Chips Get Action, Warner Bros. Bidding Gets Hostile, Market Could Get JOLTed
U.S. OK's Nvidia's H200 products in China, WBD battle heats up, and we'll get two months' worth of JOLTS job openings data.
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It's no small wonder that the 1981 Motley Crue hit "Piece of Your Action" ran repeatedly through my head on Monday evening. Most readers have probably either forgotten or maybe never heard of the song. The lyrics are a little on the racy side, which is why I did not put them on display here. But it was AI-capable graphics processing units, or GPUs, that I was thinking of last night as was the president of the United States, not whatever was on the minds of the Crue 44 years ago.
President Trump posted to his Truth Social account: "I have informed President Xi of China that the United States will allow Nvidia (NVDA) to ship its H200 products to approved Chinese customers in China and other countries under conditions that allow for strong national security."
The president added, "President Xi responded positively! $25% will be paid to the United States of America."
The dollar sign in front of the 25% was either a typo or the president was being emphatic that the U.S. government was getting a sizable piece of the action. Later on in the post, the president wrote, "The Department of Commerce is finalizing the details, and the same approach will apply to AMD (Advanced Micro Devices), Intel (INTC), and other great American Companies."
Both Nvidia and Advanced Micro Devices (AMD) compete in the AI-capable chip export market. Intel (INTC) , unless something is soon to be announced, as far as I am aware of, does not.
Perhaps the president was pushing for these high-end designers to make more use of Intel's foundry rather than having Taiwan Semiconductor (TSM) produce most of the high-end silicon. Yes, Intel is an American company, but Taiwan Semiconductor is building out massive facilities in Arizona in order to bring that production to the US, so we'll see how that plays out. The U.S. government is now, after all, an investor in Intel.
What's incredible, is that both Nvidia and AMD had agreed to pay the U.S. 15% of Chinese sales earlier this year in response to U.S. export curbs, only to face Chinese import curbs. The White House has confirmed, according to Reuters, that the 25% fee will be collected as an import tax from Taiwan, as the chips will be imported to the US for a security review prior to being then exported to China.
Designed specifically for the Chinese market, Nvidia's H200 chips are more advanced than the previously available H20 chips. They are designed on Nvidia's "Hopper" architecture, which is a generation behind "Blackwell" architecture, which is currently available in the U.S. and two generations behind Nvidia's inference-focused "Rubin" architecture to be made available for purchase in early 2026. Blackwell and Rubin are excluded from this approval, by the way.
Now, to get these chips past the goalie. The Financial Times is reporting this morning that Chinese regulators may make this difficult. There will be a process, and Chinese purchasers will likely have to show that they couldn't get what they needed from domestic designers / producers.
More on Chips...
On Monday, shares of Broadcom (AVGO) traded 2.78% higher as shares of Marvell Technology (MRVL) were drubbed for a nearly 7% beating. This came after a weekend report in "The Information" implied that Microsoft (MSFT) could be talking to Broadcom about co-designing custom-made AI-capable chips. This is something that Marvell had done for Microsoft in the past.
Very interestingly, as analyst Cody Acree of Benchmark downgraded Marvell from a "buy" rating to a "hold," both Atif Malik of Citigroup and Harlan Sur of JP Morgan reiterated their "buy" ratings on the stock, while Malik increased his target price from $92 to $114. All three of these analysts are rated at five stars out of five by TipRanks.
Sur, who reiterated a $130 target price for MRVL, wrote that any reports of lost business at Marvell from the likes of Amazon (AMZN) or Microsoft were just "noise." Sur claimed that Marvell's custom chip business remains "solidly intact."
Sur added, "We believe that Marvell's ASIC (application-specific integrated circuit) programs at Microsoft and AWS (Amazon Web Services) are progressing well, and that there has been no ASIC program share loss at either Microsoft or AWS on current or next-generation AI XPU ASIC programs."
Hostile Bid!
We mentioned the idea of a hostile takeover bid in this column 24-hours ago. So did others. It took only minutes for that rather predictable reality to play out. I told readers what I thought of the announced deal between Netflix (NFLX) and Warner Bros. Discovery (WBD) on Friday. I really don't think Netflix has the balance sheet to remain comfortable after revealing that it needed to borrow $59 billion just to get that deal done. Netflix had bid the equivalent of $27.75 a share for part of WBD, beating out the Paramount Skydance (PSKY) $30 bid per share for the whole ball of wax.
Paramount CEO David Ellison has sent a letter to the Warner Bros board of directors stating: "We are providing you with funds certain from one of the wealthiest families in the world, a domestic counterparty, while also eliminating any cross-conditionality, which should give WBD's board complete comfort and certainty as to our ability to close in a timely fashion."
Paramount's bid is supported by a $40.7 billion commitment from investors that include Saudi Arabia's Public Investment Fund, the Qatar Investment Authority, and Affinity Partners (where Jared Kushner is a partner). The equity portion of the deal would be guaranteed by the Ellison family and Redbird Capital Partners. Tencent Holdings has disappeared as a participant, from the paramount bid.
How this plays out, we don't know. What we do know is that this thing is a long way from being done. Could be a situation where the winner ends up being the loser in disguise.
Markets
Treasuries from the belly of the yield curve on out continued to show mild weakness on Monday. A total of $39 billion worth of new U.S. Ten-year Notes will go to auction this afternoon. Let's see how foreign demand looks at 1 p.m. ET. Equities continue to waffle ahead of the Fed's policy statement on Wednesday afternoon.
The S&P 500 gave up 0.35% on Monday as the Nasdaq Composite gave back just 0.14%. Small to mid-caps struggled as well. The S&P 400, S&P 600 and Russell 2000 lost 0.53%, 0.44% and 0.02% respectively. Among my most closely followed indices, only the Philadelphia Semiconductors (+1.1%) and the KBW Banks (+0.25%) showed gains.
Breadth was sloppy. Ten of the 11 S&P sector SPDR exchange-traded funds closed in the red, led lower by the Discretionaries (XLY) and Materials (XLB) . Only Tech (XLK) closed in the green. Losers beat winners by a rough two-to-one margin at the NYSE and by a much tighter five-to-four margin at the Nasdaq. Advancing volume took a surprisingly strong 59.8% share of composite Nasdaq-listed trade, but just a 40.9% share of composite NYSE-listed activity.
As far as trading volume is concerned, aggregate volume was 3.8% lower on a day-over-day basis across NYSE-listings, but 3.5% higher across Nasdaq-listings. Activity was reduced across the membership of the S&P 500. In fact, S&P 500-related trading volume has now closed below its 50-day simple trading volume moving average for nine consecutive trading sessions. The pros are sitting on their hands ahead of the Fed.
In Focus
Don't be surprised if keyword reading algorithms react or even overreact this morning to both the weekly ADP Employment report and the Bureau of Labor Statistics' JOLTS Report for job openings and job quits. Due to the government shutdown, the BLS will be publishing JOLTS data for both September and October. If it appears that balance of power in labor markets has shifted decisively away from the supply side from September into October, there will be a ripple across equity markets. Then again, bad news could be good news ... for stocks.
Economics
(All Times Eastern)
07:00 - Small Biz Optimism Index (Nov): Expecting 98.3, Last 98.2.
08:15 - ADP Employment Report (Weekly): Last -13K.
08:55 - Redbook (Weekly): Last 7.6% y/y.
10:00 - JOLTS Job Openings (Sep): Last 7.227M.
10:00 - JOLTS Job Openings (Oct):
10:00 - JOLTS Job Quits (Sept): Last 3.091M.
10:00 - JOLTS Job Quits (Oct):
1:00 p.m. - Ten Year Note Auction: $39B.
4:30 p.m. - API Oil Inventories (Weekly): Last -2.48M.
The Fed
(All Times Eastern)
Fed Blackout Period.
Today's Earnings Highlights
(Consensus EPS Expectations)
Before the Open: (AZO) (32.69), (CPB) (.73), (OLLI) (.73)
After the Close: (AVAV) (.80), (CASY) (5.15), (CBRL) (-.73), (GME) (.20)
At the time of publication, Guilfoyle was long NVDA, AMD, INTC equity.
