Nvidia's dilemma illustrates how finance is no longer tethered purely to fundamentals but to the capriciousness of policy. The company recently secured limited licenses to sell its advanced H20 chips into China. Yet its quarterly forecast conspicuously omitted any revenue from that market. The omission was not the result of weak demand, since Chinese firms remain ravenous for Nvidia's technology. It's mainly due to Washington's tightening export regime. A chip is no longer just a chip: it is a bargaining chip. Analysts also noted signs of tightening data center budgets from Nvidia's hyperscale customers.
The company announced a $60 billion buyback program and its chief executive, Jensen Huang, reassured markets about the enduring strength of AI demand. The stock still fell by 1.4% in premarket trading, while futures on the main three Wall Street indices remained mostly flat.
The stakes extend beyond a single company. The bull market in U.S. equities, now three years in the making, has been driven by a near-messianic belief in the economic potential of AI. Every hiccup, from the emergence of lower-cost Chinese models to tariff-induced selloffs, has been absorbed by the market's willingness to believe. Yet valuation metrics on the S&P 500 have already surged ahead of historical averages and peers abroad. The slightest wobble in the narrative can send tremors across the system.
Other players offered their own parables. Snowflake, the data analytics company, surged on the promise of AI-driven revenue growth. CrowdStrike tumbled after forecasting weaker-than-expected sales. Elsewhere, Dollar General rose sharply after raising its annual forecast.
Hovering above all of this is monetary policy. Investors, perhaps fatigued by the daily headlines of tariffs and sanctions, are clinging to the possibility that the Federal Reserve will deliver its first rate cut of the year in September. Futures markets are pricing that probability at nearly 90 percent.
Today's session is also marked by tensions over French debt, whose yield is diverging from that of Germany and converging with that of Italy. This is a clear sign of the mistrust generated by the political chaos brewing in France. Investors will also focus on the countdown to Friday's inflation figures. Europe will be looking at preliminary August price data released in France, Italy, Spain, and Germany, while Wall Street will be focusing on July PCE inflation and household income and spending.
Meanwhile, this morning's U.S. economic data reflects a slightly stronger outlook than previously anticipated. The second-quarter GDP was revised upward to a 3.3% annualized growth rate, beating the earlier estimate of 3.1%. This suggests that the economy has maintained solid momentum, driven by resilient consumer spending and business investment despite higher interest rates. At the same time, jobless claims for the week ending August 23 came in at 229,000, essentially in line with expectations of 230,000. However, sustained strength in growth and employment could complicate the Federal Reserve's decision-making, as it may reinforce inflationary pressures and delay rate cuts.
This morning, Japan, South Korea, mainland China, and Australia posted slight gains at the end of trading. India remains under pressure after the US imposed a 50% tariff on the country. Taiwan and Hong Kong posted declines of more than 1%. European leading indicators are mostly bearish, with the Stoxx Europe 600 down 0.1%.
Today's economic highlights:
On today's agenda: new car registrations in the EU27; in Switzerland, GDP; in Spain, M3 money supply and economic confidence; in the United States, annualized GDP, new jobless claims, and pending home sales. See the full calendar here.
- Dollar index: 97,877
- Gold: $3,407
- Crude Oil (BRENT): $67.22 (WTI) $63.97
- United States 10 years: 4.20%
- BITCOIN: $113,090
In corporate news:
- Nvidia CEO Jensen Huang is negotiating with the Trump administration to sell Blackwell AI chips to China and has offered the U.S. government a revenue share from such sales.
- Walgreens Boots Alliance announced that Walgreen Co. will operate as a private standalone company under new ownership by Sycamore Partners, appointing Mike Motz as CEO.
- Dollar General raised its annual sales and profit forecasts due to strong demand from budget-conscious consumers and increased customer traffic, especially for items priced under $1.
- Teva Pharmaceutical received FDA approval and launched the first generic version of Saxenda, a GLP-1 injection for weight loss.
- Uber and Dollar Tree formed a partnership to bring nearly 9,000 stores to the Uber Eats platform, expanding Uber's reach into suburban and rural retail.
- Best Buy beat quarterly estimates with strong online and international sales driven by AI-powered gadgets, while maintaining its full-year forecast.
- Ford is recalling nearly 500,000 vehicles in the U.S. due to a brake fluid leak, along with over 300,000 additional recalls related to tail lights and airbags.
- IQVIA and Flagship Pioneering announced a strategic collaboration to accelerate the development of breakthrough life sciences companies.
- L3Harris Technologies' electronic warfare system was selected by Poland for its F-16 fighter fleet.
- Natera's Signatera test was chosen for the Phase III ARCHER clinical trial in bladder cancer.
- Hormel Foods missed quarterly earnings estimates due to rising commodity costs and forecast weaker profits for the next quarter, despite stronger sales of its turkey and bacon products.
- Apple criticized UK regulatory plans to increase competition in mobile systems, arguing it could harm users, developers, and national security.
- Snowflake shares surged over 14% as the company raised its annual product revenue forecast, benefiting from strong AI-driven demand for its data platforms.
- Burlington Stores reported a 10% increase in Q2 sales and raised its full-year guidance, aided by higher margins and lower freight costs.
- Li Auto flagged a sharp sales drop and missed earnings expectations due to intense competition and weaker demand in China’s EV market.
- Berkshire Hathaway has increased its stake in Mitsubishi Corp to 10.23%.
- Google has invested $9 billion in AI infrastructure in Virginia and eliminated 35% of managers overseeing small teams in the past year.
- Pfizer and BioNTech's Comirnaty LP.8.1 vaccine has been approved by the US FDA for updated COVID shots for everyone aged 65 and older and high-risk individuals.
- CrowdStrike's third-quarter revenue forecast fell short of expectations, leading to a significant drop in shares, despite the acquisition of Onum to boost its SIEM capabilities.
Analyst Recommendations:
- Bill Holdings, Inc.: Piper Sandler & Co downgrades to neutral from overweight and reduces the target price from USD 70 to USD 50.
- Dexcom, Inc.: Zacks downgrades to neutral from outperform and reduces the target price from USD 98 to USD 80.
- Nvidia Corporation: Punto Research upgrades to buy from hold with a price target raised from USD 138 to USD 205.67.
- Rambus Inc.: Arete Research upgrades to buy from neutral and raises the target price from USD 77 to USD 91.
- The Cooper Companies, Inc.: Citi downgrades to neutral from buy and reduces the target price from USD 97 to USD 72.
- Venture Global, Inc.: Deutsche Bank upgrades to buy from hold with a target price of USD 17.
- Bank Of America Corporation: Freedom Broker maintains its buy recommendation and raises the target price from USD 47 to USD 56.50.
- Estee Lauder: Rothschild & Co Redburn maintains its neutral recommendation and raises the target price from USD 66 to USD 83.
- Five Below, Inc.: Wells Fargo maintains its overweight recommendation and raises the target price from USD 140 to USD 170.
- Pvh Corp.: Barclays maintains its overweight recommendation and raises the target price from USD 83 to USD 101.
- Reddit, Inc.: President Capital Management Corp maintains its buy recommendation and raises the target price from USD 130 to USD 243.
- Snowflake Inc.: Baird maintains its outperform recommendation and raises the target price from USD 215 to USD 260.
