Banananomics: Asian Oil In Jeopardy As Iran Awakens

Iran has been accused of seizing an Israel-linked commercial ship early on Saturday morning as it passed through the Strait of Hormuz, reports the BBC.

Inputs that matter: "The Portuguese-flagged ship is linked to Israeli billionaire Eyal Ofer."

• The Islamic Republic News Agency (IRNA) said the naval branch of the Islamic Revolution Guards Corps (IRGC) had seized the MSC Aries as it was "linked to Israel."

• The ship is now in the process of being transported to Iranian waters.

• There were 25 crew members onboard at the time of the seizure.

The opportunity: The MSC Aries was seized as the U.S. positioned warships to defend Israel from Iran.

• The Wall Street Journal reports, "Army Gen. Erik Kurilla, the head of U.S. Central Command, discussed a possible Iranian attack with Israeli Defense Minister Yoav Gallant in Israel on Friday."

• "The U.S. moves included repositioning two destroyers, one of which was already in the region and another redirected there, U.S. officials said, adding that at least one of the vessels carried the Aegis missile-defense system."

• "We are devoted to the defense of Israel. We will support Israel and help defend Israel, and Iran will not succeed," U.S. President Biden proclaimed.

Zoom in: Israeli Foreign Minister Israel Katz took to X (formerly Twitter) to ask the European Union "to immediately declare the Iranian Revolutionary Guards Corps as a terrorist organization and to sanction Iran."

• Since 2019, Iranian forces have carried out a series of ship seizures in the region, and the attack comes amid mounting tensions between Iran and Israel.

Between the lines: Tensions between Iran and Israel escalated after the April attack on the Iranian consulate building in Damascus, which killed a senior IRGC commander.

• The Times of Israel reports that in October, "Israel declared war on Hamas after terrorists attacked Israel's south, killing some 1,200 people in southern Israel and taking 253 hostages."

• Canada has warned citizens to avoid all travel to Israel, Gaza, and the West Bank, while the U.S. is limiting the movement of diplomats in the area.

Follow the money: According to The U.S. Energy Information Administration (EIA), the Strait of Hormuz is the world's most important oil transit chokepoint.

• Saudi Arabia and the United Arab Emirates (UAE) have functioning pipelines that can circumvent the Strait of Hormuz.

• 82% of the crude oil that moves through the Strait of Hormuz goes to Asian markets: China, India, Japan, and South Korea.

China's shift from U.S. Intel and AMD chips has intensified in response to American trade restrictions designed to deny the country the required A.I. hardware and manufacturing equipment to achieve self-sufficiency.

Inputs that matter: As of 2023, the Chinese market accounted for 27% of Intel's revenue and 15% of AMD's.

• Late last year, Beijing issued a list of 18 CPUs approved by its citizens without mentioning Intel and AMD.

The opportunity: Semiconductors are becoming strategic decisions for companies and a matter of national security for countries.

• Tensions between China and the U.S. are currently boiling over semiconductors.

• TechCrunch says Meta spends more on Hardware than A.I. talent.

• A.I. and Cryptocurrency will double data center energy consumption by 2026.

Zoom in: China's response comes four years after the FCC barred Chinese chip maker Huawei and ZTE-made telecommunications equipment from U.S. networks.

• The delay in the response signifies that China is catching up with the U.S. in semiconductor technology, often using U.S. designs obtained from previous manufacturing deals.

• Chinese chip maker Loongson has been manufacturing MIPS CPUs using designs from U.S. chipmaker MIPS Technologies.

• Tom's Hardware reports, "Loongson apparently violates U.S. sanctions on China."

Between the lines: The Biden-Harris Administration recently announced an $8.5 billion deal to help Intel become the U.S.'s leading chip maker.

• Intel plans to use taxpayer funds to expand manufacturing in Arizona, New Mexico, Ohio, and Oregon, creating 30,000 new jobs.

• "The CHIPS for America program will bring semiconductor manufacturing back to the U.S. and create a vital R&D ecosystem to keep it here," said Under Secretary of Commerce for Standards and Technology Laurie Locascio.

Follow the money: Intel is using taxpayer funding to grow, AMD is transitioning as it works to catch its rivals, and Nvidia is eating the world.

• Gary Marcus, an A.I. expert who spoke at the U.S. Senate A.I. Oversight Subcommittee, reports Sequoia discovered that the A.I. industry spent $50 billion on Nvidia chips to train A.I. models last year.

• Nvidia's revenue increased 224% in 2023 and is projected to grow double-digits in 2024.

• The Motley Fool says, "Hans Mosesmann of Rosenblatt Securities recently placed a $1,400 price target on Nvidia stock -- implying nearly 60% upside."

The Environmental Protection Agency (EPA) recently finalized stringent greenhouse gas (GHG) standards for medium and heavy-duty trucks from model years 2027 to 2032.

Inputs that matter: According to the EPA, the transportation sector is the most significant contributor to carbon emissions in the United States.

• Currently, nearly 13,000 electric medium and heavy-duty trucks are on the road.

• The four largest private tractor fleets in the nation, PepsiCo, Walmart, Sysco, and U.S. Foods, heavily invest in electric trucks.

• Daimler, the largest heavy-duty vehicle manufacturer in the U.S., aims to sell entirely carbon-neutral vehicles by 2039.

The opportunity: Analysts at S&P Global Commodity Insights have predicted that global crude demand will increase by 1.4 mb/d in the current year.

• Much of this oil goes into the supply chain, fueling ships, trains, and trucks.

Zoom in: GlobalFleet reports, "While Ford generated huge profits in 2023, the company's E.V. segment reported a $4.5 billion loss, and G.M. is not expecting earnings in the E.V. segment until 2025."

• G.M. postponed opening its second electric truck plant in Michigan to 2025.

• So far, PepsiCo is the only commercial customer of Tesla's Semi truck with "two different types of routes: long-haul routes that transport between 250 and 520 miles per run and with a gross vehicle weight plus a load of up to 82,000 lbs."

Between the lines: Tesla is the largest seller of carbon credits in California.

• Since 2009, the automaker has made over $9 billion from carbon credit sales.

• In 2023, Tesla generated $1.79 billion in regulatory credit revenue.

• These credits are sold to their fossil fuel competitors.

Follow the money: Interest rates may be to blame for the slow start for U.S. automakers.

• Seeking Alpha explains that renewable energy is capital intensive, and as interest rates soar, those funding these projects look for alternatives with faster return on investment.

• While referring to energy projects, the same holds true for public corporations responsible for shareholder returns.