BY BILL GRIFFO 

December 24, 2025

 

Hey Income Hunters,

As we head into the final days of the year — with Christmas lights glowing, families gathering, and markets thinning out —

It’s a good moment to step back, pour a cup of something warm, and reflect on where the world really stands as we head into 2026.

This week, Washington unveiled a big, bold idea with an even bigger name: Pax Silica.

On paper, it sounds reassuring. 

What is Pax Silica?

Pax Silica is a U.S.-led strategic initiative designed to build a secure, prosperous, innovation-driven silicon supply chain…

The stated goal is to reduce coercive dependencies, protect AI-critical materials, and ensure allied nations can deploy transformative technologies at scale.

In the language of geopolitics, it’s meant to signal leadership, coordination, and strength.

But as always at Power Income, we don’t stop at the press release.

This quote captures this moment perfectly:

 “The U.S. always does the right thing… after it has exhausted all the alternatives.” — Winston Churchill

What the U.S. arguably should have done in 1994, 2000, 2005, or 2009… it is now attempting in late 2025. Better late than never — but late still matters.

The Pax Silica Initiative insists it is “not about isolating others” and frames itself as a positive-sum partnership. Yet in the next breath, it quietly excludes China — while inviting a ring of countries around it.

Who’s at the Table…

The inaugural Pax Silica Summit includes Japan, South Korea, Singapore, the Netherlands, the UK, Israel, the UAE, and Australia — a formidable list of AI, semiconductor, and logistics powerhouses.

But the facts are:

• China is the largest trading partner for Japan, South Korea, Singapore, Australia, and the UAE

• China is a massive import partner for Israel
• Even where China isn’t #1, it’s rarely far behind

This raises an uncomfortable question:

Do U.S. policymakers really believe that technology shared with these partners won’t ultimately find its way to China?

History suggests otherwise.

For the past 25 years, U.S. policymakers and corporate elites consistently underestimated China — blinded by short-term profits… 

So, Pax Silica may be more of an admission: China is close to catching up.

Why else launch this now — not during Trump’s first term, not during Biden’s semiconductor sanctions push — but today?

It suggests U.S. big tech is facing true competition for the first time in its modern history. With Silicon Valley going to Washington asking for help.

Here are the constraints investors should not ignore:

• The U.S. is 15–20 years late

• Debt-to-GDP near 120% means inflation will choke off reshoring attempts
• Partner countries are deeply indebted and economically reliant on China
• The U.S. tech lead is narrowing — fast

Market Implications Heading into 2026

In my humble opinion, Pax Silica is not a long-term bullish signal — it’s a warning flare. 

Sure, the headlines may fuel a significant move higher in stocks in the months ahead. In fact we expect that but beyond the short-term they tell us U.S. tech leadership is no longer uncontested, even if equity investors haven’t priced that in yet.

This aligns with themes we’ve discussed all year — from AI-driven labor shocks to global money flows and geopolitical fragmentation (see prior reports on AI and global liquidity).

As you can see in the chart below: Despite geopolitical pressure and sanctions, U.S. tech’s relative edge over Chinese technology firms continues to erode — a trend investors are largely ignoring.

 

 

Year-End Thoughts

As Christmas approaches, we genuinely wish you and your families health, peace, and joy. Markets will come and go. Cycles will turn. But disciplined thinking and clear-eyed analysis matter most — especially when optimism is being sold aggressively at year-end.

Enjoy the holidays. Hug your loved ones. And stay alert — because 2026 is shaping up to be anything but quiet.

Live and Trade With Passion My Friends,

Bill Griffo