Latest news with #Gavekal
Mint
5 days ago
- Business
- Mint
Why Nvidia is the biggest risk to the stock market—not tariffs
Nvidia has lost half its market value seven times since going public in 2000. While worries persist over the impact of shifting trade policy and higher tariffs on markets, the bigger risk may be the hundreds of billions invested in artificial U.S. stocks have forged new highs despite rising geopolitical risks. For Louis Gave, head of investment and research firm Gavekal, the worry is how dependent markets have become on AI spending—and one of its main beneficiaries, Nvidia. Since the release of ChatGPT in 2022, U.S. total market cap has expanded by $23 trillion—more than the market caps of Japan, Europe, and the U.K. combined, Gave wrote in a note to clients Monday. Though the capital spending on AI—about 11% of GDP—isn't as extreme as the tech boom in 1999, Gave sees parallels. Over seven years in the 1990s, capital spending rose from 8% to 11.5% of GDP. The consensus view had been that growth was structural and companies would have to buy computers and spend on broadband and e-commerce. But the spending did eventually stall, causing stocks to tumble. This time the surge in AI-oriented spending is shifting the traditionally asset-light businesses of Microsoft, Meta, and Alphabet into being asset heavy. Nvidia has been the biggest sees the possibility that the hundreds of billions of dollars invested in artificial intelligence turns out to be a dud as the bigger risk for markets. He posits the recent disappointment in semiconductor-equipment manufacturing stocks could foreshadow trouble ahead. While Tokyo Electron last week said the outlook for cutting-edge chips—such as Nvidia's—remained strong, Gave notes the company's warning that demand from logic manufacturers had markedly weakened. ASML in mid-July offered a similarly sober outlook and warned it couldn't guarantee 2026 growth amid tariff uncertainty. Gave sees a couple reasons behind these warnings, including the impact of higher tariffs and threats making Asian companies hesitant to spend billions of dollars when they are unsure if the rules of the game will change on them, Gave says. It is possible consumers could be rethinking spending, with Tokyo Electron noting softness in global sales of mobile phones, laptops, and personal computers. It could also be the semiconductor capex cycle is starting to feel the weight of the China embargo, Gave says. China has spent aggressively in recent years to build its own semiconductor supply chain and reduce its reliance on foreign inputs, but now in many subsectors, China is pushing ahead faster than most anticipated, Gave says. While the stocks of other companies have suffered, Nvidia has continued to forge higher. Gave is concerned what happens to the market when Nvidia, with its $4.2 trillion market cap, disappoints. He notes Nvidia has lost half its market value seven times since going public in 2000. The fallout from a repeat could be far-reaching. Gave notes the aggregate wealth of consumers everywhere has burgeoned amid the boom in large-cap tech, U.S. megacap stocks, crypto, and gold—and a not insignificant part of that wealth creation is reliant on the premise AI ushers in a new era of productivity gains. If those gains don't materialize or venture capital and big tech companies rethink the their expanding AI capital spending, Gave says the market could suffer a pullback in valuations that triggers a nasty negative wealth effect. It could also fuel investor concerns about what could replace AI as a driver for both earnings and economic growth. 'The recent rollover in what had been a strong momentum trade for the tech boom feels like it could be a proverbial canary in the coal mine," Gave cautions. Write to Reshma Kapadia at
Bloomberg
31-07-2025
- Business
- Bloomberg
Is a Glum Britain Heading for a Repeat of 1992?
Anatole Kaletsky of Gavekal suggests that today's 'non-negotiable' fiscal rules are analogous to the ERM. By Save Welcome to the award-winning Money Distilled newsletter. I'm John Stepek. Every week day I look at the biggest stories in markets and economics, and explain what it all means for your money. I don't know whether you've noticed or not, but there's a gloomy tinge to the national mood here in the UK.
Yahoo
13-06-2025
- Business
- Yahoo
Stock markets slide and oil prices surge after Israel attack on Iran
Stock markets around the world slumped and oil prices surged after Israel on Thursday launched a military strike on Iran. Two hours before the start of trade in the U.S., S&P 500 futures contracts fell 65 points, or 1.1%, to 5,984, while futures on the Dow Jones Industrial Average and Nasdaq Composite dropped 1.1% and 1.4%, respectively. U.S. benchmark crude oil jumped $4.97, or 7.3%, to $72.91 per barrel. Brent crude, the international standard, rose $4.78, or 6.7%, to $74.15 per barrel. "Any remaining hopes for sub-$60 [barrel per] oil prices this year must now be buried. Israel's attacks early Friday against Iran, directed against nuclear facilities, missile sites and senior personnel, are a marked departure from earlier exchanges between the two Middle Eastern powers," Tom Holland, global research director with investment advisory firm Gavekal, told clients in a note. Markets in Asia and Europe sank in overnight trading. Tokyo's Nikkei 225 fell 0.9%, the Kospi in Seoul lost 0.9%, Hong Kong's Hang Seng retreated 0.6%, Shanghai Composite Index sank 0.8% and Australia's S&P/ASX 200 fell 0.2%. In Europe, Germany's DAX dropped 1.4%, France's CAC 40 shed 1% and Britain's FTSE 100 slipped 0.5%. Israel's attack involved a wave of airstrikes on Iranian nuclear facilities, scientists and senior military commanders. Iran responded to the attack by firing more than 100 drones at Israel on Friday morning, according to Israeli officials. "The main channel by which this escalation could impact the global economy would be through higher oil prices," analysts with Capital Economics said in a report. "For what it's worth, there does not appear to have been any direct impact on oil production or export facilities in Iran. But the key risk for global energy markets is that Iran tries to block the Strait of Hormuz," they added. Iranian crude exports are restricted by Western sanctions and import bans, with China the only recipient of the country's oil. Israel exports only small amounts of oil and and other energy products. Still, a sustained increase in global energy prices could reverse U.S. progress in lowering inflation closer to the Federal Reserve's 2% annual target, according to JPMorgan analysts. Inflation remains elevated but has gradually edged closer to the Federal Reserve's 2% annual target. The Consumer Price Index rose 2.4% in May on an annual basis, cooler than analysts had expected, as energy costs eased and with few signs for now that U.S. tariffs are weighing on consumer spending. Video shows Air India plane crashing in Ahmedabad Air India plane crashes shortly after takeoff, carrying more than 240 people An accused woman skips her pedicure, kills her ex-husband Sign in to access your portfolio
CBS News
13-06-2025
- Business
- CBS News
Stock markets slide and oil prices surge after Israel attack on Iran
What we know about Israel's airstrikes on Iran What we know about Israel's strikes on Iran What we know about Israel's strikes on Iran Stock markets around the world slumped and oil prices surged after Israel on Thursday launched a military strike on Iran. Two hours before the start of trade in the U.S., S&P 500 futures contracts fell 65 points, or 1.1%, to 5,984, while futures on the Dow Jones Industrial Average and Nasdaq Composite dropped 1.1% and 1.4%, respectively. U.S. benchmark crude oil jumped $4.97, or 7.3%, to $72.91 per barrel. Brent crude, the international standard, rose $4.78, or 6.7%, to $74.15 per barrel. "Any remaining hopes for sub-$60 [barrel per] oil prices this year must now be buried. Israel's attacks early Friday against Iran, directed against nuclear facilities, missile sites and senior personnel, are a marked departure from earlier exchanges between the two Middle Eastern powers," Tom Holland, global research director with investment advisory firm Gavekal, told clients in a note. Markets in Asia and Europe sank in overnight trading. Tokyo's Nikkei 225 fell 0.9%, the Kospi in Seoul lost 0.9%, Hong Kong's Hang Seng retreated 0.6%, Shanghai Composite Index sank 0.8% and Australia's S&P/ASX 200 fell 0.2%. In Europe, Germany's DAX dropped 1.4%, France's CAC 40 shed 1% and Britain's FTSE 100 slipped 0.5%. Israel's attack involved a wave of airstrikes on Iranian nuclear facilities, scientists and senior military commanders. Iran responded to the attack by firing more than 100 drones at Israel on Friday morning, according to Israeli officials. "The main channel by which this escalation could impact the global economy would be through higher oil prices," analysts with Capital Economics said in a report. "For what it's worth, there does not appear to have been any direct impact on oil production or export facilities in Iran. But the key risk for global energy markets is that Iran tries to block the Strait of Hormuz," they added. contributed to this report.
Yahoo
13-05-2025
- Business
- Yahoo
U.S.-China tariff truce offers relief — and plenty of uncertainty
A tariff truce between the U.S. and China announced on Monday will offer companies some relief, but also prolong the kind of economic uncertainty that makes it hard for businesses to plan for the future. Beginning May 14, the U.S. will lower its maximum tariff rate on Chinese imports from 145% to 30%, including a 10% baseline levy plus a fentanyl-specific 20% levy. China will reduce its 125% tariff on American goods to 10%. But clinching a long-term trade deal is likely to prove challenging, while the reduced 30% tariff rate could still lead to price hikes for consumers, experts told CBS MoneyWatch. "It remains to be seen whether the U.S. and China can agree to a trade deal that keeps tariffs from rebounding in 90 days," analysts with Gavekal, an investment research firm, said in a report. "So far, only the U.K. has reached an agreement with the U.S., and that doesn't tell us much." Is the 30% tariff permanent? No. Absent a formal trade deal, there's no guarantee that President Trump won't again raise tariffs on China once the truce expires after 90 days and that Beijing won't also retaliate. U.S. Treasury Secretary Scott Bessent called the new baseline tariff a "floor" in an interview with Bloomberg Surveillance. "This is just a 90-day pause that allows the two countries to work toward a deal," supply-chain expert Sina Golara, an assistant professor at Georgia State University's Robinson College of Business, told CBS MoneyWatch. Is a 30% tariff on Chinese imports still high? Under the agreement, the U.S. will lower tariffs on Chinese goods from as much as 145% to 30%. Still, that represents a steep hike on the level of U.S. levies on China before Mr. Trump took office. "If you look at where we were pre-'Liberation Day' or when Trump took office, this 'agreement' is just a baseline tariff increase to 30% across the board," said Alex Jacquez, chief of policy and advocacy at Groundwork Collaborative, a left-leaning public policy think tank, referring to the phrase President Trump used in announcing a barrage of tariffs on April 2. "While it's a walk-back from the prohibitive 145% tariffs, it still leaves us no closer to any concessions or renegotiations vis-à-vis China than we were." Tariff rates aren't the only potential sticking points as the countries continue to negotiate. "The two countries have a lot of grievances in many dimensions, so it's not just tariff rates," Golara noted. "It's where they strand on other trade barriers, the trade imbalance, and the U.S. accusing China of currency manipulation, so there's a lot to discuss. It makes sense for them to want to take more time." What does the U.S-China truce mean for economic growth? There's good news here: If both countries' reduced tariffs remain in place, consumer confidence is likely to improve and boost spending. That should help contain U.S. inflation and help support the job market, according to Oxford Economics associate economist Grace Zwemmer. The announcement also reduces the odds of the U.S. economy entering a recession this year, according to experts. Oxford Economics chief U.S. economist Ryan Sweet lowered his forecast for a recession to 35% from more than 50%. Will shipments from China start flowing again? Large and small businesses alike in the U.S. have warned that higher tariffs will raise consumer prices, while some companies have canceled orders from Chinese factories because of the high levies. "It's very clear that Trump was staring down the barrel of a huge drop in imports from China across the busiest shipping season, as companies build inventory for Christmas and the holiday season," Groundwork Collaborative's Jacquez told CBS MoneyWatch. "There were more announcements from companies about burning through their inventory and having to pass costs to customers, or having to cease importing from China." Freight shipments from China are expected to surge during the 90-day tariff pause, as companies bulk up their inventories to guard against the trade talks foundering and levies rising. As a result, shipping rates will rise, and squeeze smaller businesses, whose margins are already thin. "Right now, you'll see a huge rush in trying to get imports in from China in this 90-day period. That will strain shipping logistics just as it did in Covid, when everything opened back up," Jacquez said. Will consumer prices still rise? Businesses still face added costs with 30% tariffs in place, and they are likely to pass some of those expense onto consumers. But the price hikes could be less substantial depending on how companies handle tariffs, according to Georgia State University's Golara. "If we have a mix of some companies handling tariffs well, we won't see broad-based inflation rise to a painful level. We might see pocketed effects in different and specific products and sectors," he said. Other experts agree the pause is good news for companies and consumers. "The tariffs were so punishing that it was creating this incentive not to import anything from China," Veronique de Rugy, a senior research fellow at the Mercatus Center at George Mason University told CBS MoneyWatch. "The announcement is also good news because it means supply is not going to be as restrained as it was." It doesn't mean the U.S. it completely out of the woods, though. "It's still a significant increase in taxes for American consumers. We are still in a worse position than we were," de Rugy said. How are companies reacting? Businesses are still grappling with significant economic uncertainty, making it hard to plan for the future. "If you're a small business and don't know what your inputs will cost next week or in 90 days, it's going to be extremely difficult to do business in this uncertain environment," Jacquez said. Kim Vaccarella, founder and CEO of Bogg, a U.S-based beach bag and accessories company that makes its products in China, has been scrambling to shift at least some of its manufacturing to Vietnam and Sri Lanka because of the Trump administration's stepped-up tariffs. "We were looking at alternatives and set up viable sources in both countries, and we were working toward manufacturing there," she told CBS MoneyWatch. Then came The White House's announcement on Monday. With the U.S. earlier this year having raised its country-based tariffs on Vietnam and Sri Lanka to o46% and 44%, respectively, China may again be Vaccarella's best option. "Now we are back to square one, because at 30% it's less expensive to manufacture in China," she said. "If tariffs stay at 30% or go lower, it just looks like we spent a lot of money quickly trying to ramp up production somewhere else, because that would have been more acceptable under this current nightmare." A leading index of small business optimism has fallen every month this year, although it remains above its levels before the November presidential election. Vaccarella had warned customers that the price of her company's bags could jump as early as July. "But 30% we can work with," she said. "There might have to be a small increase, but it won't be what it would have been at 145%." New inflation data shows first effects of Trump's tariffs Darren Criss lands two Tony nods for robot romance musical, "Maybe Happy Ending" Prabal Gurung shares personal journey in new memoir, "Walk Like a Girl"
