The new age of digital exploration and conquest

In 1492, Christopher Columbus set sail across the Atlantic, heralding a new age of exploration and conquest. Today, we stand at the cusp of a similar epochal shift, but this time the frontier isn’t the uncharted territories of the Earth. Instead, it’s the infinite expanse of the digital realm.

The race to dominate this new world along with its trillions in nascent GDP is no longer led by explorers and adventurers. At the helm of these digital mercantile armies are sovereign state leaders, vying for supremacy in semiconductors, data, automation and the energy resources to power it all.

Physical nation states are the new contenders in the digital race

The global landscape is witnessing a paradigm shift where economic powerhouses like the U.S., China, Russia, Taiwan, and India are engaged in a fierce competition.

Presidents, PMs and despots have become the mercantile captains of old, displacing Davos Man. They clearly recognise the critical importance of semiconductors, chips, memory, storage, and energy in their quest to harness and grab their unfair share of the digital spice trade.

Why? It’s the best chance they have to fund their staggering unfunded obligations to their ageing populations, and their debt stacks. One notable exclusion is India due to its young demographic and rate of technological adoption.

The strategic importance of semis

Semiconductors are the lifeblood of modern technology and the ‘pick and shovels’ of data. They power everything from smartphones, edge devices and data centres to advanced AI systems. Control over semiconductor production and supply chains has become a national priority, as evidenced by chip export bans, tariffs, sanctions and other restrictions aimed at securing technological advantages.

Taiwan, home to the world's leading semiconductor manufacturer TSMC, finds itself at the epicentre of this struggle. The island's strategic importance can’t be overstated given its control over semiconductor fabrication makes it a focal point in the geopolitical tug-of-war.

Recent news about Taiwanese ability to neutralise its chip technology in the event of Chinese invasion highlights the ugly side of digital mercantilism and the clear supply risk to the rest of the world, not just China.

Regulation

In the U.S., the Biden Chips and Sciences Act (Chips Act), passed in 2022, represents a strategic move to bolster domestic semiconductor manufacturing and reduce reliance on foreign supply chains.

By providing significant funding and incentives for companies like Intel, Micron, and others to expand their U.S. operations, the Act aims to secure the nation's technological edge and economic security.

This initiative is a critical component in the broader digital arms race, ensuring that the U.S. can maintain a steady supply of semiconductors essential for everything from EVs and consumer electronics, to advanced military systems.

By fostering domestic innovation and production, the Act not only mitigates risks associated with Taiwanese and global supply chain disruptions but also positions the U.S. as a formidable competitor against other major players, present and future.

In the meantime, trade wars continue

The US/China trade war, now in its sixth year, has now gone digital and is being sustained by the following blunt instruments:

• Restrictions on China’s ability to buy advanced chips/chipmaking equipment from the U.S.

• U.S. fiscal warfare to support domestic chip fabrication.

• Tariffs and sanctions issued by the U.S., and most likely counter-tariffs/sanctions, on certain foreign semiconductors and companies providing services as well as a host of other items like PVs, EVs and batteries, etc., which you can read about here.

And yesterday, in response to escalating protectionism from the wheelhouse of U.S.S Mercantile, China announced its $47.5 billion Big Fund III. Big Fund will support growth in China’s semiconductor industry. If you ask me, that’s way more effective than counter-tariffs.

Energy, the backbone of digital infrastructure

As nations scramble to dominate the semiconductor industry, they also recognise the critical need for reliable energy sources to power chips, clouds and other digital infrastructure. The investment in renewable energy and stored energy in batteries underscores the strategic efforts to ensure energy security.

Countries are investing heavily in energy sources, technologies and transmission rails to support the massive data centres and AI-driven systems that will drive future economic growth. However, at some point a realisation is likely that only nuclear energy will be able to provide sufficient zero emissions freight to power the picks and shovels of data miners.

The data arms race

The ultimate prize in this digital race is data. The digital economy is increasingly data-driven, with AI, cloud, automation, and robotics set to unleash unprecedented levels of productivity and innovation. It’s why data has been called ‘digital oil’.

Frankly, without it, there’s absolutely no way to gap over the lost GDP caused by ageing work populations, and the obscene cost of servicing the global debt stack.

Control over data flows and the ability to process and analyse vast amounts of information will define the winners of this new era.

Geopolitical implications

The battle for digital supremacy has profound geopolitical implications. Recent battles in the digital world highlight the strategic manoeuvres nations are willing to undertake to protect their interests.

The U.S. and China, in particular, are locked in a high-stakes rivalry, with both nations seeking to outpace each other in technological advancements.

Russia's focus on cyber capabilities, India's burgeoning tech industry, and Europe's regulatory approaches add layers of complexity to this global game of biffo.

The outcome of this digital arms race will shape the geopolitical landscape for decades to come, influencing everything from economic policies, military strategies, ongoing technological disruption, M&A strategy, and personal investment portfolios.

Like the Trump trade war, the digital arms race won’t be over for many years.

A new era of digital conquest

Just as 1492 marked the beginning of a new world order, the current era symbolises a transformative shift towards digital conquest. The race to control semiconductors, data, and energy is more than just a technological competition; it is a battle for economic and geopolitical dominance over the digital oasis.

And it’s no longer fought at sea, it’s fought in the ether where the stakes are higher than ever due to the promise of digital GDP that’s already been estimated in double figure trillions. That’s what’s driving the ambitions and mercantilism of today’s global leaders.

For companies and investors alike, understanding these dynamics and strategically positioning themselves will be key to harnessing the opportunities and mitigating the risks of this new epoch.

See you in the oasis.

Ready Mike One