To begin this week’s newsletter, we examine the future of war and geopolitics, highlighting both advancements in autonomous weapons and theories of geopolitical blocs. Then, we touch on the threats that the US economy currently faces, from fears of recession to a ballooning federal deficit. We then move on to look at the manmade famine created by Sudan’s civil war which is largely going unaddressed as the Ukraine and Palestine conflicts demand everyone’s attention. We end this week’s newsletter by looking at the foundations that Nvidia has built that keep it above its competitors, and how Microsoft is hedging its bets on AI models to avoid over-reliance on just one company.

The Future of War and Geopolitics

America Isn’t Ready for the Wars of the Future

Mark A. Milley & Eric Schmidt, Foreign Affairs

Playing Catch-Up on Grand Strategy 

Christopher Parry, Law & Liberty

The rapid advancements in autonomous weapons and AI are fundamentally changing the nature of warfare, moving away from traditional metrics like troop numbers and conventional weaponry. The United States, however, is unprepared for this shift and must urgently reform its military structure, tactics, and procurement processes to maintain its global dominance. This includes better training for soldiers in AI and drone operations. Failure to adapt could leave the U.S. vulnerable to technologically advanced adversaries. Moreover, the U.S. should lead in ensuring these technologies are used ethically and push other nations to adopt similar standards, using economic leverage if necessary. The essence of war remains unchanged, but its character is evolving rapidly, necessitating swift adaptation by American officials.

War isn’t the only thing changing; some experts argue that the world is consolidating into different blocs, reflecting earlier geopolitical dynamics rather than the ideological bifurcation of the Cold War era. These experts argue that the free world faces a strategic challenge: whether democratic Europe, the Asia-Pacific states, and the Greater Middle East will be absorbed into the Eurasian-authoritarian bloc consisting of China and Russia or remain part of the maritime-democratic system. To thrive in the 21st century, the free world must resist the Eurasian-authoritarian bloc’s commercial and military domination of the countries caught in between (the “Rimland”), and maintain control over the seas as a key strategic medium. Given the deterrent effect of nuclear weapons and the high cost of large-scale military incursions, future geostrategic conflicts will likely involve localized skirmishes, proxy wars, and frequent hostile encounters. Scholars argue that the maritime-democratic strategy should focus on deterring aggression, containing the Eurasian-authoritarian bloc, keeping allies loyal, and managing geopolitical and geoeconomic friction. The argument continues that free nations must maintain their grip on the World Ocean and the international rules-based system if they are to weather this time of transition.

What Threatens the US Economy?

Is the US heading for a recession? 

Claire Jones, Delphine Strauss, & Martha Muir, Financial Times

What Soft Landing?

Project Syndicate

America’s Deficit Attention Disorder 

Maurice Obstfeld, Project Syndicate

Last Monday, global stock markets experienced significant declines, with the S&P 500 seeing its largest single-day drop since 2022 and Japan’s TOPIX index having its worst performance in 37 years. Large tech companies were particularly affected, as shown by a 3.4% drop in the NASDAQ index. This downturn was partly due to shaken investor confidence in technology firms and American economic exceptionalism, compounded by the Federal Reserve’s unexpected decision not to cut interest rates. Additionally, the Bank of Japan’s move to raise rates while other central banks are cutting them has increased market volatility. The potential for a financial-market bubble bursting remains uncertain, but analysts argue that greater scrutiny of unproductive, leveraged assets is essential to prevent a broader economic crisis.

However, some economists argue that investors have exaggerated the threat of a US recession, although the era of rapid growth may be ending as the economy slows down. Despite a global equity sell-off triggered by concerns over the US economy and a weaker jobs report, most economists predict a “soft landing” with inflation returning to the Fed’s 2% target without a significant rise in unemployment. While some analysts fear a recession could disrupt the global economy, recent data suggests the US remains near full employment, and delinquency rates on loans are not yet at crisis levels. Markets are anticipating several interest rate cuts this year, reflecting cautious optimism among economists. Others argue that the most urgent issue for America, which neither political party is addressing, is the growing budget deficit and the rapid accumulation of debt. Some economists claim that policies aimed at reducing federal debt would improve the situation by cutting government spending and taxing private sector spending. The primary benefit of such policies would be lessening the burden on future generations and reducing the risk of a government funding crisis. If the public debt continues to rise, it will lead to higher borrowing costs and a more problematic foreign debt situation.

Sudan’s Manmade Famine Is Going Unnoticed

War in Sudan is being fuelled by a web of external actors

David Pilling, Financial Times

Sudan’s Manmade Famine

Alex De Waal, Foreign Affairs

While the Ukraine-Russia and Israel-Hamas conflicts have been making headlines and topping the agendas of world leaders, Sudan’s civil war is raging in the background and with it a manmade famine. Though once allies who took joint control of Sudan’s civilian government together, the Sudanese Armed Forces (SAF), headed by General Abdel Fattah al-Burhan, have been battling the paramilitary group the Rapid Support Forces (RSF), led by General Mohamed Hamdan Dagolo (known as Hemedti), for power since April 2023. There is evidence that both sides are using starvation as a weapon of war which has created the world’s largest hunger crisis as more than 18 million Sudanese are “acutely hungry”, 3.6 million of which are children who are “acutely malnourished”. Starvation is cheap and effective so despite the SAF and RSF signing a Declaration of Commitment to Protect the Civilians of Sudan, an agreement brokered by the US and Saudi Arabia last year, both sides have ignored the declaration, and pressure from international actors to bring an end to the conflict has been weak. The United Nations made an emergency appeal in February to raise $2.7 billion for Sudan’s expanding humanitarian crisis, but only 15% has been raised. As put by David Pilling at the Financial Times, “While the wars in Gaza and Ukraine are regarded as existential moral and strategic conflicts, it has been harder to get exercised about where justice lies on the Burhan-Hemeti divide.”

Alex de Waal, Executive Director of the World Peace Foundation and author of the Foreign Affairs article featured, argues a reason that peace talks with the SAF and RSF have been unsuccessful is the two Gulf leaders who have the power to bring Burhan and Hemedti to the table have failed to prioritize the crisis. While the proxies on each side routinely deny direct involvement, Saudi Arabia’s Crown Prince Mohammed bin Salman (MBS) has supported the SAF along with Egypt while the United Arab Emirates President Mohammed bin Zayed (MBZ) has supported the RSF alongside Russia. The tangled history between the Saudis and the UAE has made it even more challenging to make any progress on a cease-fire in Sudan, and Sudan is a “small dial in their astrolabe” as geopolitical stakes in the Red Sea are high and the Gulf kingdoms balance their relationships with Israel and the US on one side and Iran and its proxies on the other. However, a resolution to the Sudan civil war, and at the very least progress on getting food aid where it needs to go, will demand joint cooperation of Saudi Arabia and the UAE as well as pressure from Washington and other international leaders.  

Walled Gardens in Artificial Intelligence

Why Every Big Tech Company Has Failed to Dethrone Nvidia as King of AI 

Christopher Mims, The Wall Street Journal

How Microsoft spread its bets beyond OpenAI 

Madhumita Murgia & Stephen Morris, Financial Times

Nvidia, a computer chip company that has quickly become a household name due to its chips’ importance in artificial intelligence (AI) development, has built a formidable business barrier, known as a “walled garden,” that keeps customers loyal and competitors at bay, similar to Apple’s ecosystem. This barrier is constructed from both software and hardware, with the CUDA platform being central to its success. CUDA allows Nvidia’s GPUs to perform a wide range of tasks at speeds unmatched by general-purpose processors. Over the years, Nvidia has continuously expanded CUDA with specialized code libraries, making it difficult for competitors to lure away its customers. Despite competition from companies like AMD, Nvidia is expected to maintain a dominant market share in AI chips due to its extensive software ecosystem and long-standing developer support.

Outside the world of chips, Microsoft is making sure it isn’t reliant on only one company for its business in AI. Satya Nadella’s early investment in OpenAI in 2019 led to a highly successful partnership, giving Microsoft a significant lead in the generative AI market. This move has more than tripled Microsoft’s share price, positioning it to compete with Apple for the title of the world’s most valuable company and outpace Google. Unlike its rivals, Microsoft has diversified its AI investments and partnerships, developed its own AI models, and increased hiring to strengthen its AI capabilities. The company reported an 80% increase in capital expenditures, spending $56 billion in 2024 on infrastructure and technology. Despite this investment, it is yet to be seen which strategy will ultimately pay off.