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Last week, news tumbled out that tech investors should note: a year-long investigation by Der Spiegel, Insider and Le Monde reported there had been five recent meetings of a “secret” Russo-Chinese group to come up with tools to disable American satellites such as the Starlink system developed by SpaceX.
Yes, you read that right. Even as US banks issue bullish recommendations for SpaceX stock, Russia and China have a three-stage strategy to undermine its tech, according to these reports, allegedly to counter US aggression. And while this has not been verified by Moscow, Beijing or Washington, it echoes earlier analysis by the UK and US and has startling potential implications.
Starlink, after all, is crucial for the Ukraine war. “[It] is indeed the blood of our entire communication infrastructure now,” said Mykhailo Fedorov, Ukraine’s former defence minister (who has just been ousted, in a stunningly ill-judged move). Indeed, since satellites underpin much of our modern civilian life, we would all be badly hit by any loss, as we saw, to a tiny degree, when a US nuclear test damaged satellites in 1962.
So these reports should not be ignored. For one thing, they show why investors need to be aware of the emerging collaboration between Russia and China, with the former now essentially swapping its battlefield experience and raw materials for Chinese tech. “This is real, it’s serious and it’s ongoing,” Christo Grozev, one author of the investigation, tells me.
It should also remind us that even as we watch the conflicts in muddy Ukrainian fields or the Strait of Hormuz, the next war might actually occur in space. “Orbits are now battlefields,” read a recent note from the venture firm Andreessen Horowitz, which is investing in military tech. “We can . . . naively hope that China and Russia will abide by treaties for the peaceful use of outer space [or] treat space as the warfighting domain that it is.”
The tale highlights a third point: current tech exuberance often seems to ignore geopolitical risks. Yes, the share prices of SpaceX and hyperscalers have recently fallen, and fewer investors are buying their bonds. But skittish investors mostly seem to worry that today’s gargantuan capital spending will not be matched by future revenues; I rarely hear much discussion of military threats.
Why? “Fomo”, or fear of missing out, is one factor: institutional investors keep gobbling up tech, since those that shunned US tech stocks in the past suffered a “bug zapper” of underperformance, said Michael Cembalest of JPMorgan.
And insofar as investors know about Russian-Chinese threats, many probably hope they will be neutered by the deterrent of mutually assured destruction. One scary idea floating around, which apparently surfaced in the secret Russo-Chinese forum, is that of putting pellets into orbit to damage SpaceX satellites; but since that move would also endanger Russian and Chinese satellites it seems unlikely to happen.
There is another factor affecting investor psychology as well: the sheer multitude of current tail risks, including the danger that China will invade Taiwan, that Russia will resort to nuclear strikes, that AI will wipe out jobs (or humanity) and so on.
This multiplicity is apt to encourage a fatalistic shrug; doubly so given survivor psychology. Previously, investors used to fret about such tail risks or panic when actual shocks hit hard. But in recent years we have had multiple shocks: the 2008 financial crisis; the 2020 pandemic; 2022’s full-scale invasion of Ukraine by Russia; ongoing US tariffs; and now the US attack on Iran.
The sheer number has made investors more hardened; even more so since our economic and financial systems seem to have greater resilience than previously thought. “Oil shocks are no longer so shocking,” noted Nouriel Roubini, who pointed out that a range of factors, such as demand destruction, fuel stockpiling, energy diversification and the creation of new pipelines, mean that oil prices have not risen as much as some expected amid the Iran war.
The key point, then, is that using Newtonian physics to predict markets with straight-line extrapolations from the past is unwise. Instead, better to read a potent recent speech by Ravi Menon, a former top Singaporean regulator, which uses relativity and quantum physics to frame geoeconomics. “Apparently contradictory states can coexist,” he said. “Distant things can be deeply connected [and] uncertainty is an irreducible feature of our system.” Amen.
In some senses, this shifting investor mindset represents progress: adaptation and resilience in the face of tail risks is good. But it can also foster dangerous complacency as deviance is normalised. The satellites news is a case in point.
Today that not-so-secret Russia-China forum might not seem a threat; but eventually it might. So tech investors should watch its next meeting, which is reportedly due to happen later this year in St Petersburg. And then let’s all pray for peace — on earth and in space.
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