A while back I told you that I liked long Taiwan Dollar against the Indian Rupee.
Well, I’m out.
Call it a stop loss, call it the end of an era.
You might think this is about $NVDA stock, but we’re talking about the $TWD currency. At this point, the former boils down to your view on which of the below wins the Game of Thrones, and their individual ramifications for markets. If you are like me and don’t have a strong view on any of that stuff, there are two major takeaways: fewer chips, tighter credit. And like with the data center piece from last week, less compute, with the same amount of demand, means the price has to go up.
I won’t be bargain hunting here unless by some chance the board confirms Jensen stays and the stock is still down here (by the way, down another 8%+ in overnight trading on the latest news).
Looks like this could just be getting started. Who knows how many more shoes are going to drop. But, as a businessman, Jensen is a phenomenal founder-CEO, running the most important company in the world, and has been performing an insanely difficult balancing act between the Dragon and the Eagle for decades.
Whether or not Alice Huang was a foreign agent, the reporting indicates that she was helping Alibaba get chips they weren’t supposed to.
Unfortunately, this would mean he’s probably gotta go. Depending on the actual story, and how deep the rabbit hole goes, I would try to keep the guy. If only for the sake of the global economy.
What does this mean for markets?
Not great.
The mega rally we’ve just been benefitting from was fueled by two critical pipes, both of which just took a hit:
Credit - Jensen was single-handedly pushing the ball down the field when it comes to the infrastructure build-out. Playing a critical role as credit intermediary in a host of deals where NVDA’s real or prospective financial backstop allowed for the deployment of capex that normally would require bigger companies or more restrictive financings. Aka “the Jensen Put.”
Supply - if you think it’s too risky to have Jensen stay in the job, I have some hilarious news about where all those chips come from…
As a reminder, the most critical node in the global supply chain is not IN China but right OUTSIDE of China, on an island Beijing says is China, run by the government that used to run China, which the people who run China now really, really don’t like. Needless to say that’s complicated, famously fragile, and one might even say inadvisable from a historical perspective.
And this is through no fault of the good people of Taiwan, who to some extent face the same dilemma as Jensen: sitting between two giants, dependent on both of them, praying for a resolution without becoming a casualty.
So that’s where we leave it.
Not good for credit pipes underneath the AI infra build.
Not good for the convenient fiction that we can ask Taiwan to continue to play both sides.
Till next time.
Appendix
The Indian Rupee leg of the trade still looks alright vs KRW, but it deserves its own piece given the ongoing shenanigans with the capital account and the reserve policy. Just noting it here.
How the major LLMs rate the potential Nvidia CEOs:
Claude
GPT
Grok
Board dynamics are kind of interesting. Looks like for Jensen to lose the job, he has to lose at least one of the old guard.
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