C (3:13)

Hey, Mark. How you going?

B (3:15)

I'm doing all right, but I'm a little confused by what's happening in the markets right now, as I normally am, which is why I've come to you. Why don't you set the scene for us first? Nvidia comes out with this banger earnings report after the US Market closes on Wednesday. What happens to its stock and why?

C (3:33)

Well, the answer is not a lot happened to its stock, but there was some stuff you could read in between the lines of what Nvidia was saying that do give some reasons for caution. So let's not not muck about with this. They had a great quarter. They had revenues of $47 billion in the quarter.

B (3:52)

That's a ton of money.

C (3:54)

That is a lot of dollars. But as you say, they're reluctant to build future Chinese sales into their earnings outlook for the coming quarters, which is a bit of a kind of way of saying, yeah, we're just not sure how this stuff is going to pan out. Because if you rewind just a couple of weeks, Nvidia is one of the companies that struck a deal with Donald Trump and the Trump administration recently to say, okay, we're going to restart certain chip sales to China, but the federal government's going to get a 15% cut of the revenues. This is a very unusual thing to do. And they're just not sure how quickly sales are going to come back after this prohibition on selling these types of chips to China has been lifted. So it's all just a little bit iffy.

B (4:39)

Right? As we're talking right now about midday New York on Thursday, Nvidia is down 1%.

C (4:46)

Yeah.

B (4:46)

I think it's important to unpack just how important Nvidia is in the AI investing story overall.

C (4:53)

Honestly, it's hard to overstate. This company is the biggest company in the world and together with a clutch of other really big technology companies, the likes of kind of Amazon, Apple, Meta, that they occupy a gigantic slice of the US stock market.

B (5:11)

Something this is the Magnificent Seven, right?

C (5:13)

This is the Mag Seven. But together, like the top 10 companies in the S&P 500 just occupy a really unusually massive slice of the index, like something like 40% of the index. If you really Want to, you can get really worried about because you can think to yourself, okay, there's been this enormous surge into the AI trade effectively over the past two years. This idea that artificial intelligence intelligence is the transformative technology of the 21st century and that there's no such thing as throwing bad money into this. It's all going to make money. Even some of the really big executives in this space. You look at Sam Altman from OpenAI, they're the brains behind ChatGPT. Even he is saying, look, there are some investors who are getting over excited. And so now there is a little bit more disquiet. And I don't know, and you don't know how far that's going to run, but it is new and it's worth keeping an eye on.

B (6:10)

Well, this is the thing that trips me up, right? So you have the thing that Sam Altman said. We had the MIT report that came out a little while ago that basically said that 95% of organizations are getting zero return from artificial intelligence. We saw a sell off in stocks last week that dragged down the S and P and the nasdaq. Then on top of that, we're starting to see central bank independence in the US come under severe threat, which in theory should shake investors. And those two things combined in my mind would have created a really unwelcoming climate for investors.

C (6:46)

No, not just in your mind. I am asking exactly the same question. Economists who know an awful lot more about the world, like Paul Krugman, are asking exactly the same question.

B (6:54)

Okay, so I'm in good company. This is, this is not just a me thing, not understanding markets.

C (6:58)

It's not just a you thing. No, you're not being an idiot. No, absolutely not.

B (7:02)

I love to hear, hear that. It's so great.

C (7:05)

So some investors that I speak to in absolute fairness are saying, look, you don't need to worry about that stuff. It's all just noise. Just focus on the corporate earnings. And if you look at the corporate earnings from places like Nvidia, I don't see anything to not like here. There are optimists out there who think that this stuff doesn't matter. But there are plenty of people out there in financial markets who are like, nope, this does not make sense. And at some point, something's got to give.

B (7:31)

Kati Martin is the FT's markets columnist. Thanks, Katie.

C (7:34)

Pleasure.

B (7:41)

The Japanese stock market is silently rallying. Four months of gains have driven Japan's Topics index to a record high. I'm joined now by the FT's Leo Lewis, our Tokyo bureau chief. Hey Leo.

D (7:53)

Hello there. Hi.

B (7:55)

So tell me about this rally. When did it start?

D (7:58)

So it started about four months ago and the low point was just after Donald Trump announced his Liberation Day tariff plans. And really after that, the Japanese market just kept going higher and higher. And what was interesting about it is how little kind of fuss was being made about this very steady advance in what is a very big market. And often a market that rallies don't last for a very long time. So the reason it was dubbed a stealth rally, a ninja stealth rally, was because it reached this all time high without anyone really making a big fuss about it.

B (8:39)

Well, we are talking about it now and I'm wondering who's investing all this money into the Japanese market? Is it foreign investors? Is it domestic investors? Is it both?

D (8:51)

So the really interesting thing about rallies in the Tokyo market are that the biggest ones have tended to be led by foreigners. And these rallies are good, but they don't last terribly long. And this one, it was led by foreigners. But what was so interesting about this is that domestic investors, which include retail investors, individual Japanese who invest in their money more enthusiastically than in the past with some government incentives to do so, were getting involved as well. So we had multiple forces pushing this rally up.

B (9:25)

And why are we seeing this rally now, Leo?

D (9:28)

Well, one of the key reasons is that earlier in the year we heard about the big tariffs that were going to be imposed and Japan discovered that it was going to be subject to perhaps tariffs of 25%. And obviously for a country that is exporting a lot of cars to America, along with a lot of other industrial goods, this was, you know, a disaster. And eventually the news came out, well, look, it's going to almost certainly be close to 15 and actually there was a certain relief. It's not great, but it's not quite as bad.

B (10:02)

Well, are there other factors at play here besides the Trump administration tariffs?

D (10:07)

Yes, there are, notably China. The level of tension between the US and and China is high enough that it's quite premature in many investors view to think about getting back into China. Emerging markets in Asia have got their own risks. And actually Japan is this big, deep, liquid market sitting there with a lot of opportunity. And if you've got loose capital that's been destined for Asia and now it's looking for a home, Japan is really pretty much the logical choice. And that's exactly what's happening.

B (10:41)

Is there concern that this rally could fizzle out, that it could be in danger?

D (10:47)

Yeah. So there's a couple of things there. The tariff and other negotiations with the United States continue with some setbacks. There's a certain level of political ruction here in Japan, with some uncertainty about how long the prime Minister will last. And the idea of an interest rate hike, perhaps within the calendar year, is now something that everyone's taking pretty seriously. On the other hand, rate hike is pretty good for the banks, and the banks are a big constituency of the Topics index. We had the governor of the bank of Japan talking about what he sees as a link between the tightness of the labor market here and the prospect that wages will rise. And so there is still good reason to think that a lot of the factors that people have been hoping for in Japan are all combining. And that is the view that's underpinning all of this.

B (11:46)

Leo Lewis is the FT's Tokyo bureau chief. Thanks so much, Leo.

D (11:49)

Thank you.

B (11:52)

You can read more on all these stories for free when you click the links in our show Notes this has been your daily FT news Briefing. Check back next week for the latest business news. The FT News Briefing was produced this week by Sonia Hudson, Josh Gabbard Doyon, Ethan Plotkin and me, Mark Filippino. Our show was mixed by Blake Maples and Kelly Garry. We had help this week from Adam Sampson and Gavin Kallman. The FT's acting co head of audio is Topher Forges and our theme song is By Metaphor Music.

D (12:33)

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A (12:48)

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