In the world we live in there is a rule for business, if there is enough profit to be made someone will be involved in the product or service. While much of the world revolves around the line between right and wrong, there is considerable money to be made if an organization goes over the line. If you own shares in the company, you want it to be on the further side of the right side, but somewhere in the background the line may have changed over the years. This rule of being on which side of the line has existed since the East India Company of the UK was the most profitable company in the world when it moved from importing tea from India (it is the reason why many people in the UK drink tea) to selling opium to the Chinese for silver. In the UK. Every time there is a sanction imposed by one country, a firm will use its expertise in logistics to find a solution to sell the product at a higher price. Another example is after the US sanctioned Iranian oil, a firm in Switzerland bought the oil because in their minds the Swiss government had not agreed to the sanctions. The oil went to refineries in Japan and Europe. The most recent example is AI chips from the US.

In an article by Ana Swanson and Claire Fu of the New York Times News Service, as most people know the latest great potential is Artificial Intelligence or using great amounts of data to find potential solutions. The great amount of data means a need for great amount of computing chips to manage the data. The best computing chips in the world are made by the US company Nvidia.

The US government beginning in October of 2022, has set up one of the most extensive technological blockades ever attempted: banning the export to China of AI chips and the machinery to make them.

The bans have made it harder and more costly for China to develop AI, but given the vast profits at stake, businesses around the world have found ways to skirt the restrictions.

AI holds promise to make the world a better place, it can also be used by the military to control the population to a greater extent and most of the world hopes it does. As well as to develop weapons to attack or defend the country.

In the US the agency leading the sanctions is called the Bureau of Industry and Security which oversees the government’s growing trade restrictions. One of their many tools is the entity list, which companies cannot export products from the US to a business on the list unless they obtain a license.

Companies are always looking for loopholes in the rules and one of them is for companies to reroute business through new partnerships or overseas subsidiaries which are not on the list.

The bureau has tried to adapt, tightening its penalties and forming a Disruptive Technology Strike Force with law enforcement and the intelligence community to pursue technology theft and illegal procurement networks.

An example of the process is Nettrix, one of China’s largest manufacturers of AI servers. The company was formed by former Sugon executives as Surgon was on the list not to do business with. Nvidia, Intel and Microsoft were partners with Sugon when the US was encouraging business relations with China. US officials met with Nvidia executives in 2021 and 2022 to discuss how China were using their chips. Nvidia stopped shipping the A100 chip. Nvidia came up with a solution to downgrade the A100 to A800 and this was within the government’s parameters and Chinese companies bought as many as possible. In October of 2023, US government regulations changed and Nvidia stopped shipping the chips.

There are less powerful chips than the A800 and those computer chips are being shipped to China. This has encouraged China to boost their strength in technology and innovation or make it in China, although for the moment, the US leads China in AI chips.

Linking to dividend paying stocks, owning shares in a profitable company is a rare thing because most companies on the exchange do not make profits. However, everyone has a potential to grow or do something and ideally you should watch from the sidelines as they try to do their thing. If they succeed, by being on the sideline and doing your homework if their sector does better than expected you will know which ones to buy. There are and always will be competitors to companies making money, someone will say I think I can do better or we can work on their weaknesses and that is a good thing. fortunately a good profitable company has the resources to buy the same companies and bring synergies to the profitable company. As an investor, you want this to happen and for the company to stay profitable.

There are more questions than answers, till the next time – to raising questions.