From AI to streaming and digital services, the tech sector is emerging as the latest battleground for trade wars and market competition. Investors are also maintaining their more cautious approach to the US market and assets as tariffs aren’t having the impact the Trump administration expected, with regions like the EU looking more attractive.
Music to investors’ ears
The Music Entertainment division within Prosus (PRX-JSE) and Naspers (NPN-JSE)-owned Tencent is in advanced talks to buy Chinese podcasting startup Ximalaya Inc. in a $2.4 billion deal that would accelerate its push to become China’s answer to Spotify.
New chip war front
Nvidia (NVDA-NASQ) shares took a hit on news that Huawei Technologies is gearing up to test its newest and most powerful artificial intelligence (AI) processor called the Ascend 910D. According to the Wall Street Journal, the company hopes the chips could replace some higher-end Nvidia products and has approached some Chinese tech companies about testing the technical feasibility of the new chip. Huawei should receive the first batch of processor samples by late May.
Ai vs AI
Meta (META-NASQ) released a standalone AI app that is built on its Llama technology to rival OpenAI’s ChatGPT. The app features an AI chatbot and a “discover” feed that allows users to see how others use the assistant.
Digital services impasse
US Treasury Secretary Scott Bessent singled out a tax on digital services as a sticking point in talks with the EU, reports Bloomberg. While the bloc said it has made tangible offers, US Trade Representative Jamieson Greer reportedly said Europe isn’t engaging well.
US IP & content play
Citadel founder Ken Griffin criticised the Trump administration’s trade policy, saying tariffs won’t bring back American manufacturing jobs as the president anticipates. A Bloomberg article quoted Griffin, who argues that the US should focus on its strengths, such as creating intellectual property and content, rather than trying to bring back low-paying factory jobs that are rapidly automating. Griffin believes the US has benefited more from globalisation than China, and the trade war has damaged the country’s relationship with the rest of the world.
US trade volumes collapsing
The Financial Times reported that the Port of Los Angeles, which serves as the main route of entry for goods from China, expects scheduled arrivals in the week starting May 4 to dip by a third compared to a year before. Airfreight handlers have also reported sharp falls in bookings.
Shorting US equity
Shorting US stocks is the main game in town among hedge funds at the moment, with fund managers still reluctant to make major bets on other assets. According to Unlimited insights carried by Bloomberg, positioning across asset classes — including currencies, bonds and commodities — remains weak.
US dollar decline
Foreign investors who bought US stocks and dollars are facing significant losses due to the decline in the S&P 500 (VOO-NASQ) and the US dollar’s value, with many adding currency hedges to their US equity portfolios to protect against further dollar declines, reports Bloomberg. Some banks and wealth managers are reporting increased demand for hedging strategies in a shift in investor behaviour that could have a significant impact on global asset prices and exchange rates. Some strategists are predicting a long-term decline in the US dollar’s value and a shift towards European markets.
ECB cuts coming
In response to the lasting damage to the European economy expected from US tariffs, European Central Bank (ECB) officials are preparing to lower interest rates further. According to Bloomberg, the officials believe the damage is already done, even if Donald Trump’s administration softens its stance in the weeks ahead.
Sector focus: PGMs
Platinum group metals should enjoy strong tailwinds with an Investec analysis of automotive sector performance in Q1 2025 showing +7% year-on-year growth, coupled with lower PGM supply. While uncertainty remains a dominant theme at present, supply tailwinds are likely to remain despite the expected recovery after Q1 2025. While Battery Electric Vehicle (BEV) penetration remains significantly below 2025 expectations, the analysts remain constructive on the sector.
