Economics

Investors scramble to make sense of a shock Chinese challenge to the dominance of western chipmakers

Even for the rollercoaster world of AI, last week was particularly volatile as investors scrambled to keep up with developments that threatened the dominance of the largest western chipmakers.

It began with a double whammy. On Monday, the Chinese memory chipmaker CXMT floated on the Shanghai stock market, soaring by 466% in value to 3.3tn yuan (£365bn).

That same day, it was reported that China had developed its own tools to carry out deep-ultraviolet lithography, a technique essential to the computer chip supply chain over which the Dutch company ASML had held a monopoly.

Oil prices got back to jumping on Wednesday, while sinking technology stocks dragged Wall Street lower amid uncertainty about what the Federal Reserve will do to get high inflation under control.

The S&P 500 fell 1.5% after swinging sharply between gains and losses in the last hour of trading. The Dow Jones Industrial Average dropped 1,153 points, or 2.2%, and the Nasdaq composite slumped 1.7% to fall 9.8% below its record set last month.

The action was more decisive in the oil market, where the price of Brent crude leaped 7.3% to settle at $88.09 per barrel after fighting resumed in the war with Iran and raised worries about the global flow of oil.

Samsung and SK Hynix fall by more than 10% amid renewed fears over AI spending and Chinese competition

The sell-off in AI stocks has intensified, driving South Korea’s stock market down to its lowest level in three months.

Investors continued to ditch chip stocks on Tuesday, amid rising concerns about the huge amount of borrowing among AI companies to fund their datacentre expansion plans.

The South Korean semiconductor companies SK Hynix and Samsung Electronics fell by more than 10%, dragging the country’s Kospi share index down by 11.5% to its lowest point since mid-April.

Analysts attributed the sell-off to renewed worries over AI investment spending, and competition from cheaper Chinese companies, after a report by the Information that China has begun mass production of homegrown deep ultraviolet (DUV) chip-making tools.

Brent crude benchmark rose to more than $80 a barrel, its steepest increase since ceasefire began

Oil markets have recorded their sharpest price rise in nearly two months after a series of attacks on fossil fuel tankers near the strait of Hormuz led Donald Trump to declare that the ceasefire deal with Iran was over.

At the same time, UK short-dated bonds suffered their worst day since the end of March as the prospect grew of a Bank of England rate rise to cope with the renewed inflationary pressures.

The yield or interest rate on two-year gilts rose 15 basis points to 4.35% with a rate rise in November fully priced in and a 50% chance of another in December. The market gave a 75% chance to one rate increase by the end of the year earlier this week.

• The economy added 57,000 jobs in June, with nearly all job growth coming from health care and social assistance.
• The unemployment rate edged down to 4.2 percent, but the employment-to-population ratio fell to its lowest level since June 2021.
• Prime-age employment declined sharply, especially among men, signaling potential weakness in the labor market despite low unemployment.
• Wage growth slowed to 3.5 percent year over year, lagging recent inflation and reflecting softer labor demand.
• Hotels, restaurants, insurance, and motion picture industries lost jobs, while women accounted for more than all net payroll job growth.
• There is still no evidence of an AI-driven jobs apocalypse, as productivity growth remains modest and concentrated job gains point to a cooling — not collapsing — labor market.

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Exploiting the unique institutional setting of Hong Kong’s real estate market, we uncover a curious ripple effect of haunted houses on the prices of nearby houses. Prices drop on average 19% for units that become haunted, 9% for units on the same floor, 6% for units in the same block, and 1% for units in the same estate. Our study makes two contributions. First, we provide an estimate of a large negative spillover on prices caused by a quality shock. Second, we find that the demand shock rather than the fire sale supply shock explains most of the spillover.

The report marked the slowest month of hiring since February, when hiring contracted.

The U.S. economy added just 57,000 jobs in June, a worrying sign for labor market stability as wage growth tracked below inflation for a third consecutive month.

In June, average hourly earnings increased by 3.5%, which remains far below the most recent inflation reading of 4.2%.

The unemployment rate ticked down to 4.2% from 4.3%. June’s total was the lightest month of hiring since February, when the labor market contracted.

Eye-opening discussion with billionaire investor Jeremy Grantham about economics, AI, climate change, and fertility.

https://www.youtube.com/watch?v=32u5T6lO8qk

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OpenAI is considering holding off on its public debut until next year, the New York Times reported ‌on Thursday, citing three people involved in the company's deliberations.

The AI startup, which has confidentially filed for a U.S. initial public offering, is targeting a valuation of up to $1 trillion, Reuters has reported, adding Chief Financial ⁠Officer Sarah Friar has told some associates the company is aiming for a 2027 listing.

OpenAI's advisers presented company executives with the option of waiting until 2027 to go public with a $1 trillion valuation, or lower the targeted valuation for a quicker listing, NYT said. CEO Sam Altman responded that any change to the trillion-dollar valuation was a non-starter.

Former US Federal Reserve chair Alan Greenspan has died aged 100, his wife has said.

NBC News correspondent Andrea Mitchell said in a statement reported by her employer that her husband had died from complications of Parkinson's Disease.

Mitchell's statement said Greenspan was "a giant of a man who helped shape the US economy for decades under presidents of both parties, but was always honest in acknowledging his mistakes".