To The Moon

Performance of Global Equity Indices(in US Dollar)

Source: Bloomberg, Tiger Brokers

Key Market Themes

Is the Biden Administration's Plan for Stricter AI Chip Export Restrictions Set to Have a Profound Impact on the Tech Industry?

• Last week, Bloomberg, citing sources familiar with the matter, reported that the Biden administration plans to introduce further AI chip export restrictions before leaving office on January 20. Rumors suggest that the new regulations will categorize countries and regions into three tiers as follows:

• Tier 1: Includes major U.S. allies such as Germany, Japan, and the Netherlands. These countries will face minimal restrictions and can nearly freely access AI chips exported by the U.S.

• Tier 2: Covers most countries and regions worldwide, which will be subject to a total computing power limit on a country or regional basis. If these nations wish to raise their computing power cap, they must meet U.S. government security requirements and undergo review.

• Tier 3: Includes mainland China, Russia, and other regions, which may face a total ban on importing U.S. AI chips.

• Following the news, companies like NVIDIA, Amazon, Microsoft, and Meta openly expressed opposition and skepticism. They argued that this approach by the Biden administration would not reduce risks of misuse but might instead threaten economic growth and America's technological leadership.

  NVIDIA’s latest financial report shows that the U.S. and Taiwan account for approximately 60% of its revenue, while the remaining 40% is directly or indirectly related to mainland China. Thus, we believe the full and smooth implementation of this ban may face challenges. However, if it is eventually enforced strictly, it will significantly impact American chip manufacturers, including NVIDIA.

Source: Wind, Tiger Brokers

Is the U.S. Stock Market Facing a Pullback as Economic Data Strengthens？

• Recently, the core economic data for December in the U.S. has been released, and its strong performance has once again startled the market. Among the highlights:

  The Services PMI came in at 54.1, significantly exceeding both previous figures and market expectations.

  Nonfarm payrolls added 256,000 jobs, a figure comparable to the monthly averages in 2023 and far surpassing forecasts.

  The latest unemployment rate stood at 4.1%, lower than both the prior reading and market estimates.

Source: CME Group, Tiger Brokers

• In light of such robust data, expectations for Federal Reserve rate cuts have been significantly reduced. Currently, the market is pricing in only one rate cut in the second half of 2025. Some institutions have gone further, suggesting that "the Fed's next move might be a rate hike rather than a cut."

  At the same time, U.S. Treasury yields have surged, with the 30-year Treasury yield briefly breaking above the 5% threshold. Conversely, due to fading hopes for rate cuts, U.S. equities—particularly tech stocks—have suffered a series of sharp declines.

Source: CME Group, Tiger Brokers

• Currently, market sentiment is similar to that of September 2024, but it reflects the opposite extreme. Back then, even minor disruptions triggered fears of slipping into a recession. Now, any sign of strong economic performance sparks concerns about potential rate hikes. While the recent economic data is overall robust, it is not without weaknesses. For instance: wage growth has shown signs of slowing and the Michigan Consumer Sentiment Index has ended its six-month streak of gains.

• Additionally, the Federal Reserve's minutes revealed that many officials noted, "Consumers are currently more price-sensitive and increasingly prefer discounted goods, making it more challenging for businesses to raise prices." We believe that as long as there are no significant changes in external conditions, the Federal Reserve is unlikely to resume rate hikes. Using time to create space for inflation to gradually converge may be its best strategy. In the medium term, the current market appears somewhat overvalued. The last time 30-year Treasury yields exceeded 5% was in Q4 2023, during the peak of rate hikes. However, the current inflation level is clearly much lower than it was then. That said, in the short term, the possibility of further upward pressure cannot be ruled out. The inauguration of Donald Trump next week introduces a major uncertainty.

Source: Bloomberg, Tiger Brokers