Nvidia to Resume AI Chip Sales to China

Summary

WSJ What’s News - Episode Summary: "Nvidia to Resume AI Chip Sales to China" Release Date: July 15, 2025

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1. Nvidia Secures US Approval to Resume AI Chip Sales to China

The episode opens with significant news for Nvidia as the company receives assurances from the U.S. government to resume sales of its advanced AI chips, specifically the H20 series, to China. This development marks a pivotal moment in U.S.-China trade relations, especially concerning technology and national security.

Key Highlights:

• Jensen Huang’s Diplomatic Effort: Nvidia CEO Jensen Huang was in Beijing engaging with senior Chinese officials to secure this approval. This follows his direct appeal to former President Trump to facilitate business operations in China and leverage the country's AI expertise.

• Jonathan Chang’s Analysis: Jonathan Chang, WSJ’s China Bureau Chief, delves into the diplomatic nuances of this decision.

  Jonathan Chang [01:39]: "They do a lot of business in China and they want to be able to sell their products. But of course, the technology that they have... are now a national security asset... if they were to cut off the Chinese, then that would spur research and development that could eventually get China in a place where there are companies that could make chips on a par with Nvidia's."

• Economic Implications: Chang highlights that Nvidia's technology is not only commercially valuable but also a strategic asset. Allowing sales to China helps ensure that U.S. technology remains globally pervasive, preventing China from developing parallel capabilities.

• Cooling Trade Tensions: This approval coincides with easing trade tensions between the U.S. and China. Recent data indicates that while U.S. exports to China have declined, China's overall trade growth remains robust, extending beyond the U.S. market to regions like Africa, Southeast Asia, Latin America, and Europe.

  Jonathan Chang [02:38]: "Trade has not fallen off a cliff for China. To the contrary, it's continued to grow. Their official target is 5% growth for the year, and the first half shows positive indicators with Q1 at 5.4% and Q2 at 5.2%."

2. U.S. Banking Sector Kicks Off Earnings Season

As the episode progresses, attention shifts to the financial sector, with major U.S. banks reporting their earnings.

Key Highlights:

• Banks Reporting Earnings: Institutions like JPMorgan Chase, Wells Fargo, Bank of New York Mellon, Citigroup, and BlackRock are among those releasing their quarterly results.

• Market Reaction: Despite recent tariff threats from President Trump impacting indices like the FTSE 100 and cryptocurrencies like Bitcoin, the market remains optimistic. Investors are now looking towards corporate earnings to gauge the long-term impact of trade policies on economic growth and profitability.

• Insights from Telus Demos:

  Telus Demos [04:28]: "I don't think that those big banks are going to necessarily be feeling it that much... The small bank stocks have pretty dramatically underperformed, and I think that's because of what we're seeing in loan growth."

  Demos points out that large banks have outperformed their smaller counterparts, partly due to robust loan growth in sectors like commercial and industrial lending. Conversely, smaller banks are struggling with slower loan growth, reflecting broader economic uncertainties.

• Economic Indicators: The upcoming Consumer Price Index (CPI) report is anticipated to show accelerated consumer inflation, influenced by the Trump administration's tariffs. This data will be crucial in determining the Federal Reserve's approach to interest rates.

  Luke Vargas [05:19]: "June's CPI report is likely to show consumer inflation accelerated last month as the Trump administration's tariffs begin to push up prices."

3. The Declining U.S. Dollar: Impacts and Implications

A significant portion of the episode is dedicated to analyzing the sharp decline of the U.S. dollar, marking its worst performance in over five decades during the first half of the year.

Key Highlights:

• Jack Pitcher’s Analysis: WSJ markets reporter Jack Pitcher provides an in-depth look at the factors driving the dollar's decline and its repercussions.

  Jack Pitcher [07:15]: "Over the first half of the year, a few of the biggest indexes tracking the dollar against other major currencies fell more than 10%. That's a really big move by currency market standards."

• Causes of Decline:

  • Economic Uncertainty: Concerns over U.S. trade policies, particularly tariffs, and the growing national deficit have eroded investor confidence in the dollar.
  • Interest Rates: Unlike previous years where high U.S. interest rates attracted global investors, the current environment offers less incentive to hold dollars.

• Effects on American Consumers and Businesses:

  • Travel Costs: American tourists will find overseas travel more expensive as their dollars hold less purchasing power abroad.

    Jack Pitcher [08:14]: "American tourists traveling overseas this year may know all too well that the dollar won't get you as far as it used to."

  • Multinational Corporations: U.S. companies with significant overseas revenues benefit from a weaker dollar. Their products become more competitive internationally, and profits repatriated from abroad are worth more in dollar terms.

    Jack Pitcher [08:31]: "A weaker currency can help businesses in two aspects... international customers can buy more American products... profits from foreign operations translate into more dollars."

• Investment Opportunities:

  • Diversification: Investment advisors suggest that American investors may benefit from diversifying into international stocks. A weaker dollar enhances returns when foreign earnings are converted back to dollars.

    Jack Pitcher [09:43]: "American investors have a very overweight allocation to US Stocks... now is a good moment for people to take a look at their diversification and allocation and consider more international stocks."

  • Potential for Continued Decline: While there's an expectation that the dollar may continue to weaken, Jack Pitcher cautions that market predictions are inherently uncertain.

    Jack Pitcher [11:24]: "Lots of people do expect the dollar to fall further... but nobody knows what is going to happen next. In markets, these things are really hard to predict."

4. Upcoming Economic Indicators and Market Outlook

The episode concludes with a look ahead to key economic indicators and their potential impact on markets.

Key Highlights:

• June CPI Report: Scheduled for release at 8:30 AM Eastern, this report is expected to reflect rising consumer inflation due to tariffs, influencing the Federal Reserve's policy decisions.

• Federal Reserve’s Stance: The combination of reciprocal tariffs and potential inflationary pressures may lead the Fed to maintain its "wait and see" approach regarding interest rate adjustments.

• Multinational Business Advantages: Despite challenges for consumers, multinational businesses stand to gain from the weaker dollar, which could bolster their earnings in the upcoming Q3.

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Conclusion: This episode of WSJ What’s News provides a comprehensive overview of significant developments in U.S.-China trade relations, the financial sector's performance amidst economic uncertainties, and the profound impact of the declining U.S. dollar on both consumers and multinational corporations. With expert analyses from Jonathan Chang and Jack Pitcher, listeners gain valuable insights into how these factors intertwine to shape the current economic landscape and future market dynamics.

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Produced by Daniel Bach, Kate Bullivant, and Azhar Sucri. Supervising Producer: Sandra Kilhoff.

Transcript

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[Luke Vargas]

Relief for Nvidia's Jensen Huang as the US okays the company's sales of AI chips to China I'm looking forward to.

[Jack Pitcher]

Shipping H20s very soon, and so I'm very happy with that. With that very, very good news.

[Luke Vargas]

Plus, it's time for bank earnings in what could be a key test of the market's recent momentum. And sorry, Americans in Europe, we'll look at who's losing out as the dollar slides. It's Tuesday, July 15th. I'm Luke Vargas for the Wall Street Journal, and here is the AM Edition of what's news, the top headlines and business stories moving. We begin with a big win for chipmaker Nvidia after it said it received assurances from the Trump administration that it can sell its advanced AI chips to China. The news came as Nvidia CEO Jensen Huang was in Beijing meeting senior officials and just days after we reported that he directly appealed to President Trump to be able to do business in China and tap into the country's AI talent. To unpack this turnabout after the Commerce Department restricted sales of Nvidia's H20 chips to China in April, is Wall Street Journal China Bureau Chief Jonathan Chang. John, there is diplomatic subtext all over this story. What can we say about what brought about this announcement?

[Jonathan Chang]

They do a lot of business in China and they want to be able to sell their products. But of course, the technology that they have, the capabilities they have, are now a national security asset, one that some hawks in the US Are reluctant to allow to fall into China's hands and that China really wants to get its hands on. Nobody can make or can design the kind of chips that Nvidia does. That's why they are so valuable. But if they were to cut off the Chinese, then that would spur research and development that could eventually get China in a place where there are companies that could make chips on a par with Nvidia's. So the other half of the argument from Jensen Huang to the US Government is to say that you want US Technology to be used globally, you want Nvidia chips to be everywhere.

[Luke Vargas]

And John this is coming at a time when trade tensions between the US And China are cooling off. China. China's second quarter GDP figures came through today and it looks like there's good news there as well.

[Jonathan Chang]

So you could see that China was, when it comes to exports, generally on the same trajectory as it was before President Trump came back to office. The main difference is that US Exports, exports to the US have fallen off by quite a bit, by double digit percentage points. That shortfall has been made up for more than made up for by other geographies, in particular Africa, in particular Southeast Asia, in particular Latin America, Europe as well. So that's obviously going to raise some question in the US about whether or not there are goods that are coming out of China. They're still arriving in the US but they're simply taking a detour. So you can see that trade has not fallen off a cliff for China. To the contrary, it's continued to grow. And we know that that export and manufacturing machine is a big part of the reason why China's economy has gotten so big in the first place. Their official target is 5% growth for the year. So if you're talking about 5.4 for the first quarter and 5.2 for the second quarter, you're looking pretty good.

[Luke Vargas]

That was the Journal's China bureau chief, Jonathan Chang in Beijing. A number of big US Banks are kicking off earnings season this morning, with results due from the likes of JPMorgan Chase, Wells Fargo, bank of New York Mellon and Citigroup, along with the world's largest asset manager, BlackRock. It comes after markets seem to shrug off President Trump's tariff threats last week pushing US index, London's FTSE 100 and Bitcoin to record highs. But now investors are seeking clarity from corporate leaders about how the back and forth on trade has affected their businesses, worried it will hurt economic growth and corporate profits when stocks already look expensive. On the latest episode of WSJ's take on the Week podcast, co host Telus Demos explained what we can expect to see from banks big and small.

[Telus Demos]

I don't think that those big banks are going to necessarily be feeling it that much. Now. I will say that the large bank stocks have pretty dramatically outperformed. And this is something I'm going to be writing about as we head into earnings. The small bank stocks have pretty dramatically underperformed, and I think that's because of what we're seeing in loan growth. When you look at commercial and industrial loan demand, it's just, it's not really growing and you know, maybe that reflects the fact that people still aren't making big investments in reshoring or whatever. We think that might come out of the other side of tariffs now that we're through the budget. Look, obviously there's some concerns about the deficit element here. We've seen what's happening with the dollar and the Treasuries market. But from a US Economy point of view, you know, big tax cuts coming through that might be good for the economy, good for businesses. So the bank's commentary, I think, will play into that as well.

[Luke Vargas]

And in addition to earnings today, we're also expecting the Labor Department's consumer price index at 8:30am Eastern. June's CPI report is likely to show consumer inflation accelerated last month as the Trump administration's tariffs begin to push up prices. So far, inflation data has largely def fears that Trump's levies will fuel price rises. However, the recent bevy of so called reciprocal tariffs may muddy the outlook and force the Federal Reserve to stick with its wait and see stance for longer. Coming up, the plunging dollar is making overseas travel more expensive, but could provide a big boost to multinational businesses. We'll survey the winners and losers after.

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[Luke Vargas]

Here's a trend that American tourists traveling overseas this year may know all too the dollar won't get you as far as it used to. Wall Street Journal markets reporter Jack Pitcher has been tracking what's now become the worst first half of the year for the currency in more than 50 years. And he joins me now with more. Jack, over the last few months, we've covered, let's say, the relative declines that the dollar's seen on certain days compared to other currencies. But stepping back, it sounds like we are now in markedly different territory compared to what had kind of become the norm in the last few years. Tell us what you're seeing.

[Jack Pitcher]

Yeah. So over the first half of the year, a few of the biggest indexes tracking the dollar against other major currencies fell more than 10%. That's a really big move by currency market standards, where especially with developed market currencies, the moves tend to be a bit smaller. That is coming from a position of really big strength. Over the last few years, the dollar had been at mult decade highs in part because the US Was lifting interest rates and the US Was seen as the most attractive place in the world to invest. And global investors needed dollars in order to do that. Now we came into January and that dynamic was coming into question a little bit. We have this uncertain trade policy that's expected to have a little bit of a chilling impact on trade. We have more uncertainty over the US Deficit situation and concern that those deficits are growing. And as a result, international investors have been buying fewer dollars and the price has been falling.

[Luke Vargas]

Jack, we are in the middle of a very busy travel season. Obviously, Americans heading abroad, they're going to be paying more for things as a result of the trend we've been talking about here. The upside though, and maybe a trend that's more relevant overall, is for American multinational businesses, some tailwinds heading into earnings season.

[Jack Pitcher]

Potentially, yes. This can be a positive on a couple fronts, both for American companies and for American investors. On the corpor side, a bunch of US companies have really major overseas businesses. It's actually about 40% of the revenues in the S&P 500 come from overseas. A weaker currency can help businesses in two aspects there. Number one, if they're exporting, their international customers are now going to be able to buy more American products. It's more affordable with the weaker currency. The other factor here is if you're selling things or have businesses in foreign countries, if the dollar is weaker, you're able to bring those profits back and have them translate into more dollars from your foreign currencies. This is a really big deal for a lot of the biggest US Companies. Think Amazon, Apple, they have big overseas businesses. And if the dollar goes up as it has a lot over the last few years before 2025, that can have a pretty significant hit to their earnings this year. We're starting to see the opposite impact.

[Luke Vargas]

I'm curious, for American investors looking overseas, it sounds like there might be some factors here worth taking into account as well.

[Jack Pitcher]

Yes. Another thing that investment advisors are talking about right now is lots of American investors have a very overweight allocation to US Stocks. Part of that is preference. US Stocks have outperformed for a long time. People like investing at home and Part of it is a lack of rebalancing. And US Stocks have generally outperformed international stocks for most of the last decade. And if people haven't been rebalancing their allocations back into other funds, you might have had a huge overweight to the US by accident. I've talked to a lot of advisors who are saying now is a good moment for people to take a look at their diversification and allocation and consider more international stocks. One thing that does help with that is when you buy an international stock fund or international stocks directly, you tend to need to actually buy those companies, companies in the foreign currency. Your fund manager is doing this on your behalf. That means when that's converted back to US Dollars, when you're selling your shares, or when your fund is getting priced at net asset value, you can get extra gains from the currency rate when the dollar is falling. That's been pretty stark. This year on Vanguard's biggest international fund, for instance, this year, year to date through July, it was up close to 20% in US dollars. About half of that gain came from the actual international stocks being up, and the other half of that gain came from currency appreciation.

[Luke Vargas]

Finally, Jack, just going back to that recommendation from some advisors that American investors maybe should be looking abroad now. It sounds like underlying that is sort of an assumption that this trend is going to stick around. Is that the outlook you're hearing?

[Jack Pitcher]

Lots of people do expect the dollar to fall further. There's various factors underpinning that, including the debt situation, including just how strong and by some metrics, overbought the dollar had been for several years. That being said, nobody knows what is going to happen next. In markets, these things are really hard to predict. And a lot of analysts have been calling for the dollar to fall for years and years, and it didn't up until recently. That being said, there are lots of factors here where Wall street is expecting persistent dollar weakness.

[Luke Vargas]

I've been speaking to Wall Street Journal markets reporter Jack Pitcher. Jack, thank you as always for the update.

[Jack Pitcher]

Thank you.

[Luke Vargas]

And that's it for what's news for this Tuesday morning. Additional sound in this episode was from Reuters. Today's show was produced by Daniel Bach, Kate Bullivant and Azhar Sucri. Our supervising producer was Sandra Kilhoff. And I'm Luke Vargas for the Wall Street Journal. We will be back tonight with a new show. Until then, thanks for list.