Nvidia Asks Suppliers to Halt H20 Work, Information Says

Economic

Summary:

Nvidia asked suppliers to halt H20 chip production after Beijing discouraged its use, raising doubts about Chinese demand. Local rivals like Huawei gained, while Nvidia faces unsold inventory and regulatory uncertainty.

Nvidia Corp. has instructed component suppliers including Samsung Electronics Co. and Amkor Technology Inc. to stop production related to the H20 AI chip, the Information reported, citing unidentified sources.

Nvidia issued those orders this week after Beijing urged local companies to avoid using the H20, the Information said, referring to a chip designed specifically for the Chinese market. The US company’s shares slid about 1.3% in US pre-market trading.

A production suspension would raise questions about fundamental demand for the H20, a less-powerful version of Nvidia’s cutting-edge AI accelerators that competes with similarly capable chips from the likes of Huawei Technologies Co. and Cambricon Technologies Corp. The latter company’s shares soared as much as 20% Friday, leading a rally in fellow Chinese chip stocks.

Nvidia and Advanced Micro Devices Inc. both recently secured Washington’s approval to resume lower-end AI chip sales to China, on the controversial and legally questionable condition that they give the US government a 15% cut of the related revenue. But their Chinese customers are under pressure to adopt homegrown chips instead — part of a broader objective to build a world-class domestic industry and wean the country off US technology.

In past weeks, Chinese authorities have sent notices to a range of firms discouraging use of the less-advanced semiconductors, Bloomberg News has reported. That followed warnings about alleged security risks in the H20, after Washington officials said they were considering ways to equip chips with better location-tracking capabilities.

The scrutiny coincides with the growing capabilities of homegrown alternatives to Nvidia designed by Huawei and its peers. On Thursday, Chinese AI phenomenon DeepSeek said its latest AI model was customized to work with next-generation Chinese-made AI chips, without elaborating.

Chief Executive Officer Jensen Huang on Friday said he was surprised when Beijing expressed those concerns and was now addressing that in talks with the authorities. But he reiterated that the H20 houses no such security backdoors. Huang, who was in Taiwan to discuss his upcoming Rubin chip with Taiwan Semiconductor Manufacturing Co., said Nvidia’s also in talks with Washington about a potential follow-up to the H20 for China, though that depended on the Trump administration.

“Offering a new product to China for AI data centers — the follow-on to the H20 — that’s not our decision to make. It’s up to of course the US government,” Huang told reporters during an impromptu briefing at the airport. “We’re in dialogue with them but it’s too soon to know.”

What Bloomberg Intelligence Says

Nvidia’s decision to halt H20 chip production, as reported by The Information, follows the Chinese government urging local companies to avoid using the chip and creates fresh uncertainty over when Nvidia’s China business can recover. We had previously projected H20 shipments to China would resume no earlier than the end of this year. Although a delay might temper optimistic estimates for China, robust US hyperscaler demand and Blackwell adoption should offset the impact on Nvidia this year.

- Kunjan Sobhani and Oscar Hernandez Tejada, analysts

Click here for the research.

It’s unclear whether the Information’s story relates to new production of the H20 or stockpiles of unfinished AI accelerators.

Semi-finished semiconductors are “piling up” at Amkor, which packages chips for customers like Nvidia, the Information reported. Representatives for Amkor didn’t immediately respond to requests for comment after normal hours. A Samsung representative declined to comment.

Nvidia, which wrote off $5.5 billion of H20 chips for China after the Trump administration decided to ban the product, is still sitting on unsold inventory. Huang has said the US reversal of that ban over the summer could help Nvidia recover some but not all of that writedown.

Nvidia Asks Suppliers to Halt H20 Work, Information Says_1

Cambricon Shares More Than Double From July Low

Nvidia — which is due to report earnings next week — has repeatedly denied it builds backdoors or location-tracking into its product. “We constantly manage our supply chain to address market conditions,” an Nvidia spokesperson said in response to the Information report.

“As both governments recognize, the H20 is not a military product or for government infrastructure. China won’t rely on American chips for government operations, just like the US government would not rely on chips from China. However, allowing US chips for beneficial commercial business use is good for everyone.”

Source: Bloomberg

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ING

Economic

Commodity

Russia-Ukraine Conflict

Political

Energy

Oil prices moved higher yesterday as the initial enthusiasm over progress towards a ceasefire between Russia and Ukraine continues to fade. It’s proving difficult to set up a Putin-Zelensky summit, while discussions around potential security guarantees face obstacles. Russia suggests, for example, that it should be part of any security guarantees for Ukraine. Not helping matters is Russia launching its largest strike on Ukraine in over a month. The less likely a ceasefire looks, the more likely the risk of tougher sanctions.

Meanwhile, President Trump’s trade advisor, Peter Navarro, said he expects that secondary tariffs on India for its purchases of Russian oil to go ahead next week. An additional 25% tariff is set to come into effect on 27 August. While Indian refiners initially took a step back from buying Russian crude when these tariffs were announced, reports are that attractive discounts have Indian refiners showing increased interest once again. This poses upside risk for the oil market. If tariffs push India away from buying Russian oil, and Russia can’t divert this supply to other buyers, domestic producers would be forced to reduce supply. However, this is less of a concern if India continues with its Russian crude purchases.

This week has also seen a further easing in the tightness in the middle distillate market. Yet the gasoil crack has strengthened this week, along with the prompt ICE gasoil timespread. This comes amid some refinery outages. Gasoil inventories in the Amsterdam-Rotterdam-Antwerp (ARA) region increased by 170kt WoW to 2.03mt, helping to take stocks closer towards the seasonal 5-year average. Meanwhile, middle distillate stocks in Singapore increased by 371k barrels. Increases in ARA and Singapore follow a 2.34m barrel increase that the Energy Information Administration (EIA) reported earlier this week in US distillate stocks.

European gas prices rallied yesterday. The Title Transfer Facility (TTF) settled close to 4% higher as attention increasingly turns to upcoming maintenance work in Norway, which will lead to lower Norwegian flows to Europe. EU gas storage is close to 75% full at the moment, lagging the 5-year average of 82% and well below last year’s level of 91% full. European prices will need to remain competitive relative to Asia to ensure enough LNG heads to Europe ahead of the next heating season. However, LNG send-outs in Europe have been trending lower since peaking in June.

Source: ING

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Risk Warnings and Disclaimers

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Adam

Economic

The latest economic data suggests the US economy is decelerating. That means growth is slowing, jobs are shrinking, and households are spending less. As we showed in a recent #BullBearReport, economic growth, inflation, and personal consumption are trending lower.

Slowing US Growth Suggests Risk to Earnings Outlook_1

Unsurprisingly, with job growth weakening, consumer sentiment also took a hit in the latest report, with future expectations remaining very weak.

Slowing US Growth Suggests Risk to Earnings Outlook_2

While the financial markets got very excited over the data, as it creates pressure for rate cuts in the US, it bodes poorly for future returns. So far in 2025, there have been 88 central bank rate cuts, the fastest cut cycle since the 2020 COVID crash. That is not a sign of burgeoning economic growth. While stocks and credit anticipate the Fed joining the easing party, the pace of cuts suggests that weakness is spreading globally.

Slowing US Growth Suggests Risk to Earnings Outlook_3

Crucially, economic growth, or the lack thereof, shapes earnings expectations and investor behavior. At first glance, it looked like the US economy was regaining strength in the latest GDP report. But the drivers of that growth tell a different story. Consumer spending rose 1.4 percent, the primary contributor.

However, this increase was funded mainly through savings depletion and increased credit usage. Real wage growth remained stagnant, which means consumers were not spending more because they earned more. They borrowed and spent their savings.

Another major contributor to Q2 GDP was a sharp drop in imports. While this technically boosts GDP, it is not indicative of economic health. Imports fell because domestic demand weakened, and tariffs continued to distort trade flows. Export growth was modest, but not enough to offset the larger picture of global trade deceleration.

Private fixed investment also declined in Q2, suggesting businesses are pulling back on capital expenditures, particularly equipment and structures. This signals reduced confidence in future demand. Inventory restocking added marginally to GDP, but with backlogs thinning and sales slowing, inventory reductions are likely in Q3 and Q4.

Furthermore, while investors are exceedingly bullish on the stock market, forecasts for the remainder of 2025 are sobering. Most projections now place US economic growth at 1.5 percent or lower in the second half. By Q4, real GDP growth could slow to below 1.0 percent year-over-year. Even the IMF, which recently produced its global growth estimates, has the US economy growing at 2% for the next two years, and the Eurozone near 1%.

As discussed above, consumer spending, the primary driver of GDP, will be constrained by slowing wage growth, high debt servicing costs, and reduced access to credit. The economy lacks alternative growth engines without a pick-up in business investment or export demand. That reduction in economic demand will translate into forward earnings expectations, requiring a revaluation of financial markets.

Slowing US Growth Suggests Risk to Earnings Outlook_4

Let’s look at some of the most recent economic data to assess the risks.

US Economic Data: Good, Not Great

July’s employment report confirmed that the slowdown in US economic growth is taking root. Nonfarm payrolls increased by a mere 73,000 jobs. Expectations were for 110,000. The bigger story is in the revisions. May and June payrolls were slashed by 258,000. That’s the second-largest two-month downward revision since the 2008 recession. When employers stop hiring and previous gains get erased, that is not a data glitch—it’s a signal.

The unemployment rate increased to 4.2 percent, while labor force participation remained at 62.2 percent. While not alarming at face value, the lack of participation growth shows that the working-age population isn’t reentering the workforce in significant numbers.

More importantly, full-time employment remains weak as a percentage of total employees, which correlates to the future direction of personal consumption expenditures and inflation. Such is unsurprising given that for individuals to consume at higher levels, they need full-time employment. Without increases in consumption, US economic growth and inflation will decline.

Slowing US Growth Suggests Risk to Earnings Outlook_6

Wage growth is also losing momentum. Average hourly earnings rose 0.3 percent month-over-month, but year-over-year gains slowed to 3.9 percent. This is a problem. Inflation is still hot in services and necessities, eroding real income growth.

Slowing US Growth Suggests Risk to Earnings Outlook_7

Consequently, households feel the pinch, and discretionary spending will reflect that in the second half of 2025. Such is particularly the case with rising delinquency rates, particularly in student loan debt.

Slowing US Growth Suggests Risk to Earnings Outlook_8

The sector breakdown of job growth shows late-cycle dynamics. Healthcare and government jobs are still being added, but these are non-cyclical. Manufacturing employment declined, reflecting weaker orders and global trade slowdowns. Professional and business services hiring has stalled.

Furthermore, the labor market is transitioning from a phase of post-pandemic recovery to a structurally slower employment cycle. Businesses are tightening labor expenses as revenue growth slows.

This is not a short-term adjustment; it’s a reset of hiring expectations across multiple sectors. If wage growth continues to moderate and hiring slows, the consumption-driven economy will lose its primary growth engine.

Data Reveals Broad-Based Slowdown

Outside the employment report, July’s ISM Manufacturing Index fell to 48.0, marking five months of contraction. New orders were sluggish, while the employment index plummeted to 43.4 percent. This reading is significant. It indicates companies are actively reducing factory jobs, not simply slowing hiring.

The problem is not isolated to manufacturing. The services sector, comprising roughly 70 percent of the U.S. economy, barely holds on. The ISM Services Index registered at 50.1 in July, down from a reading of 50.8 previously. This is technically an expansion reading, but only by the slimmest margin.

The composite index is economically weighted (70% services / 30% manufacturing). It tells us what we already suspected: that the economy is growing, albeit very slowly.

Slowing US Growth Suggests Risk to Earnings Outlook_9

The employment component of services fell to 46.4 percent. When service firms start cutting payrolls, it signifies a more profound weakness in demand. For months, services spending was the buffer against manufacturing softness. That buffer is eroding as input costs have risen. Businesses face increasing operational expenses while revenue growth stagnates, a recipe for margin compression.

This was evident already in the Q2 earnings reporting period. There would have been no earnings growth without Megacap Technology and major Wall Street banks.

Slowing US Growth Suggests Risk to Earnings Outlook_10

Industrial companies have already started guiding lower. Tariffs, higher input costs, and weakening orders are cutting into margins. Companies like Caterpillar (NYSE:CAT), Deere (NYSE:DE), and 3M (NYSE:MMM) have issued profit warnings. Consumer-facing companies are also vulnerable. Discretionary spending is slowing, and rising input costs will further squeeze margins for retailers and service providers.

While technology and AI-driven firms have recently become bright spots, their strength cannot offset broader corporate margin pressures. In Q2, S&P 500 earnings grew 6.4%, with 80 percent of companies beating estimates. But this masks a weakening breadth of growth, where earnings beats are concentrated in essentially just two sectors.

As noted, slowing economic growth will reduce earnings expectations for Q3 and Q4. Margin compression will dominate as companies with pricing power and efficient cost structures prosper while the rest struggle to meet expectations.

Investors must now consider this risk.

Investor Positioning in a Slowing Economy

The evidence points to a slowing US economy. Growth is weakening, inflation remains elevated, corporate margins face pressure, and interest rate cuts are likely. These conditions require a shift in investment strategy. Investors must adapt to preserve capital, generate income, and manage risk. Positioning should emphasize resilience, quality, and income stability. The goal is to reduce exposure to volatile sectors and concentrate on assets that perform well during economic slowdowns.

Here are key actions investors should consider:

Reduce exposure to cyclical stocks: Cut back on discretionary sectors like retail, travel, and consumer electronics that rely heavily on strong economic growth.

Increase allocation to defensive sectors: Focus on consumer staples, healthcare, and utilities. These sectors provide stable earnings even in weak environments.

Favor companies with strong pricing power: These firms can better maintain margins despite rising input costs.

Prioritize strong balance sheets: Low debt and high cash reserves reduce financial stress and support consistent returns.

Add high-quality dividend payers: Look for companies with a track record of stable or growing dividends. These provide income support as capital gains slow.

Increase fixed income exposure: Short-duration bonds and high-grade corporates may benefit from falling interest rates.

Consider yield curve positioning: A steeper yield curve from rate cuts may create an opportunity in intermediate bonds.

Avoid speculative growth stocks. These firms rely on future earnings and cheap financing, both of which are under pressure in a slowing economy.

A decelerating US economy changes the return profile across asset classes. Adjusting now to focus on quality, cash flow, and defensive positioning can improve downside protection and set the stage for more stable portfolio returns.

While there are no guarantees, the current gap between what Wall Street expects and what the economy can deliver is very different. Could the economy catch up to meet Wall Street’s expectations? Sure. It just usually doesn’t happen that way.

Source: investing

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Risk Warnings and Disclaimers

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Adam

Economic

China Evergrande Group, for the most part, lived true to its name -- it was once the country's premier developer, its listing in Hong Kong in 2009 was the biggest by a Chinese private developer, and it had the largest pile of debt in the property sector globally.

That attribute stayed with the company till the very end of its boom-to-bust saga -- its delisting from the Hong Kong stock exchange on Monday would be one of the largest by market value and volume in recent years.

For investors in the firm the journey has been anything but grand.

The developer started with a strong public market debut and a stock value of $9 billion in late 2009 that grew more than five-fold to $51 billion eight years later only to plummet to earth in recent years; it is now worth a meagre $282 million.

The company's journey from stock exchange darling to a pariah in the financial markets is a cautionary tale of unbridled debt-fuelled expansion in the world's second-largest economy.

Its shares fetched HK$31.39 apiece at its peak, and it was down to HK$0.163 when it exchanged hands for the last time 19 months ago.

Trading in shares in the world's most indebted developer with more than $300 billion in liabilities has been suspended since it was hit with a liquidation order on Jan 29, 2024, after it defaulted on debt and failed to finalise a restructuring plan.

Evergrande (3333.HK) is getting delisted from the Hong Kong Stock Exchange due to its failure to resume trading within 18 months, according to a filing on Aug 12.

The delisting will close a chapter in China's unprecedented property crisis that started in 2021, though it's unlikely to be the last to meet such a fate as the sector continues to be hobbled by a liquidity squeeze and a lack of demand.

Earlier this month, China South City (1668.HK), became the first state-backed property developer to get a liquidation order from the Hong Kong High Court, following a similar fate for a handful of privately-owned peers.

“Evergrande is one of the landmark examples of the collapse of China's real estate sector a few years ago," said Gary Ng, senior economist at investment bank Natixis.

While the delisting is "largely symbolic", he said it "still marks the end of the golden age of China's real estate sector."

Chinese authorities over the few years have been striving to revive the property sector that once accounted for a quarter of its GDP, while buyers wait for their unfinished homes to be handed over and creditors hope to recoup their money.

"It'll be hard to revive consumption demand and sentiment when people have an empty pocket," said Oscar Choi, chief investment officer of Hong Kong-based Oscar and Partners Capital Ltd, who covered Evergrande as an equity analyst for many years previously at an investment bank.

Evergrande declined to comment.

LIQUIDATION PROCESS

The delisting of Evergrande comes as many other developers scramble to stay afloat and avoid getting into liquidation by securing creditors' support to revamp debt, analysts have said.

Evergrande's rapid rise to the top followed by its dramatic collapse mirrors the fate of its founder, who was raised by his grandmother in a rural village in central Henan province, started as a steel technician and became one of China's richest.

At Evergrande's listing party in 2009 filled with champagne, Hui Ka Yan was joined by many Hong Kong tycoons including Hong Kong property giant New World Development's late founder Cheng Yu-tung and Chinese Estates founder Joseph Lau.

In March last year, Hui was barred from the securities market for life and fined 47 million yuan after the regulator accused the group's flagship unit of inflating results, securities fraud and failing to make timely disclosures.

While Hui has not been seen in public since his detention in 2023, the company liquidators are fighting court battles with him to freeze his and his former spouse's overseas assets and to recover $6 billion paid in dividends and remuneration to him and other former executives.

Lawyers expect the liquidation process to take a decade and the recovery rate for creditors is likely to be very low.

Evergrande's liquidators said last week they have recovered about $255 million from selling the firm's offshore assets, which included school bonds, club memberships, artwork and motor vehicles.

That compared to the creditor claims made to liquidators totalling $45 billion.

Hopes for some homebuyers and investors who put their money in Evergrande's wealth management products are also diminishing.

"After a lot of property viewings, I chose Evergrande because I thought such a big developer would not collapse. I was wrong," Douyin user 8AD2D1D4, who was waiting to receive his home purchase, wrote in the social media post.

($1 = 7.8140 Hong Kong dollars)

Source: reuters

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Michelle

Economic

Political

US President Donald Trump said he would fire Lisa Cook from the Federal Reserve Board of Governors if she does not resign her post over mortgage-fraud accusations from a top ally.

“I’ll fire her if she doesn’t resign,” Trump told reporters on Friday.

The comments intensify Trump’s pressure campaign against the central bank, which he has bashed for months over its decision to keep interest rates steady.

Trump on Wednesday called for Cook’s resignation after Federal Housing Finance Agency Director Bill Pulte alleged she committed mortgage fraud by lying on loan applications to secure favorable terms. Cook later responded, saying she would not be bullied into stepping down.

Source: Bloomberg Europe

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Adam

Economic

Chinese artificial intelligence startup DeepSeek has hinted that China will soon have homegrown “next generation” chips to support its AI models, while announcing an update to one of its large language models.

In a comment under a post on its official WeChat account, DeepSeek said the “UE8M0 FP8” precision format of its newly released model V3.1 is tailored for the next-generation domestically built chips that will be launched soon.

FP8, or 8-bit floating point, is a data processing format that can boost the computational efficiency for training and inference of large deep learning models.

DeepSeek’s mention of China’s coming next-generation chips may signal plans to work more closely with China’s emerging AI chip ecosystem in the face of Washington’s advanced semiconductor export restrictions and Beijing’s push for chip self-sufficiency.

The comments come about two weeks after Beijing reportedly urged Chinese AI developers to use domestic alternatives to Nvidia’s graphics processing units used in AI training. While analysts say China’s domestic AI chipmakers lag behind Nvidia in technological advancement and scale, players like Huawei have been making progress.

In its Thursday post, DeepSeek did not disclose the chips it used to train the V3.1, or what local chips the UE8M0 FP8 might be compatible with.

DeepSeek shook up the tech world earlier this year after it released its R1 reasoning model, which demonstrated capabilities comparable to those of Western competitors like OpenAI, despite U.S. export controls restricting it from using Nvidia’s most advanced AI training chips.

Prior to that, in December, the company released its V3 model, which it said had been trained on about 2,000 of Nvidia’s less advanced chips.

Following DeepSeek’s model breakthroughs, the U.S. further tightened export restrictions in April, effectively banning Nvidia’s H20 chips, which had been specially designed to meet prior export restrictions on China.

Last month, officials from the Trump administration said they planned to allow Nvidia to resume shipping the chips to China. However, the H20s are now being met with scrutiny in China, with regulators reportedly mandating companies against buying the chips until a national security review is completed.

Chip analysts have told CNBC that companies like Huawei that have been seeking to build an alternative AI chip ecosystem in China could benefit from a lack of Nvidia’s H20s in the market.

DeepSeek said Thursday that its V3.1 came with “major changes,” including faster response times, and a hybrid reasoning architecture that allows the model to support both reasoning and non-reasoning modes. Reasoning models can execute more complicated tasks through a step-by-step logical thought process.

Starting Sept. 6, the company will also adjust the pricing for using the model’s API, which allows developers of other apps and web products to integrate DeepSeek on their platforms.

Source: cnbc

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Glendon

Forex

Economic

Nodding toward significant changes in the economic landscape over the last five years, Federal Reserve Chair Jerome Powell on Friday announced an updated operating framework for the U.S. central bank that reflects the return of higher inflation pressures and reduced prospect of near zero short-term interest rates.

Announcing the changes in a speech to be delivered to the Jackson Hole economic symposium in Wyoming, Powell said "there is a great deal of continuity with past statements" in the new framework.

"We continue to believe that monetary policy must be forward-looking and consider the lags in its effects on the economy" and that the Fed must balance risks to both its job and inflation mandates when setting monetary policy, Powell said. He added that setting numerical goals for things like the ideal level of employment is "unwise."

The new operating edict moves away from what had been an omnipresent challenge of monetary policy having to operate at very low interest rates due to what had been a period of very low inflation relative to the Fed's 2% target, the landscape that informed its 2020 policy review.

Powell said in the new framework "we removed language" about the low-rate environment and "we returned to a framework of flexible inflation targeting and eliminated the 'makeup' strategy" featured in the 2020 framework, the last time the Fed updated its overall operating principles.

"Our revised statement emphasizes our commitment to act forcefully to ensure that longer-term inflation expectations remain well-anchored, to the benefit of both sides of our dual mandate," Powell added.

The review of the central bank's operating principles was widely expected. The minutes from the central bank's July 29-30 policy meeting, released on Wednesday, had noted the overhaul "would be designed to be robust across a wide range of economic conditions."

That was a nod to the fact that the last iteration was quickly overrun by the events of the COVID-19 pandemic. The agenda advanced then said the Fed would allow inflation to overshoot the 2% target to make up for periods when the central bank had fallen short of the goal.

Powell said under the new principles "we take into account the extent of departures from our goals and the potentially different time horizons over which each is projected to return to a level consistent with our dual mandate."

IMPACT OF PANDEMIC

The last framework was adopted in the context of a Fed that at that time had been contending with an extended period of very weak inflation pressures, which had in turn led to a long period of very low short-term interest rates. Low rates complicated the Fed's ability to respond to economic shocks.