US vs. China dominance: How tech stacks measure up

Nvidia (NVDA) CEO Jensen Huang says the US tech stack should be the global standard, just as the US dollar (DX=F, DX-Y.NYB) is.

Yahoo Finance Markets and Data Editor Jared Blikre, who also hosts Yahoo Finance's Stocks in Translation podcast, discuss the artificial intelligence (AI) chipmaker CEO's comments and what they imply.

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Video Transcript

00:08 Speaker A

NVIDIA CEO Jensen Wang recently talked about the US tech stack and how it compares to China's. He even threw in the US dollar in the same breath, which caught the eye of President Trump. If you're scratching your head wondering what is this tech stack? Uh, sit back because because today on Stocks and Translation, we are going to break that down for you.

00:32 Speaker A

Now, first, let's take a listen to what Jensen himself had to say to Yahoo Finance after Nvidia's recent earnings.

00:41 Jensen Huang

The American tech stack should be the world standard, just as the American dollar is the world standard that economies are built on. We want the American tech stack for the world's technology and industries to be built on. I mean that includes China.

01:03 Speaker A

Now, let's define this term. In tech, a stack is already a metaphor, a layered view of how the parts of technology work together. For AI, you can think of it as a hierarchy or a stack with hardware at the bottom, all the way up to the apps you use at the top.

01:31 Speaker A

And here's how it breaks down by layer. We have applications at the very top. That's chatbots, design apps, and company tools people actually use and touch. Below that are platforms, the basic software tools used to build and run those apps. Then comes the infrastructure, which is the cloud and data centers, big facilities running services in AI. And on top of all of that, it's built on the hardware layer. That's chips, servers and the equipment that connects them.

01:54 Speaker A

So, how does the tech stack compare to China? In this chart, we have each bar as a country with the US at the left and the China at the right here. Each color is a different, uh a different layer of the stack and it's in the same order as before. We had to make a lot of assumptions to get these numbers, so take them with a grain of salt. And what we're attempting to measure or estimate is the annual flow of revenue or sales for the hardware and software items.

02:26 Speaker A

And for infra infrastructure, by the way, we're using capital spending instead of sales. The devil's in the details as they say, but when you add it all up, it's easy to see that the hardware layer alone in the US, at that's at that's in the bottom in white, that is larger than the value of China's entire stack. And it all totals to about $725 billion annually in the US compared to about $125 billion worth for China.

03:00 Speaker A

So, why bring up the business of the US dollar dominance? Because the dollar is the world's reserve currency, which is a widely held national currency used to trade, borrow and save across borders. Reserve status means it's trusted, easy to move and accepted everywhere.

03:22 Speaker A

And now, we can compare how widely the US dollar is held versus the Chinese yuan, its currency. If you add it all up, the world's currencies held by all the central banks, it comes out to the equivalent of over $12 trillion. And the US dollar share of that is just under $7 trillion, which means that the dollar makes up about 60% of the pie worldwide. And that compares to about a quarter trillion dollars for China, or just under 2%.

03:55 Speaker A

And getting back to Huang's original point, we can now compare US tech stack dominance to that of the US dollar. Here we have these two worlds side by side. The US tech stack is about six times as big as China's, so that ratio is 6 to 1. Meanwhile, the dollar's holdings are about 25 times that of the Chinese yuan. So that's a 25 to 1 ratio.

04:22 Speaker A

In other words, the dollar is much more dominant than the US tech stack. And just to be clear, this is a very apples to oranges comparison. But the whole purpose of this exercise is to view the global AI race from the perspective of the leaders that are shaping it. Not only on the tech side of AI, but also on the government policy side. It's also an interesting way to think about relative scale. And the bottom line is, think of the tech stack as today's competition for global standards, like the dollar in finance. The US leads it for now, but the race is definitely on.

05:01 Speaker A

And tune into the Stocks and Translation podcast for more jargon busting deep dives. New episodes can be found Tuesdays and Thursdays on Yahoo Finance's website or wherever you find your podcast. Stay tuned for more market Catalyst. Related Videos

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