August 2022 Mewsletter

Cloud Computing Industry


In 1956, then U.S. Vice President Richard Nixon, under President Dwight D. Eisenhower, told Soviet First Secretary Nikita Khrushchev that the United States constitution allowing for free speech represented the better economic business model.  Khrushchev pushed back saying, “We will bury you.”  In the 1980s, President Ronald Reagan swaggered with confidence that the personal computer would be the end of secrecy and Soviet central government control.  Soviet President Mikhail Gorbachev understood this began a period of glasnost with the Soviet hammer-and-sickle flag being lowered for the last time over the Kremlin in 1991.  Now in 2022, as we watch Russia and China gain an edge over America with their strong centralized governments, many are beginning to understand Reagan’s conviction and see Big Technology as America’s secret weapon to remain competitive in the global market.

On February 12, 2022, Ukraine passed a law allowing private cloud providers to host government data outside of its borders.  This was seen as a major step forward for the country, as it would allow for greater efficiency and security for government data.  However, just days after the law was passed, Russia invaded the Ukraine.  This invasion led to many questions about the security of Ukrainian data, its sovereignty and the advantages seen from the perspective of other weaker European and Eurasian countries who had similar deals with private cloud providers.

Technological advances have created a new medium through which we can communicate in cyberspace.  The speed at which technological advancements are being made in the communications industry has made it difficult for the legislative and judicial branches of government to determine exactly what protections should exist to cover free speech in a world of pedophilia and anarchy. The first amendment of the constitution simply states that, “Congress shall make no law respecting an establishment of religion or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press, or the right of the people peaceably to assemble, and to petition the Government for redress of grievances.”  Freedom of expression is addressed.  Cyberspace, the international flow of data and the speed at which it can be used for strategic governmental decision making are larger issues.  Meanwhile, self-regulation has thus far proven sufficient in noncommunist countries.  Communist governments, however, see this new open medium as a facilitator of subversive agendas.

To gain control of this threat, the Chinese and Russian governments have been innovative at curbing freedoms within cyberspace by censorship of what their citizens see and hear, even as computer networking has become a daily routine for billions of people.  These government control efforts have spawned new and successful efforts to control the behavior of billions of people using artificial intelligence and super computers.  Artificial-intelligence systems now heavily influence domestic behavior in China, political thought, geopolitics, military buildups and training and the proposed successes of war strategies using deep learning and big data.

For now, however, these supercomputer efforts do have weaknesses which is an advantage for the United States and its allies.  The Dutch, through a company called ASML, have a monopoly on Extreme Ultraviolet Lithography systems.  Lithography equipment is the most difficult equipment for China to replace when it comes to semiconductor production and highly sophisticated semiconductors are the heart of super computers.  Without EUV lithography systems, the progress the Chinese have been making in building super computers will halt.  Last month the U.S. began pressuring ASML to ban shipments of their highest technology to China.  Washington’s proposed restrictions would expand upon an existing moratorium on the sale of the most advanced systems to China, to thwart China’s plans to become a world leader in chip production.  If the Netherlands agrees, it will significantly broaden the range and class of chip-making gear, now forbidden from heading to China, potentially dealing a serious blow to Chinese chipmakers.  Clearly the fear is that if China becomes the world leader in computer chips it will resemble a power play to control all those using such chips.  Computing power has become real power.  Do you want your computer chips with open-source freedoms or significant restrictions that benefit Chinese communists?  Unfortunately, many countries in Eurasia, South American and Africa would take either, thereby becoming wards of the Chinese strategy for leading world hegemony.

On the other hand, if you are the leader of an independent nation and you want to save your national data, which identifies your national heritage, laws, and systems of governance, where do you want the storage of this information to be held, Google or Huawei, Amazon or Alibaba, Microsoft or Tencent?

It is the U.S. constitution, through the first amendment, that assures national autonomy and freedom from communist intervention.  The rule of law, freedom of speech and freedom from censorship are key factors in differences between the cloud computing markets in China and the United States.  These factors assure Microsoft, Amazon and Alphabet continued dominance in the cloud storage market.  Compared with the United States, China’s cloud-computing market size is small, and the proportion of public cloud and SaaS (software as a service) are less. The size of China’s public cloud market is only 10.8% of that of the United States.  The Chinese point to the problems of concept awareness, labor costs, industrial structure, and supply capacity as reasons for American dominance in the market. However, Chinese saber rattling going on in Taiwan and the war in Ukraine are significant negative internalities that communist countries will find it difficult to overcome. Perhaps leaders of Russia and China should go back and reread the speeches of Richard Nixon and Ronald Reagan on the topic of open market-source advantages as data is widely viewed as the New Gold, driven by cloud computing.



Vaughn L. Woods, CFP, MBA

Vaughn Woods Financial Group, Inc.

2226 Avenida De La Playa

La Jolla, CA 92037



Investors should be aware that there are risks inherent in all investments such as fluctuations in investment principal.  Past performance is not a guarantee of future results.  Asset allocation cannot assure a profit nor protect against loss.  Although the information has been gathered from sources believed to be reliable, it cannot be guaranteed.  Views expressed in this newsletter are those of Vaughn Woods and Vaughn Woods Financial Group and may not reflect the views of Bolton Global Capital or Bolton Global Asset Management.  The information provided is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice.  VW1/VWA0275.