Susannah Streeter, Chief Investment Strategist, Wealth Club:
”Just when some calm looked set to be restored to markets, the Jensen Huang spy bombshell has hit, threatening to charge the tech sector with fresh volatility. The allegations centre on a close relationship with a Chinese businesswoman whom US intelligence reportedly suspected of working for Beijing. Huang has admitted being unfaithful to his wife and apologised to his family and colleagues. All eyes will be on the share price later amid worries about whether any sensitive company information or national security secrets could have been compromised.
The board says it has no reason to believe that either has happened, but it is launching a full investigation. The revelations also raise questions about the political handling of the affair, after reports that Donald Trump had been briefed about the intelligence concerns around a year ago but took no action. That also raises a broader concern about what other scandals or vulnerabilities could be lurking beneath the surface in the increasingly interconnected world of big tech.
Huang’s reputation has undoubtedly been tarnished, but right now the furore does not look as though it’ll pull him from his throne, given how intertwined Nvidia’s valuation is with his superstar tech status and his position as the architect of its dominance in the semiconductor market. That expectation may reassure investors, that while headline dominating, the affair won’t be a big bump in the road for the company.
For now, the repercussions across the wider chip industry look relatively limited although the scandal could disrupt the tech rebound. Nvidia’s Asian suppliers have gained back ground following last week’s brutal sell-off, with Taiwan’s TSMC climbing around 4.7% and South Korea’s SK Hynix and Samsung also making progress. These are important relationships given that TSMC manufactures Nvidia’s advanced AI processors, while SK Hynix supplies the high-bandwidth memory essential to powering them. Samsung is also fighting to secure a bigger slice of that lucrative memory market.
London’s Footsie is on the front foot in early trade as inflationary concerns ease and it’s buoyed by the wider market rebound. Miners have been among the biggest gainers in early trade as sentiment around global growth improves. Investors are assessing signs of progress in Middle East peace negotiations after Trump’s latest comments suggesting fresh attacks on Iran are highly unlikely, while talks continue. Brent crude is trading around $96 a barrel, down sharply from October’s highs of $116, as hopes of a more conciliatory approach help take some of the heat out of oil markets. That’s providing some relief on the inflation front, particularly given the economic repercussions of higher interest rates. Investors will be looking to Thursday’s UK GDP figures for a clearer steer on whether the economy is managing to keep its footing or starting to weaken under the pressure of higher borrowing costs.”
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