Become a Creator today!Start creating today - Share your story with the world!
Start for free
00:00:00
00:00:01
Under the Banyan Tree - Replay: Live from HSBC Hong Kong
21 Plays1 year ago
This week, we’re replaying our debut live episode of Under the Banyan Tree, recorded in front of an audience at HSBC Hong Kong in August 2023. Fred and Herald are joined by regional sector heads Jing Liu, Michelle Kwok and Frank Lee. Disclaimer: https://www.research.hsbc.com/R/61/9SZdWRp Stay connected and access free to view reports and videos from HSBC Global Research follow us on LinkedIn https://www.linkedin.com/feed/hashtag/hsbcresearch/ or click here: https://www.gbm.hsbc.com/insights/global-research.
Hosted on Acast. See acast.com/privacy for more information.
Recommended
Transcript
Introduction to HSBC Global Viewpoint
00:00:02
Speaker
Welcome to HSBC Global Viewpoint, the podcast series that brings together business leaders and industry experts to explore the latest global insights, trends, and opportunities.
00:00:13
Speaker
Make sure you're subscribed to stay up to date with new episodes.
00:00:16
Speaker
Thanks for listening.
00:00:17
Speaker
And now onto today's show.
00:00:24
Speaker
This episode of Under the Banyan Tree was recorded in front of a live audience at HSBC Hong Kong back in late August.
00:00:30
Speaker
It covers many of the key themes that shaped markets and economies across Asia in 2023, and with those themes still very relevant as we approach the year-end, we wanted to replay the discussion for you this week.
00:00:42
Speaker
As always, analyst notifications, disclosures and disclaimers must be viewed on the link attached to your media player, and with that, it's over to your regular hosts.
Meet the Hosts and Guests
00:01:00
Speaker
Hello ladies and gentlemen and welcome to our first ever live recording of the Under the Banyan Tree podcast where we put Asian markets and economics in context.
00:01:09
Speaker
My name is Fred Neumann, Chief Asia Economist at HSBC.
00:01:13
Speaker
And I'm Harold van der Linde, your other host, and I'm the Chief Equity Strategist for HSBC.
00:01:19
Speaker
Great to see so many this evening.
00:01:22
Speaker
We have three guests here that I would like to introduce to you.
00:01:25
Speaker
The first one is Jing Yu, who is our Chief China Economist at HMC Global Research.
00:01:31
Speaker
Michel Kwok next to me, who is the Head of Asian Real Estate Research.
00:01:35
Speaker
And we've got Frank Lee, who is our Head of Technology Research.
00:01:39
Speaker
And he's going to talk a bit about AI, artificial intelligence later on.
00:01:44
Speaker
And we want to jump right in.
China's Economic Landscape
00:01:46
Speaker
I think China is obviously the topic du jour.
00:01:50
Speaker
Jing, let's start with you.
00:01:52
Speaker
How bad are things, really, if you look at the Chinese economy at the moment?
00:01:57
Speaker
I think the pessimism may not be quite justified because the hard data still show quite some bright spot.
00:02:04
Speaker
We see a very clear disconnect between, for example, the housing sector performance versus the service sectors in general.
00:02:15
Speaker
We have actually seen the data supporting
00:02:19
Speaker
the strong service sector performance, including the newly created statistics by the National Bureau of Statistics, which is showing the service retail sales more than 20% year-on-year growth for the first seven months.
00:02:36
Speaker
And if we go to all kinds of
00:02:38
Speaker
high frequency data, traffic jam, the box office revenue, et cetera, those are all doing well.
00:02:47
Speaker
And let's speak the EV sector.
00:02:50
Speaker
We have seen the EV export basically more than double this year.
00:02:55
Speaker
So it's not that bad, let's put it that way.
00:02:57
Speaker
Jing, you were also in China not too long ago.
00:02:59
Speaker
You told me that you tried to get into, what is it, some supermarket in Hangzhou?
00:03:03
Speaker
And how long did people line up?
00:03:05
Speaker
Yeah, this is the news circulated on the social media.
00:03:10
Speaker
Basically, Hangzhou opened a Costco.
00:03:12
Speaker
I'm not sure whether this is the first one, but people are willing to wait for two hours just to get into the supermarket and another five hours to check out.
00:03:22
Speaker
And then on the social media, they said it's a 300 yuan kind of experience, but still worth it.
00:03:30
Speaker
A lot more people.
00:03:31
Speaker
So there are things doing pretty okay, but the policymakers, at least the market, expect that policymakers are going to do something, right?
00:03:38
Speaker
And so far, the response has been rather underwhelming.
00:03:42
Speaker
Is that fair to say?
00:03:43
Speaker
What do you expect they're going to do?
00:03:45
Speaker
Yeah, exactly.
00:03:46
Speaker
So, so far we have seen lots of talks and incremental measures at best.
00:03:51
Speaker
And this is very different from the previous cycles where the Chinese government usually would rush in to either inject a large liquidity
00:04:01
Speaker
or launch the big infrastructure investment or lifting the housing restrictions one way or the other in order to boost a strong recovery.
00:04:11
Speaker
But this time around, they'd rather see more organic consumption driven growth.
00:04:18
Speaker
But, Jing, let me challenge you a little bit here.
Transition in China's Economy
00:04:23
Speaker
Even if Chinese policymakers wanted to do something, what can they really do?
00:04:28
Speaker
In the past, they built infrastructure to get the economy going again.
00:04:32
Speaker
They reflated the housing market.
00:04:34
Speaker
What is there really that they could conceivably do that would excite us about it?
00:04:39
Speaker
Aren't they constrained with too much debt?
00:04:41
Speaker
Aren't they constrained with demographics?
00:04:43
Speaker
Aren't they constrained with the property market that has gotten too big?
00:04:47
Speaker
What are you really hoping for that they could deliver that would, say, get people excited again about investing in China?
00:04:54
Speaker
That's right.
00:04:54
Speaker
You're exactly right about in the past we have built too many infrastructure projects, maybe too many homes as well.
00:05:02
Speaker
And actually the debt overhang also means a lot of resources, a lot of capital have been locked into those sectors.
00:05:09
Speaker
Now China is probably looking for structural change.
00:05:13
Speaker
where the future growth could be driven by first private consumption and maybe manufacturing, operating and green transition.
00:05:21
Speaker
But at the same time, because housing and infrastructure have represented such a big share in GEP, so they need a smooth transition towards the new growth engines.
00:05:35
Speaker
Now we're talking about housing here, so Michel, that's a sector that you look at in detail.
00:05:41
Speaker
Can you give us a bit of a description of how bad is the picture?
00:05:44
Speaker
So certainly, Harold, it's a very difficult time for the market.
00:05:49
Speaker
We had hoped that a couple of years ago, as things continue to evolve, we should be clearer by now.
00:05:54
Speaker
But it so happened that we continue to be disappointed by the pace of deterioration of the market.
00:06:00
Speaker
It's fragile.
00:06:01
Speaker
You know, we have had to take our numbers down directionally to rethink about what that practical scenario would be in China.
00:06:11
Speaker
Let's take a step back.
00:06:12
Speaker
And when we talk about the Chinese housing market,
00:06:15
Speaker
From your vantage point, has the psychology been broken?
00:06:19
Speaker
Because that seems to me very important here.
00:06:21
Speaker
We've had for decades rising prices in real estate.
00:06:25
Speaker
People wanted to get on the real estate ladder.
00:06:27
Speaker
Now we've seen a year and a half of probably sliding prices, not officially, but maybe unofficially.
00:06:33
Speaker
Do you think that the psychology has been broken, that it'd be very hard to convince people to buy apartments again?
00:06:39
Speaker
Or do you think really there's still a lot of pent-up demand that ultimately can be unleashed?
00:06:45
Speaker
It's actually very tough because home price expectation is something that we all look at.
00:06:51
Speaker
We buy when there is expectation that home price would continue to increase, but clearly that's not the case.
00:06:58
Speaker
But more importantly, I do think there are risk pants of demand.
00:07:02
Speaker
There are still households looking to purchase a home.
00:07:06
Speaker
because there's a need to.
00:07:07
Speaker
For instance, if you're a family, you need to send your kids to school, you need to be in a certain district, then you'll be quite picky in terms of the location.
00:07:16
Speaker
But clearly, in terms of thinking about what we should be expecting now versus a year or two years ago, the size of the pie has shrunk very meaningfully.
00:07:27
Speaker
So yes, there is demand, but as a willing home buyer, they will be a lot more picky in terms of what they can
00:07:34
Speaker
for pricing and also the location of the home.
00:07:38
Speaker
Jing, to bring you back here,
00:07:40
Speaker
the Chinese property market is probably 20% of GDP, conservatively measured.
00:07:46
Speaker
That has huge implications.
00:07:48
Speaker
What do you think is then the underlying growth rate for China?
00:07:51
Speaker
Surely the 6% rates are over that we saw in the past.
00:07:56
Speaker
Can you give us a hint of where we are in the next few years in terms of what you think the potential of the economy is if property is kind of falling away as a growth driver?
00:08:05
Speaker
Right.
00:08:06
Speaker
So ironically, if actually now the expectation is housing prices may not go up, at least not so rapidly, or even going down, certain people who haven't bought a home may feel less pressure because they don't have to save so much for the down payment.
00:08:24
Speaker
So that could, to some extent, help with the consumption.
00:08:27
Speaker
At the same time, we see a clear change of the mentality from the government.
00:08:33
Speaker
Maybe in the past they focused more on the hard infrastructure, but in the future they probably will spend more on soft infrastructure, such as granting the migrant workers access to the public health, public school, etc.
00:08:48
Speaker
That can also support consumption.
00:08:50
Speaker
So I think private consumption is something
00:08:53
Speaker
to look forward to.
00:08:54
Speaker
On top of that, now it's still small, but probably starting with EV sector and some other sectors belonging to this new economy can grow much bigger.
00:09:07
Speaker
So that would be the
00:09:08
Speaker
new driver as well.
00:09:10
Speaker
Last but not least, China is very ambitious on the green transition.
00:09:15
Speaker
I think the green transition actually cut into every single sector in the economy.
00:09:21
Speaker
So those are all quite promising in my view.
00:09:25
Speaker
So still promising growth potential in medium term.
00:09:28
Speaker
But maybe last question for you, Michelle, is we still need to get there.
00:09:32
Speaker
That is, next two, three, four months, we still have a lot of hurdles to pass.
00:09:36
Speaker
Do you get a sense that there's still a bit of pain to come when it comes to Chinese housing market?
00:09:41
Speaker
We have obviously big headlines that we grapple with in the last few weeks when it came to China.
00:09:47
Speaker
Markets are quite on edge a little bit.
00:09:49
Speaker
From your perspective, looking at housing names, developers, is there
00:09:55
Speaker
A bit more pain to come?
00:09:57
Speaker
Certainly I do think more pain, but in terms of assessing the level of pain, I think it really depends on when we would see if there is one, a meaningful policy package.
00:10:08
Speaker
And I want to talk about meaningful policy package here.
00:10:11
Speaker
What I really mean is to give these developers the much needed liquidity support that they need so we can buy more time.
00:10:19
Speaker
Otherwise, I think more defaults will come.
00:10:22
Speaker
But at least on the bright side, we see that some of the leading developers, particularly the state-owned names, they are still growing.
00:10:29
Speaker
They are still performing quite well.
00:10:30
Speaker
Will that liquidity support come?
00:10:33
Speaker
I think one thing, over the past several weeks maybe, we see the price controls have been relaxed.
00:10:41
Speaker
So we used to have both price ceiling, price floor, both binding in different cities, preventing the market to clear.
00:10:50
Speaker
Now that maybe some of the price cut in certain cities can attract more buyers, and to that extent, already naturally more funding available.
00:11:02
Speaker
Maybe less profit, but at least the market is moving.
00:11:06
Speaker
On top of that, we also see more talks about the three arrows, they call it, different channels of raising funds.
00:11:15
Speaker
That is coming as well.
00:11:17
Speaker
Fred, so this has implications for you as well in terms of how this impacts the rest of the region, right?
Impact on Southeast Asia and India
00:11:25
Speaker
So we see weaker growth in China coming through that will be impacting the rest of the region.
00:11:32
Speaker
Where are the areas where maybe that are less sensitive or more sensitive to weaker growth in China?
00:11:40
Speaker
Well, I think what we just heard, the challenges near term in China, even if we say medium term, there's stabilization coming through, is essentially that we're seeing disinflationary pressures, deflationary pressures coming out of China.
00:11:53
Speaker
One statistic, to share statistics here, China's housing construction sector uses one quarter of global steel demand.
00:12:03
Speaker
in three years it loses enough cement to turn the entire Great Britain into a car park.
00:12:09
Speaker
That just gives you a sense of the size of the construction sector.
00:12:13
Speaker
And so if that declines, then that puts downward pressure on commodities, less steel consumption, and that means
00:12:21
Speaker
disinflation for the rest of the world.
00:12:22
Speaker
We now have, for example, reports of Chinese steel producers putting steel on the global market, undercutting the prices of others.
00:12:30
Speaker
And that spreads pain around the region.
00:12:33
Speaker
Yeah, that's pain if you sell cement, of course, but it's good if you're buying cement and if you're importing commodities, right?
00:12:39
Speaker
And I'm, for example, thinking about India.
00:12:41
Speaker
They could benefit from this.
00:12:42
Speaker
Is it correct?
00:12:43
Speaker
That's right.
00:12:44
Speaker
So we have economies that compete directly with China, like Korea, like Vietnam, for example, like Japan, ultimately are undercut in global export markets because they compete directly with China, and that's disinflationary.
00:12:56
Speaker
But India has the opposite issue because India imports a lot of commodities, and so weaker commodity prices are actually good for India, and hence we see the Indian economy actually doing quite well at the moment.
00:13:08
Speaker
But let's bring Southeast Asia in because, of course, Southeast Asia needs China as a big export market.
00:13:15
Speaker
Very important.
00:13:16
Speaker
But they also compete with China.
00:13:18
Speaker
So it's kind of more, you know, not clear where Southeast Asia falls in terms of the growth prospects.
00:13:25
Speaker
How do you think about the equity markets in Southeast Asia?
00:13:27
Speaker
Yeah, so there's a couple of things going on in the Southeast Asian equity markets.
00:13:31
Speaker
First of all, we see some of these markets widening up.
00:13:33
Speaker
All sorts of new companies are coming to these markets, so that's good.
00:13:36
Speaker
We see this in Vietnam, we see this in Indonesia, for example, as well.
00:13:40
Speaker
Secondly, there are, similar to India, certain growth drivers.
00:13:43
Speaker
So next week I'm going to be in Java.
00:13:46
Speaker
As you know, I'm doing a bit of temple hunting and stuff like that.
00:13:50
Speaker
So I need to travel through Java.
00:13:51
Speaker
And certain places that would take five or six hours to get to only five years ago, there's now a highway.
00:13:58
Speaker
Access there has significantly improved.
00:14:01
Speaker
And that means that factories can go there.
00:14:03
Speaker
That means employment opportunities go up.
00:14:05
Speaker
And that creates a new consumer market there.
00:14:08
Speaker
So there are kind of these long-term drivers over there as well.
00:14:11
Speaker
But of course, there are also buyers of commodities, right?
00:14:15
Speaker
Harold, you lost me there a little bit.
00:14:16
Speaker
You just said you're temple hunting in Indonesia.
00:14:19
Speaker
Can you explain that, please?
00:14:21
Speaker
So I'm writing a book about the 14th century Java, a very interesting period, the rise of China, Kublai Khan, and how Indonesia responded to that.
00:14:31
Speaker
And in order to understand what happened, you have to go to the temples, because on the temples, there's the stories have been carved into stone.
00:14:38
Speaker
So I'm visiting about 50 temples and trying to figure out what actually happened in those places.
00:14:43
Speaker
So we all had a nice summer holiday, but Harold spent it in Tamil Nadu and in Indonesia going to temples in 40 degree heat.
00:14:51
Speaker
Everybody has their own job.
00:14:53
Speaker
My wife joins me and thinks this is actually fun.
00:14:55
Speaker
So imagine that.
00:14:56
Speaker
So that's what I'm going to do over the next three weeks.
00:15:00
Speaker
But just to put that aside, the old temples and the access that is improving there, you of course have also that there is demand for commodities there.
00:15:10
Speaker
Indonesia is a large producer of nickel and the Chinese...
00:15:13
Speaker
They're making electric vehicles.
00:15:15
Speaker
You need big batteries for it.
00:15:16
Speaker
And of course, that means that they are investing there.
00:15:19
Speaker
And that should have all sorts of macro benefits for Indonesia as well, Fred.
00:15:23
Speaker
It does.
00:15:23
Speaker
We talked about weaker commodity prices a little bit because China's economy is not doing too well.
00:15:28
Speaker
But Indonesia is an exception because it is producing commodities that are feeding into the energy transition.
00:15:34
Speaker
And Jing, you mentioned China doubled its EV car prices.
00:15:39
Speaker
exports this year, actually becoming the number one exporter of vehicles potentially this year.
00:15:44
Speaker
And a lot of these minerals needed to be sourced from Indonesia.
00:15:47
Speaker
So that's a permanent boost to the Indonesian economy, even if China is slowing down.
00:15:54
Speaker
Yeah, that's right.
00:15:54
Speaker
And then there is a third driver.
00:15:56
Speaker
So you've got domestic growth, right?
00:15:58
Speaker
Investments, you have demand for commodities.
00:16:00
Speaker
And then you have supply chains moving from China into Asia.
00:16:05
Speaker
Is that correct?
00:16:05
Speaker
And I think Frank here can maybe give us a couple of examples of what is happening.
00:16:10
Speaker
I think we should bring in Frank on this because before you and I keep taking this conversation over, Frank, before we start talking about AI, what are you seeing on tech supply chains moving to Southeast Asia?
00:16:24
Speaker
Yeah, that's a great question, Fred.
00:16:26
Speaker
I think if you think about the overall supply chain relocation, it's been ongoing for quite some time.
00:16:31
Speaker
And I think the initial phase is really about the cost structure of mainland China has been going up.
00:16:37
Speaker
They raised their labor costs quite aggressively over a 20-year period, where it became kind of uneconomical for certain industries to stay there.
00:16:45
Speaker
And it happened first with a lot of textile.
00:16:48
Speaker
But it was more difficult to move the tech supply chain because there's a cluster effect.
00:16:54
Speaker
But that clearly has started, this unwinding has started to happen.
00:16:57
Speaker
So I think there's a concept that people talk about as China plus one.
00:17:01
Speaker
Basically, you have a supply chain in China, mainly in China, you'll be servicing the domestic market, but you're going to replicate that supply chain outside.
00:17:11
Speaker
And I think you are seeing that trend ongoing, and it's going to be a sustainable trend for the next couple of years.
00:17:17
Speaker
And you see, if you look at by country, Vietnam is probably the most attractive choice for a lot of assembly.
00:17:27
Speaker
But if you go into semiconductor testing and assembly, it's Malaysia.
00:17:33
Speaker
Penang has been, it's quite interesting because Penang is a place that was 30 years ago a big focus for semiconductor investments.
00:17:41
Speaker
A lot of multinationals have invested in Penang.
00:17:45
Speaker
They have the resources and then 20 years ago basically people moved to China, mainly China.
00:17:52
Speaker
You can't escape the vortex of China, right?
00:17:55
Speaker
But now it's reversing again and you see people coming back.
00:17:57
Speaker
So that's interesting.
AI Infrastructure and Investment
00:17:59
Speaker
It's reversing.
00:17:59
Speaker
But of course, there's another big, big trend in the tech world, and that is artificial intelligence.
00:18:05
Speaker
Now, before we talk about some of the specific implications,
00:18:10
Speaker
laid out for us how many of these chips do you actually need?
00:18:16
Speaker
How expensive is this stuff?
00:18:18
Speaker
Give us a sense of what it takes in terms of the computing power that sits behind AI.
00:18:24
Speaker
We're all amazed by what AI can do, but what is it in terms of the tech hardware that sits behind us?
00:18:30
Speaker
Give us a sense of how big the scale is.
00:18:33
Speaker
Yeah, that's a good question, Fred.
00:18:36
Speaker
The answer is I don't really know how much computational power needs.
00:18:39
Speaker
Nobody knows yet.
00:18:40
Speaker
I think if you think about, you know, this year is all about AI.
00:18:45
Speaker
The rage is all about AI.
00:18:47
Speaker
But nine months ago, 10 months ago, no one really noticed this.
00:18:50
Speaker
So basically, I think what you saw was ChatGPT was this lightning in a bottle that basically got people excited about it.
00:18:58
Speaker
But what has proven to be the case is that real investment is going on now in AI.
00:19:03
Speaker
And we're really seeing the infrastructure being built right now.
00:19:07
Speaker
I think initially when the AI craze took off, there were a lot of people that were skeptical.
00:19:12
Speaker
They were saying, is this just like metaverse?
00:19:14
Speaker
A couple of years ago, everybody kept talking about metaverse.
00:19:17
Speaker
But then, you know, we have seen that no one really talks about metaverse now.
00:19:20
Speaker
But AI, I think, is a different story because, you know, there's a lot of applications that are still yet to be realized, but the investment is there.
00:19:28
Speaker
So, Frank, NVIDIA chips, how much do they cost now these days?
00:19:33
Speaker
And some of these servers, can you give a price tag to that as well?
00:19:37
Speaker
Sure.
00:19:38
Speaker
So if you think about the amazing price power that NVIDIA has managed to generate this year, they used to make graphic cards for high-end gaming.
00:19:48
Speaker
And the average selling price for a graphic card was $2,000, which was very expensive for the average user.
00:19:58
Speaker
But now that they're going into AI, they're making $25,000 for a graphic card.
00:20:01
Speaker
That's a 10x increase.
00:20:05
Speaker
But if you add to the fact that they're actually not only selling cards anymore, they're actually selling the entire system, then the price point of a system could be over $200,000.
00:20:15
Speaker
So imagine how much the multiple expansion is.
00:20:18
Speaker
So it's going from $200,000 to $200,000.
00:20:20
Speaker
You also talk about different stages of AI, I think three stages if I'm not mistaken.
00:20:24
Speaker
Can you just briefly tell me what that is?
00:20:27
Speaker
Yeah, sure.
00:20:28
Speaker
So I think probably the easiest, probably a more simplistic way of thinking about AI that we're looking at is that we think there's multiple stages of investment.
00:20:38
Speaker
Stage one is, I think, really right now about
00:20:42
Speaker
feeding the large Langmuir models, about training them right now.
00:20:46
Speaker
And this is where, you know, NVIDIA has a huge dominance.
00:20:50
Speaker
No one really competes against them in this space.
00:20:53
Speaker
So during this early phase, they're probably capturing 80% of the entire value.
00:20:59
Speaker
And then this is being driven by all these hyperscalers that are continuing to invest.
00:21:03
Speaker
Stage two is really when you move from training to what they call inference, where you start deducting with AI.
00:21:09
Speaker
This is an interesting opportunity because there could be more players.
00:21:14
Speaker
Specifically, people are talking about using these application-specific ICs.
00:21:19
Speaker
So these are chips that are customized.
00:21:21
Speaker
So you see cloud companies want to design their own chip, right?
00:21:25
Speaker
And then the third stage of AI is what I like to think is the blue sky scenario.
00:21:30
Speaker
And this is basically when you think about AI going away from the cloud, but toward your device.
00:21:37
Speaker
So basically you could have AI functionality directly on your smartphone, on your PCs.
00:21:42
Speaker
Now this is a blue sky scenario is because
00:21:45
Speaker
that could drive a big replacement in smartphones and PCs again, which we all know has been challenging.
00:21:50
Speaker
So that's really, I think, the ultimate positive scenario.
00:21:55
Speaker
You talked about NVIDIA, which is a U.S. space company.
00:21:58
Speaker
How many companies in Asia are now able right now to really capitalize on it?
00:22:03
Speaker
You said NVIDIA is capturing 80% of that, you know, that incremental dollar is going to AI.
00:22:09
Speaker
Are there Korean companies, Taiwanese companies that are cashing in as well, or is it too early to tell?
00:22:15
Speaker
This is, I think, in the stage one, this is really one winner right now that dominates.
00:22:21
Speaker
So just to look as an example, we all know about TSMC is the manufacturer for all of NVIDIA's chips.
00:22:29
Speaker
So you would think they would benefit.
00:22:31
Speaker
But if you think about the value of how much TSMC makes per chip, they make about $500 to $600 per chip.
00:22:40
Speaker
NVIDIA makes $25,000, right?
00:22:43
Speaker
So there's a huge imbalance in terms of the power position.
00:22:50
Speaker
So I think this is the struggle is that one company is currently in stage one dominating so much.
00:22:58
Speaker
The beneficiaries for companies in the hardware supply chain are there, but they're not getting the same benefit as much as one company is.
00:23:07
Speaker
What we very often see is that a new concept arises, a new technology arises.
00:23:11
Speaker
There's initially exponential growth.
00:23:13
Speaker
A few companies benefit from that.
00:23:15
Speaker
We're there with that at the moment with these chip makers.
00:23:19
Speaker
But then all sorts of bottlenecks and challenges emerge that are not always easily identifiable in early stages.
00:23:26
Speaker
But if you look at that, where do you think some of the risks lies or some of the challenges lie for AI?
00:23:35
Speaker
The big question that I think hasn't really been asked is really, how do you monetize?
00:23:40
Speaker
How do you make money on AI, right?
00:23:43
Speaker
This hasn't really been a question that's been addressed.
00:23:46
Speaker
So I think once you get out of this investment stage, there will be questions that people are gonna start looking at.
00:23:51
Speaker
And I think this is where, is it gonna be the cloud providers that provide, that can make money on it?
00:23:58
Speaker
Is it gonna be Microsoft who can charge people
00:24:02
Speaker
a subscription fee for using AI in things like Microsoft Office.
00:24:08
Speaker
So I think those are going to be the challenges that come later.
00:24:11
Speaker
But for now, I think it's just the hardware makers are enjoying the early benefits, which is really just about building the infrastructure.
00:24:19
Speaker
It reminds me a bit how you really made money during the gold rush by buying companies that produce shovels and picks rather than actually the gold miners, because it's very uncertain at this point.
00:24:30
Speaker
Yes.
00:24:30
Speaker
And with that, ladies and gentlemen, it's been an excellent discussion.
00:24:32
Speaker
I want to thank you all for coming and everybody for listening around the world to the podcast, for joining us here literally under the Banyan tree.
00:24:40
Speaker
And I suspect, Fred, that this won't be the last time that we're going to do such a live event.
00:24:45
Speaker
Absolutely.
00:24:46
Speaker
Big thanks to our guests Jing Liu, Michel Kwok and Frank Lee.
00:24:50
Speaker
Thanks for joining us today.
00:24:52
Speaker
And if you're not already subscribed to Under the Bany Entry, you can find us on Apple Podcasts, Spotify, or wherever you get your podcasts.
00:24:59
Speaker
That's absolutely right.
00:25:00
Speaker
And with that, we thank you all.
00:25:24
Speaker
Thank you for joining us at HSBC Global Viewpoint.
00:25:28
Speaker
We hope you enjoyed the discussion.
00:25:30
Speaker
Make sure you're subscribed to stay up to date with new episodes.