on Chinese workers and credits... The experience of Toyota, Hyundai, and Kia shows, however, that success in China is not a prerequisite for global competitiveness. Toyota has become the world’s largest carmaker despite a relatively modest China footprint. Hyundai and Kia, for their part, have grown despite running loss-making China operations after the 2017 THAAD dispute triggered consumer boycotts that cratered sales.

4. The US Congress has become ideologically polarised since the turn of the millennium.

And immigration has been at the forefront of the polarisation.

5. A summary of the destructive chainsaw Trump has taken to the US Science establishment.

The proposed 2026 Budget outlines cuts of 34 per cent for basic research and 22 per cent for all research. It demands a 55.7 per cent cut for the National Science Foundation (NSF) — from $8.8 billion to $3.9 billion — and a 39.3 per cent cut for the National Institutes of Health (NIH) — from $46 billion to $27.9 billion. These two agencies are the primary sources for TRL 1-2 basic research. The story for TRL 3-6 applied research is also rough. The Department of Energy’s (DoE’s) Office of Science faces a 14 per cent cut, and Nasa’s science-research budget is slated for a 46.6 per cent reduction — from $7.3 billion to $3.9 billion... 

The Nazi government, which took charge in 1933, was a populist one, harnessing mass anger against the cosmopolitan elites. An estimated 25 per cent of all physicists in Germany, including 11 past or future Nobel laureates like Albert Einstein, Max Born, and Leo Szilard, fled Germany. The best research organisations of the world — like the University of Gottingen — were destroyed. It only took one year. In 1934, the great mathematician David Hilbert said to the Nazi education minister “mathematics in Gottingen? There is really no such thing any more”.

6. Comparing dotcom era telecom investments with AI investments today.

There were more than 80mn miles of fibre optic cable laid from the mid-1990s until the end of the dotcom boom, and much of that investment took years to pay off. US telecom companies spent $444bn in capital expenditure between 1996 and 2001. Still, compare this with the $342bn that will be spent this year alone in the US by the top investors in AI data centres and computing infrastructure, including Microsoft, Alphabet, Amazon and Meta. At the current rate of power consumption needed to fuel AI development, estimated investment will stretch to nearly $7tn by 2030.

7. Nvidia makes a $1 bn investment in Nokia to take a 2.9% stake in the Finnish telecom manufacturer, following which the shares in Nokia surged 21% and Nvidia by 5%. Nokia is seeking to diversify away from network infrastructure into AI and cloud services. 

This is part of the vendor-financing model of the emerging AI market. Is Ericsson next for Nvidia?

8. Two graphics that question the argument that we are in a bubble. One, the PE multiples of the Big Tech firms compared to those in earlier bubbles. 

The capex boom is largely (at least till now) being funded by free cash flows, unlike debt in earlier booms.

9. It's useful to keep in mind that much of the infrastructure in the West was built long ago.

In Britain we are using rail lines, bridges and sewers built by the Victorians, and even the Romans’ roads. It has taken over 150 years for London to need an expansion of the sewerage system begun by Joseph Bazalgette in 1859 (and largely finished within a decade). The US built its railroads in the 19th century, and interstate highways from the mid-1950s.

10. The reforms currently underway in the US to reverse safeguards in the banking sector in the name of deregulation may be an instance of bad deregulation. 

Last week, the Federal Reserve announced plans to overhaul its annual banking stress tests to make them less onerous. US banking watchdogs are widely expected to follow up with other changes to capital and leverage rules that could unlock $2.6tn in additional lending capacity, according to consultants Alvarez & Marsal. To backers, there is a logic to the Trump administration’s moves. Shackling banks with high capital requirements has not eliminated risky lending. Instead it has led to regulatory arbitrage that makes the danger harder to supervise, they say. As the IMF pointed out, banks now lend to private capital, which uses the funds to leverage investor money while making loans and buying securitised debt. In theory, the investors absorb the first losses, keeping bank deposits safe. In reality, layers of borrowing by companies like First Brands make it hard to tell who is on the hook and may lead to complacency. If banks lent directly, they say, they would do more due diligence and pick their borrowers more carefully... 

Another Trump administration initiative to allow ordinary investors to put their money in alternative assets, which have long been restricted to institutions and the super wealthy. Those changes are expected to channel floods of retail and retirement money to private capital groups, giving them bigger pots with which to make loans and buy asset-backed securities. These retail funds will be under particular pressure to deploy capital quickly because of the way they are structured... Bank of England governor Andrew Bailey said last week that “alarm bells” are going off around the rapid growth of structured products, and JPMorgan chief executive Jamie Dimon has proclaimed that the recent collapses of subprime auto lender Tricolor and car-parts maker First Brands are evidence of “cockroaches” in the credit market. The failures have uncovered complex webs of borrowing and allegations of fraud, leading Apollo chief Marc Rowan to warn that eroding lending standards are leading to “late-cycle accidents”.

11. Stock market concentration in the US is at all time high.

Eight of the 10 biggest stocks in the S&P 500 are tech stocks. Those eight companies account for 36 per cent of the entire US market’s value, 60 per cent of the gains in the index since the market bottomed in April and almost 80 per cent of the S&P 500’s net income growth in the last year... MSCI All World index, which comprises over 2,000 companies from more than 40 markets, currently has almost a quarter of its capitalisation in just eight US tech groups.

 On Tuesday afternoon, when US Stocks hit their latest highs, 397 stocks in the S&P 500 lost ground. In 35 years, the index never posted a gain on a day when do many of its components sold off. 

Since the launch of ChatGPT in November 2022, the US markets have been on a tear, underpinned by AI stocks.

This is an interesting snippet.

Since 1970, the total value of all publicly traded US stocks has averaged about 85 per cent of US GDP. Warren Buffett once described this as “probably the single best measure of where valuations stand at any given moment”. On Tuesday, the metric rose to a record 225 per cent.

12. More on the First Brands bankruptcy case in the US in this story of how a small Draper, Utah-based equipment finance specialist, Onset Financial, ended up with a $1.9 bn loan exposure to the Ohio-based automotive parts maker which borrowed close to $12 bn to finance acquisitions. 

First Brands’ reliance on Onset, which claims to eschew the “rigid” and “strict” approach of banks in favour of “speed” and “flexibility”, illustrates how unconventional corners of credit markets facilitated its borrowing binge, with many of the Ohio-based company’s lenders unaware of the true scale of its debts until it was too late... Onset’s corporate identity to date has been marked by promotional videos, a high-tempo sales culture and links to both prominent local investment firms and sports players. The fallout could ripple through the community in Utah, where Onset has built up an image of growth and glamour. Founded in the depths of the 2008 financial crisis in Draper, a small city 20 miles south of Utah’s state capital Salt Lake City, Onset’s triumph over stodgy rivals in a key area of business lending is a recurring theme of its corporate lore. Equipment leasing is a $1.3tn industry in the US that allows companies to rent machinery rather than sink large amounts of upfront capital into building or improving their facilities... People familiar with Onset’s operations describe a model fuelled by a direct and ambitious sales force. “What does our product do? We sell money, simple as that,” Taylor Weeks, Onset’s vice-president of sales, told a podcast in 2023. Weeks added that the company provides “rocket fuel” for “high-growth” businesses.

Equipment leasing is a $1.3 trillion industry!

13. FT writes about the rise of China's biotech firms, licensing technology and selling drugs outside the country. From having no biotech sector to speak of ten years back, in the first eight months of 2025, there have been 93 overseas licensing deals worth a total of $85 bn on drugs developed in China. 

China’s transformation from a copycat manufacturer of drugs developed overseas to a hub of homegrown research is exemplified by Jiangsu Hengrui. Founded in 1970, it spent the first two decades as a small-scale state-owned manufacturer of low-cost antiseptics. In the 1990s, it started developing generic anticancer drugs. It was privatised in 1997 and began investing in building its own research capabilities. Today, it has one of the most diversified pipelines in the country, spanning weight-loss therapies, oncology drugs and Alzheimer’s treatments...

Hengrui has struck licensing agreements with Merck, Braveheart Bio and Glenmark in the past year alone. In July, it agreed a deal with UK pharmaceutical company GSK to develop up to 12 medicines. “In China, you can scale and test medicines in human beings much faster than in the US or Europe,” said Loncar. “If you have an idea for a drug, you can get an answer about whether it works a year or two earlier in China.” For many Chinese biotechs, the surge in international partnerships has provided much-needed capital after a difficult few years marked by drug pricing reforms that squeezed profit margins on domestic sales... Hengrui’s international deals have highlighted a concern for Chinese pharma companies seeking to get international approval for new drugs. The US Food and Drug Administration has repeatedly rejected one of Hengrui’s cancer drugs, citing questions about quality control at its manufacturing sites.

US and European pharma companies are doing what their manufacturing counterparts elsewhere did by outsourcing to China, only to realise that they have been outmuscled by them over time. 

This also raises questions about where India's established pharmaceutical firms are. 

14. Finally, NYT has a good article on OpenAI's circular financing deals. 

Many of the deals OpenAI has struck — with chipmakers, cloud computing companies and others — are strangely circular. OpenAI receives billions from tech companies before sending those billions back to the same companies to pay for computing power and other services.

Weekend reading links

1. Beneficiaries of George Soros and his Open Foundation.

Among the beneficiaries is Hungary’s Viktor Orbán whose Oxford scholarship was paid by Soros in 1989. Talk about no good deed going unpunished. Another kind of beneficiary is Scott Bessent, the US Treasury secretary, who ran Soros’s hedge fund for many years. Soros was the anchor $2bn investor in Bessent’s own hedge fund, Key Square Group, in 2015.

2. Chinese companies produce many AI tech components.

3. Yogendra Yadav reviews Partha Chatterjee's new book, For a Just Republic: The People of India and the State. 

4. The US tariffs latest update.

5. India's IT industry facts of the day

The top five Indian IT firms had free cash flows of nearly $13bn in the 2023-24 financial year, according to HFS Research. And Infosys said on September 11 it had approved a $2bn share buyback offer — a week before the Trump order. Yet the R&D to sales ratio for India’s IT industry is abysmal: 0.88 per cent on average, according to a 2024 report by India’s Ministry of Corporate Affairs.

6. China moves to restrict Ericsson and Nokia equipment in their telecom networks. 

Chinese state-backed buyers of IT equipment — which include mobile network operators, utilities and other industries — have begun more closely analysing and policing foreign bids. That process has required contracts by Sweden’s Ericsson and Finland’s Nokia to be submitted for “black box” national security reviews by the Cyberspace Administration of China where the companies are not told how their gear is assessed. The reviews by the powerful tech watchdog can stretch three months or longer. Even in cases where the European groups ultimately secure approval, the lengthy and uncertain audits often leave them at a disadvantage to Chinese rivals that face no such scrutiny, the people said... Beijing’s growing sales restrictions have collapsed Ericsson’s and Nokia’s combined market share in China’s mobile telecoms networks to about 4 per cent last year from 12 per cent in 2020.

Amidst these moves, Europeans have been half-hearted in their efforts to restrict Huawei and ZTE. 

Huawei and ZTE have retained 30 to 35 per cent of the European mobile infrastructure market, down only 5 to 10 percentage points from 2020, data from Dell’Oro Group shows. Germany has 59 per cent of installed 5G gear sourced from Chinese groups, according to John Strand of Strand Consult, even though the country plans to phase out high risk Chinese vendors by 2029.

7. FT writes on the wealth of the super-rich

When Forbes magazine released its first global billionaires list in 1987, just 140 names appeared on it. The 2025 version featured more than 3,000 people, worth a collective $16tn. Even allowing for factors such as the rise of China and over three decades of inflation, it is a staggering increase in both numbers and values; the net worth of Elon Musk, judged the world’s richest person in April 2025, was estimated at $342bn — compared with $295bn for the entire class of 1987. Globally, the average wealth of the top 0.0001 per cent of the population grew on average 7.1 per cent a year between 1987 and 2024, compared to 3.2 per cent for the average adult, according to Gabriel Zucman, a professor of economics at the Paris School of Economics and at the University of California, Berkeley... The top 400 wealthiest Americans had a total effective tax rate of 23.8 per cent of income in the years from 2018 to 2020, including individual income taxes, estate and gift taxes, and corporate taxes. In comparison, the rate for the wider US population was 30 per cent, rising to 45 per cent for the highest-earning workers.

Historically, asset-based taxes were the main revenue source for governments. Taxes on income in the UK, for example, were a mid to late-20th century phenomenon closely tied to the emergence of a welfare state. Now, as demographics worsen (with fewer worker and more retired people), the case for wealth taxes is becoming more compelling. 

8. How housing prices in the UK have changed over the last 35 years. 

9. GCCs are cannibalising the business of India's IT services firms.

As GCCs grow, they are eating into the pie of IT services majors, both in terms of business and skilled talent... Out of the 200,000 tech roles in India in FY25, approximately 120,000 were in GCCs, with a 10–15% year-on-year growth, said Vikram Ahuja, co-founder of ANSR, a GCC solutions platform... The real evolution started with traditional companies coming in to set up true capability centres, like [department-store chain] JCPenney, [luxury-superstore chain] Saks Fifth Avenue, [lingerie retailer] Victoria’s Secret…They have no business to be experimenting with this concept. All airlines, hotel chains, car-rental companies are coming. So, it’s become industry agnostic. On the contrary, the more low-tech and the more traditional you are, the more the need [for a GCC]... Lloyds has hired over 2,500 engineers in Hyderabad within 14 months, with 95% focused on tech. At Barclays’ India operations, two–thirds of its tech workforce is now in-house—a stark jump from just about 33% a decade ago. Even Indian lenders are following suit. Just six months ago, RBL Bank achieved a 60:40 split between in-house and outsourced tech talent—a significant leap from the 35:65 ratio of a few years ago.

A major reason for the exit is the low and stagnant wages paid by IT services firms, even as the scope of work expands. 

9. Private equity is taking over India's IB and IGCSE school chains. And results are not good.

Private equity firms are betting big on Indian education, and their playbook mirrors a Western model—optimised for cost control, standardised for scale-up, and centralised for effective management... Both CBSE and state-board campuses face tighter fee caps and myriad state-level approvals. International boards like International Baccalaureate (IB) and Cambridge have a wider fee latitude and can levy “development” charges, creating room for upgrades and margins. The model makes money within India’s nonprofit rulebook. The school usually sits in a Section-8 entity to satisfy K–12 regulations. A for-profit services arm—typically charging 10–15% of school revenue through the likes of management fees, royalties, and infrastructure leases—operates on the side... 

Investors like GSF fall back on the same approach with each school: centralise leadership, trim excess, introduce standardised systems, and make visible infrastructure upgrades. But beneath the surface, the effects of this strategy vary sharply... While fee hikes have remained within the standard 5–10% range at premium schools like Sancta Maria (Rs 7–8 lakh in annual fees)—already operating near permissible ceilings—some lower-fee campuses could see steeper increases... Infrastructure investment varies significantly by operator and campus... The international school Manthan in Hyderabad saw 60–70% staff attrition after a 100% ISP acquisition... At TIPS Coimbatore, acquired by Globeducate, 20% of the staff left after the founder exited... Student numbers, too, fell by nearly a fifth at Glendale and Oakridge in the years after their acquisition... Pre-acquisition pay rises of 8–15% have been slashed to 2–7% under new management—standard practice in the West, but a sharp adjustment in Indian schools... The result: well-trained, experienced teachers leave, and classroom quality drops... The same Western-school playbook that made these operators successful abroad doesn’t map cleanly onto India’s hyper-competitive, founder-led education landscape.

Weekend reading links

1. The power of Thailand's constitutional court.

Thailand’s Prime Minister Paetongtarn Shinawatra has been removed from office... The country’s constitutional court on Friday found Paetongtarn guilty of ethics violations over a phone call with Cambodia’s former leader Hun Sen, in which she criticised the Thai military in the run-up to the border violence... she is now the fifth holder of that office to be removed by the constitutional court in the past 17 years... Paetongtarn, a political novice, assumed office last year after her predecessor, property tycoon Srettha Thavisin, was dismissed by the constitutional court for appointing a previously jailed lawyer as a cabinet member, an ethical violation... The constitutional court has dissolved more than 100 political parties over the past 30 years, including Move Forward, which received the most votes in the last nationwide election in 2023.

2. Boeing and Airbus

The success of the A320 family has been the driving force behind Airbus’s ascendancy in its five-decade rivalry with its US competitor. For years, the two companies had a roughly 50:50 split of the market for commercial single-aisle aircraft. But by the end of last year, Airbus held a market share of 61 per cent measured by order backlog and 72 per cent by deliveries... Boeing delivered 348 jets in 2024, fewer than half the 766 that Airbus managed, as 737 Max output remained subject to a 38 per month cap pending improvements to quality control. A shortage of engines has been one of the most persistent challenges for both companies. CFM International, a joint venture between France’s Safran and GE of the US, and Pratt & Whitney have struggled to keep up with demand. Both companies’ engines for the A320neo have also had durability issues.

3. India uses half the capital to raise output by one unit compared to China.

4. FT effectively calls out corporate America as a bunch of bullies who flaunt their muscle before the weak and prostrate when they are in turn bullied.

When Zohran Mamdani resoundingly won the Democratic mayoral primary for New York in June, Wall Street and Silicon Valley erupted in outrage at his promises of free buses, rent freezes and city-run groceries. Hedge fund billionaires Bill Ackman and Dan Loeb, Jamie Dimon of JPMorgan Chase and tech entrepreneur Brian Armstrong of Coinbase all warned about the risk of heavy-handed interference in the city’s economy. David Solomon, chief executive of Goldman Sachs, took to LinkedIn to slam Mamdani’s proposal to freeze city-controlled rents. “When New York tried it in the 1920s and 1960s, it limited affordable housing, narrowed investment in new housing, and made housing outside the control area more expensive,” he wrote. The reaction over the past few weeks as US President Donald Trump has unveiled a series of blunt interventions into the workings of both the financial system and the operations of private companies has been very different... 

Yet as Trump has stepped up his attacks on the Fed, Wall Street’s leading figures have offered only limited criticism. And while many of his corporate interventions amount to the sort of European-style dirigisme that the US business elite once loved to deride, the response to Trump’s agenda has been near silence. Indeed, some business leaders have offered praise of the president’s attempts to direct the economy... The juxtaposition with Mamdani is striking: vociferous criticism of the frontrunner to be New York’s mayor from business leaders, but calculated restraint as the president reshapes the rules of free enterprise in America... the principal explanation lies in fear. Criticising Trump, they argue, is risky business. “They’re more afraid of the guy in power in Washington than of the potential mayor of New York,” says Ilya Somin, a law professor at George Mason University and scholar at the libertarian Cato Institute. “Even if Mamdani does become mayor of New York, he will not have the kind of power that the president of the US has.”... Jamie Dimon, who last month dismissed Mamdani’s economic views as “the same ideological mush that means nothing in the real world” and criticised “idiots” in the Democratic party, has stopped short of criticising Trump directly.  

5. India is now becoming a more expensive mobile services market. 

6. The Ken has a nice story on how India’s private sector is making UAE as a choice investment destination.

Personal-care and pharmaceutical company Himalaya Wellness; electric-vehicle maker Omega Seiki Mobility (OSM); electric-bus manufacturer (and subsidiary of commercial-vehicle giant Ashok Leyland) Switch Mobility; and iron-and-steel-pipe manufacturer Jindal Saw. These are just a few among Indian companies who’re planning to set up fully-operational manufacturing bases across free-trade zones in the UAE. Others, such as consumer-goods company Dabur, eyewear company Lenskart, and conglomerate Tata already have operations there. Tata’s presence, in particular, is sprawling—from hospitality ventures such as Taj Exotica and The Palm Dubai, to Tata Steel Middle East’s downstream facility to manufacture steel flooring in Jafza. Of the total 11,000 companies in the Jafza free-trade zone, 2,300 are Indian… While India currently has 276 operational SEZs with around 6,300 companies, the UAE—which is smaller than the state of Bihar in area—has 40 free-trade zones boasting over 200,000 companies… The incentive comes in the form of financial backing from UAE’s sovereign-wealth funds, joint ventures, or loans. For instance, before Lenskart’s Dubai factory became operational in 2024, it had received $500 million from the sovereign wealth fund Abu Dhabi Investment Authority (ADIA)… Similarly, Himalaya Wellness secured $80 million in loans in 2023 from the Emirates Development Bank for its upcoming plant in Dubai’s free-trade zone. Spanning 225,000 sq ft, it is expected to create jobs for 250 professionals and produce 3 billion tablets, 15 million syrup bottles, and 3 million ointment units a year by 2030.

The numbers are truly disturbing. There are 2300 Indian companies in just one UAE FTZ, compared to 6300 firms in all of India’s 276 SEZs! Even with all the obvious attractions of UAE - tax-free zones, ports and logistics facilities, and access to international institutional finance - this scale of exit should be a matter of concern. 

7. Gartner's annual "digital automaker index" which compares carmakers on their potential to monetise their software has the following line up. 

Clearly, the traditional car makers have fallen behind, being overtaken by the new American and Chinese firms focusing on electric vehicles. 

Ultimately, analysts warn that the auto industry is likely to go in the same direction as smartphones and PCs, with a small number of operating systems like iOS and Android eventually dominating the software space. They add that the transition will fundamentally tilt the industry’s modus operandi away from designing, building and selling cars — a business model characterised by mechanical engineering and relatively thin profit margins — and towards software and services. Toyota and its peers are aiming to use these to create new sources of revenue as the industry shifts to autonomous electric cars. Investment across the industry is already shifting from superior engines and external design to the computer systems that will control everything from batteries to safety features and, eventually, self-driving functions.

8. Unit economics of food delivery e-commerce.

Both Swiggy and Zomato typically charge restaurants a commission ranging from 15-30%, depending on the scale of the business, with smaller businesses often paying higher commissions. Most restaurants say nearly half the order value disappears before it even reaches them. Explaining the math, restaurateurs indicated to Mint that on an order of, say, ₹300, about ₹75- ₹90 goes to the aggregator as commission, while about ₹60- ₹90 is lost in discounts; ₹15- ₹30 goes towards marketing on the platforms just to stay visible. In the end, a restaurant is left with only ₹150- ₹90 out of an order worth ₹300. This is a generalized estimate and the actual numbers can be higher or lower depending on each restaurant’s commissions and ad spends. “Pre-covid, commissions were as low as 8-12%. Now, the base commission is 33% and with payment gateway charges, marketing costs, taxes, the sky's the limit. Cost-per-click (the cost a restaurant pays when a user clicks on the ad listing by a restaurant) used to be around ₹1.25 but now it is more than ₹7," the owner of a restaurant chain based in Assam told Mint... Spiralling costs aren’t the only concern for restaurants. Owners are also upset over arbitrary discounts, hidden features and a near-total lack of communication from the platforms. Several restaurateurs allege that Swiggy and Zomato launch discounts or even enable dine-in reservations without their consent.

9. Ajai Srivastava of GTRI points to how Quality Control Orders (QCOs) worsens the business environment in India. Sample this.

A recent example is the steel ministry’s June 13 order. It requires not only finished and semi-finished steel products, but also the raw materials used to make them, to have a BIS quality certificate. The rule took effect with barely one working day’s notice, causing shipments to be stuck at ports, contracts to be cancelled, and court cases to be filed... Now, every upstream raw material supplier — even if located in a third country — must also be BIS-certified... This policy imposes a double-certification requirement. The first certification — the one that matters — is for the final product, which is already in place under FMCS. The second, newly mandated certification is for upstream raw material suppliers, often in third countries far removed from the Indian market. Getting BIS certification takes 6 to 18 months, involves substantial fees, and requires performance guarantees and compliance audits. Small overseas mills producing modest volumes for an intermediary exporter have no incentive to invest the time and money needed for certification. This means limiting the number of foreign suppliers for Indian buyers...

Additional licensing for raw material suppliers adds no meaningful quality assurance. Existing safeguards — mill test certificates, port-level Positive Material Identification (PMI) tests, and customs inspections — already prevent substandard imports... No major steel-producing economy — the United States, European Union, or Japan — requires separate raw material certification if the final product meets national standards. Instead, they rely on traceability through Mill Test Certificates, accredited third-party testing, and mutual recognition agreements. India’s double-certification model diverges sharply from these norms and risks being classified as a non-tariff barrier (NTB) under World Trade Organization (WTO) rules... By forcing upstream suppliers with no commercial interest in India to undergo a burdensome certification process, the government has added avoidable costs, and jeopardised India’s reliability as a manufacturing partner.

10. Interesting that Cantor Fitzgerald, an investment bank run by the sons of Howard Lutnick, has been buying up tariff refund rights in the expectation that the US courts will finally rule the tariffs illegal and force the government to refund them. 

11. Palantir may be the most over-valued firm in history!

Palantir’s market value has already soared to $430bn, more than 600 times its past year’s earnings and nearly triple the equivalent multiple for Cisco (or, indeed, Nvidia) at its peak. Software firms often prefer to express their valuation in terms of underlying sales, which puts Palantir’s multiple at around 120. For comparison, in 2005, the year before the Oxford English Dictionary added the verb “Google”, Google’s price-to-sales ratio peaked at 22... Adam Parker of Trivariate Research, an investment firm, has published a note entitled “Could Palantir be the best short idea?” Writing in late May, he examined the ratio of enterprise value (which adjusts market value to account for debt and cash on the balance-sheet) to forecast sales for the coming year. On this measure Palantir then scored 73 and now scores 104. Mr Parker looked for other listed companies that had hit a multiple of 70 since 2000. Excluding financial firms and those with annual revenue of less than $50m, he found 14, the largest of which has a market value around a quarter of Palantir’s... To reduce its price-to-sales valuation to “only” Google’s at its peak in 2005, while maintaining its current share price, Palantir needs to multiply its revenue by 5.6—substantially more than the barnstorming progress it has made over the past five years. Doing this over the next five would require an annual growth rate above 40%.

12. Staggering statistic about electoral support for Trump.

According to Gallup, just 1 per cent of Democrats approve of Trump’s job performance, while 93 per cent of Republicans do — equalling the biggest split since this survey started in 1979.

13. Fascinating graphic that shows the over-representation of extreme views in social media.

Recent work by US researchers Claire Robertson, Kareena S del Rosario and Jay van Bavel among others… find that social platforms’ inbuilt tendency to reward indignant and hostile content creates incentives that systematically reward the production of simplistic messages and extreme positions, while rendering moderate views less visible… with social media we essentially have a plethora of fiercely anti-establishment and ruthlessly eyeball-chasing broadcasters, and they’re reaching much larger and broader swaths of the population. This proliferation of views and narratives formerly considered beyond the pale, spread via individuals and platforms outside the control of erstwhile political and media powers, has shattered norms that previously kept radicals on the fringe... 

A 2019 study found that communities in Italy and Germany that received broadband internet access earlier than others also saw earlier upticks in support for populist parties. In his 2024 book The Normalization of the Radical Right, Vicente Valentim shows that support for many populist positions and politicians has long been higher than widely appreciated, and that the discovery that many others share these views — a process facilitated by the internet and social media — has led to them being voiced more confidently, and embodied at the ballot box.

14. Excellent article about the rise of high-bandwidth memory (HBM) chips as the "new frontier of the AI revolution" and how SK Hynix has become the dominant maker of such chips. 

For decades, memory chips were the unglamorous end of the semiconductor industry, overshadowed by the logic or processor chips designed and produced by companies such as AMD, Qualcomm, Nvidia and TSMC to conduct calculations and control an electronic device’s operations. But HBM designs, such as the HBM3E produced at the Icheon factory, are transforming the memory industry. Joon-yong Choi, vice-president and head of HBM business planning at SK Hynix, notes that whereas in conventional dynamic random-access memory (Dram), “cost was prioritised by customers over power and performance, with HBM power and performance are prioritised over cost”. They are helping developers of so-called large language models alleviate the effects of the “memory wall” — where limitations in storing and retrieving data are an impediment to improving performance — as well as boosting efficiency and lowering costs at thousands of data centres under construction around the world...

Intel began life in the 1960s as a memory chip company, but exited the Dram sector in the 1980s under pressure from Japanese rivals Toshiba and NEC. They, in turn, were supplanted in the 1990s by Samsung and the chip division of Hyundai Electronics, or Hynix, which would later be acquired by the SK conglomerate. The two Korean groups and Micron, of the US, have dominated the sector ever since. Samsung was until recently the undisputed leader of the heavily commoditised market in Dram chips, which are powered and store data temporarily while a processor is running. It used its superior scale to invest in production capacity during the cyclical industry’s regular downturns...

HBM chips, which Hynix began developing in 2013... involved stacking layers of Dram units connected by copper wires a tenth of the thickness of a human hair, like a multistorey library with lifts to quickly transport piles of books between floors. That means HBM chips can offer 1,024 pathways for sending data to and from a processor, Choi explains, compared with 64 for conventional advanced Dram chips. “Think of it like the number of taps filling a water tank, or the number of lanes on a highway,” he says. “When it comes to the memory requirements of AI, nothing comes close to HBM.”... Hynix’s early adoption of an advanced bonding technology called mass reflow-molded underfill, or MR-MUF, as key to its HBM success. It involves the use of a special resin-based insulation material to prevent overheating, crucial when stacking up to 16 Dram chips on top of each other...

HBM chips offer profit margins of about 50-60 per cent, compared with about 30 per cent for conventional Dram units. Because each HBM chip needs to be designed to fit the specific AI graphics processing unit to which it is paired, orders must be placed a year before production, typically on one-year contracts... while compute performance is more important for training AI models, memory is widely considered more important for deployment, also known as inference.