How will the chips fall in Lat-Am, as chip demand doesn’t fall for Nvidia
Nuclear treaty negotiations have not progressed with Washington and Tehran’s terms still “far apart” as the threat of regional escalation looms. Geopolitical issues aside, it has been a relatively quiet week for global news relative to the chop and change to which we have become accustomed. There were few important economic data releases too.
Last week, following our update, the US Supreme Court limited President Trump’s use of emergency powers forcing the administration to pivot to an alternative set of rules to execute trade policy. The result was a pivot to a 10% global baseline tariff which will rise to 15% imminently.
These tariffs are only a temporary measure giving the Republicans 150 days, unless extended by Congress, to prepare more permanent legal justifications under other statutes.
While this should be a positive step to unwinding some of the negativity around US assets since Liberation Day, it also increases short-term policy uncertainty, thus the US dollar and US assets have remained subdued.
Nvidia reported excellent sales and earnings results but didn’t manage to hold onto the gains made in the run up to the release. Semiconductor stocks have had a strong start to year, however, so this move should not contradict the stellar performance of this company.
Software and cybersecurity stocks continue to struggle against a wave of pessimism around AI disruption, but some investors are beginning to look at the pullback as an attractive entry point. This perspective is reinforced by a report from Huntington Bank which revealed that 87% of businesses now name fraud and AI-driven cyber threats as their primary risk, surpassing traditional concerns like inflation or supply-chain disruptions.
Torsten Slock, Chief Economist at Apollo Global, also noted that a large share of the AI-sensitive sectors of the economy is also interest rate, trade or immigration-sensitive, and has therefore been hampered by policy not solely AI disruption concerns.
Latin America is a hotbed of activity again, with the US State Department taking the extraordinary step of revoking the visas of three high-ranking Chilean officials in relation to Chinese investment in subsea fibre-optics to directly connect the two countries.
Secretary of State, Marco Rubio, alleged that allowing Chinese firms to build critical infrastructure would compromise the telecommunications integrity of the entire hemisphere. It is clear that the US will continue to force South American countries into a binary choice between relations with them or China. It will be interesting in time to see how these chips fall.
With critical minerals of key strategic focus, India and Brazil signed a pioneering agreement to cooperate on the extraction and processing of rare earth elements in a move to bypass Chinese supply chains.
In the UK, unpaid invoices owed to small firms reached a staggering £112 billion, with nearly half of all invoices now paid late. The UK Parliament’s Business and Trade Committee is facing calls to make 30-day payment terms mandatory to prevent a wave of insolvencies.
The Japanese Yen has weakened gradually again, with its recent bout of post-election strength a little unusual given the implied boost in fiscal stimulus. The conversation is slowly turning towards how this shift in policy will be paid for, hence continued downward pressure.
South Korean equities continued to perform well in what was otherwise a relatively benign week for asset prices, with the continued rebound in precious metals the only other notable action, as they recover from the volatility at the end of January.
South Korea is benefitting from the shortage in High-Bandwidth Memory chips which are a bottleneck in the AI datacentre buildout. Samsung and SK Hynix, both Korean companies, are two of the three key global producers and account for most of South Korea’s stock market gains over the past 12 months.
What also makes South Korea appealing is that it is seeking MSCI reclassification from an emerging to developed market by 2028.
Where are markets up to?
The rolling 12 month % cumulative returns in local currency from various indices is shown in the following chart:
Where are the portfolios up to?
The portfolio performance, net of fees, to close of business on Thursday is as follows:
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