US approves Nvidia H200 AI chip exports to China

General market commentary

US equity markets finished lower on Monday as investors looked ahead to the final Federal Reserve meeting of 2025 later in the week. Leadership in the market was narrow, with technology the only sector of the S&P 500 to end the day higher, supported by gains in Broadcom after reports that it is in talks to supply semiconductor chips to Microsoft. Small cap equities were also relative outperformers, with the Russell 2000 Index posting a modest rise and now up nearly four percent over the past month. Elsewhere, Asian markets were mixed while European markets traded mostly lower despite an improvement in the eurozone Sentix economic index. Bond yields moved slightly higher, with the ten-year Treasury yield reaching around 4.17 percent.

Major US indices retreated from record levels as rising government bond yields signalled some investor caution ahead of the Federal Reserve’s policy announcement. The Dow Jones Industrial Average fell by 0.5 percent, the S&P 500 slipped 0.4 percent and the Nasdaq Composite edged down 0.1 percent. Market expectations continue to point to a high likelihood of a quarter point interest rate cut on Wednesday, with investors focused on the central bank’s updated economic projections and commentary from Chair Jerome Powell. Most sectors declined apart from technology, with communication services, consumer discretionary and materials leading the fallers. Corporate news added to market volatility, including a sharp rise in Paramount Skydance following its tender offer for Warner Bros Discovery and a decline in Netflix after President Donald Trump raised potential antitrust concerns around its proposed deal.

Latest market and economic update

Asian equities traded mixed on Tuesday ahead of the Federal Reserve meeting. Chinese markets were flat after Politburo pledges for fiscal support, while chip shares fell on news Nvidia may sell advanced AI chips in China. Hong Kong, South Korea, and India declined, Singapore rose slightly, Japan remained subdued, and Australia’s ASX 200 dipped on hawkish RBA comments.

US equity futures were largely unchanged overnight ahead of the Federal Reserve’s likely 25-basis-point rate cut. S&P 500 Futures rose 0.1%, Nasdaq 100 Futures gained 0.1%, and Dow Futures were flat. Nvidia shares jumped 2.3% after Trump approved limited H200 AI chip sales to China with a 25% tariff.

European equities traded cautiously Monday ahead of the Federal Reserve’s likely rate cut. Germany’s DAX rose 0.1% after stronger-than-expected industrial production, while France’s CAC 40 slipped 0.1%. Unilever retreated after demerging its ice cream business, while Ageas gained 0.6% after acquiring the remaining 25% stake in AG Insurance from BNP Paribas, securing full ownership.

The dollar index traded around 99, holding steady against major currencies as markets await the Federal Reserve’s likely 25bp rate cut. The euro stood at 1.1640. Investors priced an 87% chance of the cut, while caution over 2026 guidance and upcoming US data keeps the dollar rangebound ahead of global central bank decisions.

Oil prices edged lower on Tuesday, with Brent at $62.41 and WTI at $58.75, extending Monday’s losses. Markets remain cautious amid restored Iraqi production, ongoing Ukraine peace talks, and anticipation of a likely 25bp Fed rate cut. Analysts see ample supply and cautious demand keeping oil in a tight $60–65 range.

Equities on the move

The following companies experienced moves in their share price driven by analyst ratings, quarterly earnings, or other news:

The US will allow Nvidia’s H200 AI chips to be exported to China with a 25% fee, under security review, while keeping the faster Blackwell chips restricted. The move aims to balance trade and national security but has drawn criticism from lawmakers over potential military and technological advantages for China, despite Beijing’s cautious stance.

Paramount Skydance launched a $108.4 billion hostile bid for Warner Bros Discovery, aiming to outcompete Netflix and challenge Disney in the US and Canada. The deal would add HBO Max content to Paramount, but brings significant debt of around $30 billion. The sale marks a defining moment for Hollywood amid antitrust and market-share concerns.

Activist hedge fund Ananym Capital has acquired a stake in Siemens Energy and is urging the company to spin off its wind unit, Siemens Gamesa. Citing growth in gas turbines and grid power, Ananym argues the struggling wind business is holding back the company and calls for a strategic review to consider a potential separation.

PepsiCo announced a North America supply chain review and plans to cut costs following pressure from activist investor Elliott Management, which holds a $4 billion stake. Measures include reducing nearly 20% of US product lines, closing manufacturing lines, increasing automation, and simplifying snacks, while some US and Canadian jobs will be affected.

IBM will acquire data infrastructure firm Confluent for $11 billion, paying $31 per share, a 50% premium. The deal aims to expand IBM’s cloud and AI capabilities, following its $6.4 billion HashiCorp acquisition. Confluent provides technology for managing real-time data streams, with the transaction expected to close by mid-2026.

L’Oréal will double its stake in Swiss skincare firm Galderma to 20%, buying from a consortium led by EQT. The move targets growth in the booming injectable cosmetics market, which sees double-digit expansion. The deal is expected to close in Q1 2026, with L’Oréal also gaining board representation and potential for future full control.

Renault and Ford will collaborate to produce small, affordable electric vehicles and commercial vans for Europe, aiming to cut costs and counter rising Chinese competition. The first EV will launch in 2028 from a Renault plant. The partnership boosts Renault’s scale and helps Ford compete in Europe’s EV market alongside Volkswagen and Chinese rivals.

Ed Yardeni moves to Underweight the Magnificent 7, citing high S&P 500 concentration in IT and Communication Services. He advises market-weighting these sectors, overweighting Financials, Industrials, and Healthcare, and reallocating globally toward cheaper, high-momentum ex-U.S. equities, as corporate earnings remain resilient amid evolving globalisation and technological competition.

Oppenheimer sets a bullish S&P 500 year-end 2026 target of 8,100, citing resilient earnings, broadening market participation, and ongoing AI-driven productivity. With most sectors reporting strong Q3 growth, the firm expects the Fed to cut rates, supporting cyclical and Utilities sectors, while innovation and AI remain key drivers of corporate performance.

Bank of America upgraded Adyen, lifting its price target to €2,050 and reaffirming a Buy rating, citing structural growth and 20%+ annual revenue expansion through 2027. Growth is driven by the Platform business, embedded finance, and global e-commerce tailwinds. EBITDA and free cash flow are set to rise, with valuation supportive.

HSBC upgraded Visa and Mastercard to Buy, citing attractive valuations after recent underperformance and durable earnings supported by fast-growing services. Price targets rose to $389 for Visa and $633 for Mastercard. Both companies are expected to deliver double-digit revenue and EPS growth through 2027, driven by expanding value-added services and commercial payments.

Evercore ISI raised Apple’s price target to $325, citing its AI roadmap and a Siri 2.0 relaunch in early 2026 as potential profit and valuation catalysts. The update, powered by Gemini, offers multimodal interaction, on-device AI, and AI-as-a-Service monetisation, reinforcing Apple’s Outperform rating and positioning AI as a major growth driver.

Bernstein raised TSMC’s price target to $330 ADR, citing strong AI-driven demand and advanced packaging growth. The firm expects 23% revenue growth in 2026, expanding CoWoS capacity to 125,000 wafers/month, and 20% EPS CAGR through 2027. Capex will reach $47 billion, supporting AI, smartphone, and mature-node demand. TSMC remains a core holding.

Morgan Stanley downgraded Ferrari to Equal Weight with a $425 target, citing limited near-term upside as the company prioritises brand preservation over volume growth. Production through 2030 is strictly capped, constraining revenue, while fiscal 2026 sales and EBIT are forecast below consensus. Key risks include EV launch execution, residual values, and slower model transitions.

Morgan Stanley downgraded Tesla to Equal Weight with a $425 target, citing limited near-term upside as AI, robotics, and non-auto segments are largely priced in. The bank highlights slower EV adoption, regulatory hurdles, and a choppy 12-month outlook, while noting long-term potential in FSD, robotaxi, and humanoid programs.

TD Cowen upgraded Ulta Beauty to Buy from Hold, raising its price target to $725, citing a “dynamic and visible” growth phase under CEO Kecia Steelman. Analysts highlighted margin upside, strong merchandising, a 46-million-strong loyalty program, and technology-driven expansion. Operating margins are projected at 12.4–12.8% for FY25/26, with valuation considered attractive.

Morgan Stanley warns of an “EV winter” in 2026, with U.S. light-vehicle sales falling to 15.9 million and EV volumes down 20%. GM is upgraded to Overweight on strong execution and ICE demand, Tesla cut to Equal Weight, while Rivian and Lucid are downgraded to Underweight amid margin pressure, affordability challenges, and policy uncertainty.

Jefferies remains bullish on gold miners in 2026, citing attractive valuations, healthy balance sheets, strong margins, and rising free cash flow. Gold prices are expected to stay rangebound, supporting the sector. Top picks include Barrick Mining, Alamos Gold, and Royal Gold, with potential for M&A, dividends, and buybacks amid modest cost pressures.

Upcoming data and events

Today’s key economic data includes US NFIB Business Optimism, Q3 unit labour costs and productivity, JOLTs job openings and quits, and the 10-year Treasury note auction. Earnings releases feature major companies such as British American Tobacco, AutoZone, GameStop, and Campbell Soup.

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