Geopolitical necessity drives US-China tech compromise
The guest suggested the recent rally in semiconductor stocks reflects market anticipation of a pragmatic US-China deal trading high-end chips for rare earths and solar panels.
The argument
Due to the inflationary shock of the Iran conflict, Trump and Xi are incentivized to cooperate; Trump needs rare earths, magnets, and solar panels, while China wants lithography equipment and high-end chips. This mutual dependency could lead to a relaxation of semiconductor export restrictions.
The thesis, stress-tested
✓ What validates it
- ✓Official relaxation of US export controls on high-end chips or lithography equipment to China
- ✓Announcements of major rare earth or magnet supply agreements from China to the US
▸ Risks discussed
- ▸US political opposition to relaxing technology embargoes
- ▸Failure of Chinese equity benchmarks to confirm the trade-deal thesis
Hear it yourself
"Then be sure to stay tuned for our postgame segment after the feature interview when Patrick's trade of the week will explore a setup built around Louis Gabb's view that countries and corporations are entering a new era of strategic commodity stockpiling, and then we'll have our usual coverage of all the markets with Patrick's postgame chart deck. The feature interview was recorded on Monday well before crude oil prices collapsed in the wee hours of Wednesday morning on rumors of a peace deal that were still unconfirmed as of recording time early Thursday morning. I'll have an update on the latest in the crude oil coverage in our postgame segment."
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