Hello,

The four months since April have been markedly less volatile for investment markets than the period that directly preceded them. A contributing factor has been the monotonous stream of news relating to US trade negotiations and trade deals, the significance of which is evidently diminished in comparison to the tariffs announcements that sparked such sharp market falls.

 

However, recent developments demand attention. On 11th August, it was reported that Nvidia and AMD agreed to pay 15% of their revenue on certain chip sales in China directly to the US government in exchange for export licenses. While the deal might make financial sense for all parties, it also sets an intriguing precedent, and it will have surely piqued the interest of corporate execs globally. US companies are not usually required to pay the government for the right to export their goods.

 

Additionally, such an obligation represents a heavy price on Nvidia’s part. While it will hope that sales in China will more than make up for it, Chinese regulators have other ideas. They’ve been attempting to dissuade domestic firms from buying Nvidia’s products and instead opt for local alternatives. However, Chinese tech firms involved in the AI race might not be so keen on that idea. DeepSeek has reportedly experienced significant delays in producing its next model due to its use of Chinese chips. With Nvidia’s Q2 earnings report due on Wednesday, markets will be watching closely for any guidance on the above developments.

 

As always, if you wish to discuss anything in this newsletter in further detail, please do get in touch.