Head of Equity Strategy
Summary: Nvidia is making a bold and in our view correct $40bn bid for SoftBank Group's computer chip business Arm. It will cement Nvidia as one of the most influential and important computer chip makers in the world but put right in the middle of the US-China technology arms race. Oracle shares are up 9% in pre-mkt trading on the news that it has won the bid for TikTok's US business beating Microsoft to the finish line.
Yesterday SoftBank Group announced that it is selling its chip-design company Arm which is bought in 2016 to Nvidia for $40bn in deal financed with stock and cash. Arm has some of the world’s most important patents and chip-designs for semiconductors and the acquisition will cement Nvidia’s position as one of the leading computer chip manufacturers in 21st century. SoftBank Group shares were up 9% in Japanese trading and Nvidia shares are up 5% in pre-market trading.
With the acquisition Nvidia is catapulted directly into the technology arms race between the US and China more than it already was. Arm has a lucrative business in China and the Chinese regulators could block that part of the acquisition as a key technology transfer from a more neutral country such as Japan to an American technology company could be viewed as a threat in Beijing.
Dusty database company Oracle gets social media flavour
Microsoft was long thought to end up being the winner in the bid to acquire TikTok’s US business which was forced by the White House to find an alternative operational model in the US. However, over the weekend Oracle announced that it had won the bid for TikTok’s US business by offering a partnership model instead of an outright purchase. Oracle will become a ‘trusted tech partner’ according to source whatever that means. Oracle has so far not released a press release so we do not know what the framework is other than the news says that the solution will be ‘secure’ for Americans. Oracle shares are up 9% in pre-market trading showing how a little sprinkle of social media can suddenly change the appeal for investors. We still find it weird that one of the most laser-focused enterprise software businesses in the US suddenly wants to enter the social media arena.
AI: The good, the bad, and the bubble
While a deep recession may not be iminent thanks to central bank policy, interest rates will have to stay high for longer, and this will be accompanied by volatility risk from the unwinding of bubbles, especially within AI.
Steen Jakobsen,
Chief Investment Officer
The emergence of advanced AI systems is by far the most surprising event this year, turning everything upside down, while risks and benefits are debated. AI will also become an arms race between the US and China.
Peter Garnry,
Head of Equity Strategy
As China navigates global fragmentation, its cycle of technology application, productivity enhancement, and growth is threatened by US breakthroughs in generative AI, limited computing power, and geopolitical tensions.
Redmond Wong,
Market Strategist
Japan’s expertise in semiconductors and robotic integration could be the foundation of AI dominance. Combining two of this year's themes, Japanese equities and artificial intelligence, brings a wave of opportunities.
Charu Chanana,
Market Strategist
The AI fever has turned the technology into a darling, pushing crypto further into no-man’s-land. There are striking similarities between AI and crypto, and if these are to come full circle, AI won't be spared for bubbles.
Mads Eberhardt,
Cryptocurrency Analyst
Stocks related to artificial intelligence (AI) have appeared on investors' radars. Expectations are high, but it may be necessary to consider how to get exposure to AI in a diversified way.
Hans Oudshoorn,
Trainer Academy
The USD is on its back foot as markets celebrate an eventual Fed rate peak and steady long US yields. The stakes are even higher for the Japanese yen if longer major sovereign yield curves have to price in economic acceleration.
John J. Hardy,
Head of FX Strategy
While commodities, broadly speaking, have faced some tough months, a partial reversal during June could signal that the asset class is getting back on its feet with energy holding up and precious metals with upside potential.
Ole S. Hansen,
Head of Commodity Strategy
As inflation remains high central banks face hard decisions about whether they should keep hiking interest rates or stop. Meanwhile, the rise of AI creates bubble-like conditions that only make the decision harder.
Althea Spinozzi,
Senior Fixed Income Strategist
