The AI Gap Is Closing | Jason Hsu on China, Momentum Crashes and the S&P’s Seven-Stock Bet

Jason Hsu, founder and CIO of Rayliant Global Advisors and co-founder of Research Affiliates, joins Excess Returns to discuss the US-China AI race, the economics of AI spending, and what market concentration means for investors. We explore China's energy and open source advantages, opportunities in Chinese stocks, and how factor investing and machine learning can help build more diversified portfolios.
Rayliant Global Advisors
rayliant.com
Rayliant on X
twitter.com/rayliant
Topics covered:
• Why Jason believes AI safety requires cooperation between the US and China

• How Chinese AI models are closing the gap with US developers

• China's electricity infrastructure and the competitive threat from open source AI

• Where AI profits could accrue across hardware, energy, models and applications

• How chip restrictions are encouraging China to develop domestic capabilities

• Why retail trading creates opportunities and challenges for factor investors in China

• Chinese technology companies, dividend-paying state enterprises and US-China trade

• The AI spending arms race and the concentration risk facing S&P 500 investors

• Momentum crashes, value cycles and how Rayliant uses machine learning to combine factors

• Why advisors' greatest contribution may be helping clients find meaning in their wealth

Timestamps:
00:00 Jason Hsu on AI competition and safety
04:00 How close are Chinese AI models to the US?
08:25 China's energy advantage and open source economics
14:12 Who captures AI profits, and can China catch up in chips?
18:41 Chinese stocks, retail trading and speculation
24:01 China's overlooked opportunities and dividend stocks
28:05 US-China interdependence and the AI spending arms race
33:24 The AI concentration hiding in the S&P 500
37:25 Momentum crashes, value cycles and factor performance
41:54 Machine learning and building multifactor portfolios
48:46 Financial advisors, Jack Bogle and having enough
53:23 Why inefficient markets do not make alpha easy
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No information discussed in this podcast should be construed as investment advice. Securities discussed may be held by the hosts and guests, their firms or their clients.